Broughton, Andrea In what is being hailed as a landmark judgment, the European Court of Justice ruled on 16 May that UK rules limiting the right of part-time workers to retroactive membership of an occupational pension scheme are contrary to Community law. While some commentators maintain that this might lead to vast expense as employers are obliged to settle backdated claims, the full impact of this judgment will not become clear until the UK House of Lords has clarified a number of issues which the ECJ has left to national courts to decide.
Although between and many pension schemes in the UK were amended to allow part-time workers to join, it remained unclear how far back retroactive claims from those who had been denied access to the schemes could be made. Therefore, following these two judgments, some 60, public and private-sector part-time workers in the UK took cases to industrial tribunals, claiming that, under Article they had been unlawfully excluded from membership of occupational pension schemes, and seeking retroactive membership of these schemes.
Of these claims, a total of 22 were selected as test cases. In the first series of cases, the pension scheme concerned had been amended to allow part-timers to join more than two years prior to them bringing a claim to an industrial tribunal. Therefore, under UK law the Occupational Pension Regulations , the claimants were not entitled to retroactive claims, as they had been members of the scheme for more than two years prior to them bringing the case.
In the second series of cases, the claimants had ceased employment more than six months prior to bringing the claim and therefore, under UK law the Equal Pay Act — EPA , were not entitled to recognition for earlier part-time service.
In the third series of cases, the claimants had worked regularly, but periodically or intermittently for the same employer under successive contracts. Under UK law, if such contracts are not covered by an umbrella framework contract, claims must be made in the six months following the end of each contract.
The claimants all maintained that UK law in these three areas was incompatible with Community law as its requirements: However, on 4 December , the industrial tribunal inBirmingham ruled against the claimants and this decision was later confirmed by the Employment Appeal Tribunal on 24 June and upheld by the Court of Appeal on 13 February Are the following national procedural rules compatible with Community law: Does the implementation of Article through the UK Equal Pay Act constitute compliance with the principle of EC law that national rules concerning a breach of Community law must be no less favourable than national rules relating to similar domestic claims?
If not, what are the criteria for determining whether a right of action in domestic law is a domestic action similar to the right under Article ; and if a national court does identify a similar claim, what are the Community law criteria for determining whether the procedural rules governing this are more favourable than those governing the enforcement of rights under Article ? In the case of successive fixed-term contracts, is a national procedural rule which requires claims for membership of an occupational pension scheme to be brought within six months of the end of the contract compatible with 1 the rights to equal pay for equal worker under Article and 2 the principle of EC law that national rules concerning breaches of Community law must not make it excessively difficult or in practice impossible for claimants to exercise their rights under Article ?
The first question The ECJ held that the provision of the UK Equal Pay Act EPA , which came into effect in , limiting the bringing of claims to up to six months following the cessation of employment "does not render impossible or excessively difficult" the exercise of rights conferred by Article and that therefore Community law does not preclude such a national procedural rule.
The second question By asking this question, the UK House of Lords was trying to ascertain the criteria for determining whether the relevant parts of the UK EPA and Occupational Pension Regulations, which applied to the proceedings instituted by the claimants on the basis of Article , are less favourable than other procedural rules applicable to similar proceedings of a domestic nature.
The ECJ held that an action alleging infringement of a statute such as the UK EPA does not constitute a domestic action similar to an action alleging infringement of Article It also held that it is for a national court to consider whether rights of action under domestic law are similar to proceedings giving effect to rights conferred by Article Similarly, it held that national courts must also decide whether procedural rules relating to national actions are more favourable than those governing the enforcement of rights under Article The third question The ECJ held that the UK domestic law requirement that a claim concerning membership of an occupational pension scheme be submitted within six months of the expiry of each contract of employment to which the claim relates "cannot be justified on grounds of legal certainty".
Therefore, it held that Community law precludes a national rule which has the effect of requiring a claim for membership of an occupational pension scheme to be brought within six months of the end of each contract, in the case where there has been a stable employment relationship based on a succession of short-term contracts.
The ruling The ECJ's final ruling was made in six parts. The Court ruled that: Commentary This case has great significance in the UK, although there is some disagreement among commentators regarding its impact. The ruling against the two-year limit regarding service effectively means that pension benefits for part-timers who have been excluded from occupational pension schemes could in theory relate to service backdated to the date of the Defrenne case which first established direct effect of Article According to some estimates, the total cost of awarding backdated pension benefits could run to as much as GBP 17 billion, with the majority of the part-time workers affected employed in banking, the National Health Service and local education authorities..
However, this overall cost is likely to be significantly less than this, firstly due to the fact that if schemes were contributory, the employee must also pay the relevant back-payments in order to receive the full benefits from the employer.
Secondly, as the ECJ effectively referred back to the UK House of Lords the question of determining whether this provision could be brought into line with similar UK legislation, the backdating could theoretically be limited to six years, in line with contract law in the UK.
Certainly, in the case of private sector employers, the impact is likely to be limited as it is estimated that the vast majority of affected workers were employed in the public sector. However, the National Association of Pension Funds and the UK employers' organisation, the Confederation of British Industry, are both in agreement that this ruling will significantly increase administration costs for employers, as past records will need to be checked carefully.
Regarding the six-month limit on bringing a claim, as the ECJ ruled that this limit is not contrary to Community law provided that it is not less favourable than other domestic rules, the UK House of Lords will also now decide whether this six-month limit could be extended, allowing people to bring claims over a longer period following cessation of their employment. Therefore, it is fair to say that more detailed analysis of the true impact of this case will only become clear after the UK House of Lords has looked once more at the issues referred back by the ECJ.
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