Employment Appeal Tribunal decision confirms no extension of civil partners' survivor benefits

10 minute read
25 February 2014

The Employment Appeal Tribunal has confirmed that the restriction of a surviving civil partner's pension to the member's post 4 December 2005 pensionable service (in relation to non-contracted out rights) is compatible with EU law.

Mr Walker had been a member of his company's occupational pension scheme for more than 20 years. He argued that his civil partner should be entitled to the full value of a spouse's death in service pension, and not just the benefits arising from the date the Civil Partnership Act 2004 came into force (5 December 2005).

Mr Walker's claim

Mr Walker had been a member of the Innospec Limited company pension scheme since joining the business in 1980. He entered into a civil partnership with his long-standing partner on 23 January 2006. He asked for confirmation of what his civil partner would be entitled to in the event of his death while he was a member of the pension scheme.

The company confirmed to Mr Walker that civil partners would be treated in the same way as married couples, but only for service since 5 December 2005, relying on the proviso in paragraph 19, schedule 9 of the Equality Act 2010. The proviso broadly provides that it is not discriminatory for employers or trustees to treat civil partners differently from married couples for the purposes of pre 5 December 2005 pensionable service. 5 December 2005 was the date when the Civil Partnership Act 2004 came into force.

Mr Walker brought a claim in the Employment Tribunal (ET), challenging the proviso in the Act. He claimed that his civil partner's pension should take into account his considerable service in the Innospec pension scheme before 5 December 2005.

The ET agreed, and decided that the civil partner's pension should not be limited to Mr Walker's post 4 December 2005 service. The ET thought that the Equality Act 2010 was incompatible with the Equal Treatment Directive and read words into the proviso to ensure compatibility. In other words, on the basis of the ET decision, Mr Walker's civil partner would have been entitled to a full spouse's pension, based on Mr Walker's full period of pensionable service.

Innospec appealed to the EAT.

Employment Appeal Tribunal decision

The EAT has now overturned the ET's decision, finding that the ET was wrong to conclude the proviso in the Equality Act 2010 was incompatible with the Equal Treatment Directive. It considered a number of questions in reaching this conclusion.

Was this direct or indirect discrimination?

Leaving aside the proviso in the Equality Act 2010, the EAT accepted the ET's original conclusion that the discrimination against Mr Walker would have been unlawful - both on direct and indirect discrimination grounds.

Direct discrimination on the grounds of sexual orientation cannot be objectively justified. Indirect discrimination could, in principle, be objectively justified if it can be shown to be a proportionate means of achieving a legitimate aim.

While the ET had considered the limited evidence put forward by Innospec in order to justify the different treatment on indirect discrimination grounds, the ET said that this evidence was insufficient to justify the treatment. The EAT saw no reason to challenge this conclusion; it being a factual one which the ET was entitled to reach.

However, crucially, the proviso in the Equality Act 2010 could not be ignored: the EAT found that this was a lawful caveat to the general principle outlawing discrimination on the grounds of sexual orientation. As such, even if the different treatment was viewed as direct or indirect discrimination, the employer could rely upon the proviso in the Equality Act 2010 to justify the limiting of the survivor's pension to post 4 December 2005 pensionable service. In other words, the treatment was not unlawful.

In drawing this conclusion, the EAT had to consider whether the Equal Treatment Directive has retrospective effect: if it did, it would have given grounds for the ET to read into the UK legislation so as to take into account the whole period of Mr Walker's pensionable service, and not just the period from which the Civil Partnership Act 2004 came into force.

Does the Equal Treatment Directive have retrospective effect?

The EAT found in short that, no, the Directive does not have general retrospective effect.

The Equal Treatment Directive enshrines a general framework for equal treatment in employment and occupation, on the grounds of "religion or belief, disability, age or sexual orientation" in European law.

In the UK, the Equal Treatment Directive was implemented, so far as sexual orientation was concerned, by the Employment Equality (Sexual Orientation) Regulations 2003, now contained in the Equality Act 2010.

The Equality Act 2010 sets out the various strands of discrimination law in England and Wales, including that it is unlawful for the trustees of an occupational pension scheme to discriminate against a member of the scheme, except in relation to rights accrued or benefits payable in respect of periods of service prior to the coming into force of the legislation.

However, the Act also contains the proviso referred to earlier: it is not discriminatory to provide different benefits to civil partners as would be the case for spouses where either:

  1. the right to the benefit accrued before 5 December 2005, or
  2. the benefit is payable in respect of periods of service before that date.

The EAT was not persuaded by the ET's attempts to read retrospectively into the proviso (which would have entitled civil partners to benefit from a spouse's pension which also took into account periods of pre 5 December 2005 pensionable service). 

The EAT instead saw the position of pensions as akin to that of equal pay claims: equal pay claims can only be run from the period when the relevant EU instrument came into force. For example, sex discrimination claims in a pension scheme context can only be brought in respect of the period on and from 17 May 1990: the date of the seminal Barber decision.

The EAT held that a comparable approach should be taken in relation to occupational pension benefits: an employer could not be liable for discrimination during periods of employment prior to the coming into force of the Civil Partnership Act 2004.

It was therefore legitimate for the Equality Act 2010 not to give a remedy for discrimination occurring before the date of transposition from the Directive.

Was it possible to construe the Equality Act 2010 so that it was compatible with the Equal Treatment Directive?

Yes. The EAT disagreed with the approach which had been taken by the ET on the questions of retrospectivity as it applied to the Equal Treatment Directive and how this was required to be introduced in member states.

Unsurprisingly, therefore, the EAT found that the ET had been wrong to read extra words into the Equality Act 2010 in order to make it compliant with the Equal Treatment Directive. The EAT found that this was diametrically opposed to the thrust of the legislation and to the apparent intention of parliament and therefore could not be upheld.

Action points

This decision confirms that occupational pension schemes can continue to rely on the restriction in the Equality Act 2010 which limits surviving civil partners' benefits (in respect of a member's non contracted-out rights) to a member's post 4 December 2005 pensionable service. This is helpful clarity for employers and pension scheme trustees, both of whom are subject to duties under the Equality Act 2010.

By overturning the previous Employment Tribunal (ET) decision the Employment Appeal Tribunal (EAT) has quelled fears that this and other areas of discrimination protection could be subject to backdating claims.

Employers and trustees should still watch out for further developments in this area. Although the proviso in the Equality Act 2010 has survived scrutiny by the EAT, it is currently being reviewed by the government - which it must do by 1 July 2014 (as part of the introduction of the Marriage (Same Sex Couples) Act 2013).

It will be interesting to see whether the government seeks to retain the proviso in the Equality Act 2010 on the grounds of cost. The EAT refers in its decision to evidence that had been produced in the Walker v Innospec case to demonstrate that extension of survivors' benefits would involve very substantial sums - ranging from an additional cost of £88 million to a potential £3 billion.

Equally, in light of the introduction of the Marriage (Same Sex Couples) Act 2013, it remains to be seen whether the government feels it can continue to distinguish the treatment of same sex partners for the purposes of survivors' benefits, be they married or in civil partnerships.

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