For latest Supreme Court update on O’Brien, see the note at the end of this piece regarding the reference to the European Court of Justice
A part-time judge who has been battling for himself (and colleagues) to receive pensions has lost a case that could have established pension payments would be backdated to cover all their years of work. Instead the Court of Appeal ruled there will be a cut-off at April 2000, when the European Part Time Workers Directive (PTWD) (97/81/EC) was transposed into UK law.
The basis of Dermod O’Brien’s substantive case was that failure to pay pensions to fee-paid judges and tribunal chairs was unlawful discrimination under the Directive. Following earlier litigation (see O’Brien v MoJ 2013) that established Recorders such as O’Brien should receive pensions, the government has agreed to institute pensions for other fee-paid judicial offices too (see Fee-paid judicial cases: update 3 pdf). These were to be backdated to 7 April 2000 with a new scheme from April 2015 (see Consultation for details).
The Court of Appeal case (O’Brien v MoJ  EWCA Civ 1000) concerned how far pension entitlement should be backdated. Lawyers for O’Brien (and in effect any other fee-paid judicial officers in similar positions) argued that the pension provision should take into account periods of service before the Directive entered into force. He had worked as a Recorder between 1978 and 2005.
But as far as Lord Justice Lewison was concerned this would offend against the the principle that legislation should not be retroactive: “EU legislation does not have retroactive effect unless, exceptionally, it is clear from its terms or general scheme that the legislator intended such an effect, that the purpose to be achieved so requires and that the legitimate expectations of those concerned are duly respected.”
Legal issues in the latest case
Given the “discrimination” against part-time workers was not unlawful before the Directive, the Ministry of Justice argued it should not have to find money relating to accruals during that pre-2000 period when the pensions are paid out at the end of people’s careers. The passing of a Directive would deal only with the “future effects” of discrimination. To accept O’Brien’s claim would make the MoJ (and potentially employers generally) liable for an unexpected level of payment, deriving from a time when the part-time workers had no lawful claim to equal rights with full-time workers. That would be contrary to the basic EU law (and UK law) principle of legal certainty.
The counter-argument to this, however, is that payment of a pension is a future effect. Failure to take account of pre-2000 service means that at a point after 2000, when the payment is made, a part-timer’s pension would be significantly out of kilter with a comparable full-timer (ie quite apart from its being pro rata). If the Directive was intended to remedy the future effect of discrimination (ie discrimination from 2000 onwards), the pension scheme would have to take account of pre-2000 service – particularly given the judicial pension scheme is final salary – based on a calculation made on retirement regarding the period worked over the years, not based on sums stashed away annually by the MoJ to later buy an annuity for the pensioner.
At the original Employment Tribunal in this case Judge Macmillan thought he had found precedent in EU law to give O’Brien his way. Bruno and Pettini, about backdating regarding qualification to be in a pension scheme (rather than calculating benefits), looks at this contention: “Accordingly, the calculation of the period of service required to qualify for a retirement pension such as the pensions at issue in the main proceedings is governed by Directive 97/81 [the PTWD], including periods of employment before the directive entered into force.” (Para 55) Macmillan said:
“Bruno and Pettini does unequivocally resolve the year 2000 question in Mr O’Brien’s favour. By reading paragraph 55 of the judgment in the context of the first referred question [ie question referred to the European Court of Justice] and the Legislative Decree to which it relates, the effect of the Court’s ruling is seen to be that the future effects principle means that where the calculation date for determining the amount of, as well as entitlement to, a pension falls after the date on which the Part Time Workers Directive came into effect, years of service prior to that date which had previously been excluded for a reason which the Directive now prohibits as unlawful, must be taken into account in the calculation for both purposes.” (Para 28 – source Employment Appeal Tribunal case MoJ v O’Brien  UKEAT 0466/13)
The MoJ argument, in contrast, was that EU law does not recognise rights that accrue before the relevant Directive creates those rights. Bruno and Pettini was not dealing with the calculation of pension benefits, merely with whether service qualified the claimants to be members of a particular pension scheme. Robin Allen QC, for O’Brien, had denied the pension rights “accrued” during a period of employment. Instead a formula was applied at the end of employment taking into account length of employment (for example, 1/40 of the highest of the final three year’s pay times years of service under the Judicial Pensions and Retirement Act 1993 that coverd part of O’Brien’s work as a Recorder).
However, the judge in the Employment Appeal Tribunal that rejected O’Brien’s case, Sir David Keene, found wording in EU cases that contradicted Allen’s position. In Barber v Guardian Royal Exchange Assurance Group (C-262/88) for example the judgment states: “It is a characteristic of that form of pay [pension accrual treated as deferred pay in EU law] that there is a time lag between the accrual of entitlement to the pension, which occurs gradually throughout the employee’s working life, and its actual payment, which is deferred until a particular age.”
Although theoretically EU court judgments are declaratory (ie stating what the law is and, in effect, what it has “always” been – since the relevant Treaty provision to which a Direction refers), the relevant cases starting with Barber had limited back-dating to the Directive at issue for the sake of legal certainty, Keene said. At the Court of Appeal Lewison agreed, noting that in Bruno and Pettini: “Nowhere … did the Advocate-General deal with (let alone cast any doubt on) the analysis of the nature of an accruing pension right”. Paragraph 55 of Bruno (referred to by Macmillan) maintained a “distinction between access to a pension scheme and calculation of benefits”. He quotes Keene with approval:
“The court [in Bruno and Pettini] was not seeking to deal with the issue of the level of benefits, and if it had been addressing that issue, it would have had to deal with the long-established law on the topic of occupational pensions and how far past service could be reflected in the amount payable. It would have had to deal, as would the Advocate General, with Ten Oever, Barber, Coloroll, Magorrian, Brouwer and other previous decisions of the court, and to explain why the fundamental principle of legal certainty did not operate in this instance.” (CoA Para 27; EAT para 43)
Lewison in the Court of Appeal is so convinced of his argument that he declared the issue acte clair, EU legal parlance for so blindingly obvious no one could possibly disagree. In particular there was therefore no need to refer the matter to the Court of Justice of the European Union for a clarification (a preliminary reference).
Lewison relies on the principle of “legal certainty” – which he sees as a financial matter: companies (and the MoJ) should not be tripped up by surprises dating from a time when they were behaving perfectly lawfully in not offering part-timers pensions. After 2000 the MoJ was behaving unlawfully – and should have known it even if the law was only clarified in 2013 thanks to Mr O’Brien’s good offices in bringing his original case.
It seems difficult to see how the issue in the latest case can be deemed “acte clair” when one judge can point to clear wording backing O’Brien while other judges deem it irrelevant. The rules are that a preliminary reference to the European Court should not be made if the issue at stake has already been interpreted by the Court. Does Lewison really think this (from the leading CJEU case on acte clair, CILFIT v Ministry of Health) applies:
“The correct application of Community law may be so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised is to be resolved. Before it comes to the conclusion that such is the case, the national court or tribunal must be convinced that the matter is equally obvious to the courts of the other member states and to the court of justice. Only if those conditions are satisfied, may the national court or tribunal refrain from submitting the question to the Court of Justice and take upon itself the responsibility for resolving it.”
Well, apparently, yes. Lewison relies on the notion “that if a national court is sure enough of its own interpretation to take the responsibility (and possibly the blame) for resolving a point of law without the assistance of the Court of Justice, it ought to be legally entitled to do so”. He derives this from X v van Dijk. What this says is:
“A national court of last instance [which would be the Supreme Court in Britain] which takes the view that the correct application of EU law to a matter on which it is called upon to rule is so obvious as to leave no scope for any reasonable doubt is not required, under Article 267(3) TFEU, to refer a question to the Court of Justice for a preliminary ruling merely because a lower-tier court from the same Member State has requested a preliminary ruling on the same point of EU law.”
Does that mean he merely has to take the responsibility on his own broad shoulders and not do the test of finding out that the issue is “equally obvious to the courts of the other member states and to the court of justice”? That seems unlikely.
Walker v Innospec
So why has Lewison (and the other judges in the case, including the Master of the Rolls) taken the risk? The judgment was issued with another on back dating: Walker v Innospec Ltd on backdating the “future effect” of a pension for life for surviving spouses in gay marriages and civil partnerships. Before December 2005, when the Civil Partnership Act came into force, gay people could not marry or enter a recognised legally equivalent relationship. They could not therefore start accruing pension rights that could go towards a pension for their partner on death until after 2005, since Schedule 9 paragraph 18 of the Equality Act 2010 provides:
“(1) A person does not contravene this Part of this Act, so far as relating to sexual orientation, by doing anything which prevents or restricts a person who is not within sub-paragraph (1A) from having access to a benefit, facility or service—
a) the right to which accrued before 5 December 2005 (the day on which section 1 of the Civil Partnership Act 2004 came into force), or
(b) which is payable in respect of periods of service before that date.
So the legislation sanctions discrimination that means, for example, that the widow of a man with 20 years pensionable service could legally receive a larger pension for life than the widow of a woman (or widower of a man) with the same pay and pensionable service. The Court of Appeal was happy to accept this state of affairs, again on the “legal certainty” principle, that if a company was discriminating perfectly lawfully before 2005, huge costs shouldn’t be imposed by a backdating effect of anti-discrimination legislation.
Here we have a figure for the potential costs had the lord justices gone the other way. The EAT in Walker v Innospec noted: “an extension of survivors’ benefits in respect of previously accrued pension entitlement would involve very substantial sums – ranging from an additional cost of some £88 million to a potential £3 billion.”
So there is a lot at stake. Similarly with O’Brien, which could have potentially affected many companies (as well as other parts of government employment). Floodgates were not mentioned, but clearly the two judgments are at risk of looking rather policy-laden than purely jurisprudential.
Note: The Supreme Court has now looked at O’Brien and concluded that the matter should be referred to the Court of Justice of the European Union. It notes:
20. “The Court of Justice has not as yet considered the argument that if, following the Ten Oever line of authority, an occupational pension is treated as deferred pay, the right to which is acquired at the time of the work to which the pay relates, then it follows from the general principle of non-retroactivity that the directive does not alter or affect rights acquired (or, in Mr O’Brien’s case, not acquired) before it was brought into force, there being no provision in the directive which overrides that general principle. Although the majority of the court are inclined to think that Ten Oever was concerned with the exceptional Barber limitation, which does not arise in the present context, the correct approach does not appear to the Supreme Court to be acte clair.
The question referred
Does Directive 97/81, and in particular clause 4 of the Framework Agreement annexed thereto concerning the principle of non-discrimination, require that periods of service prior to the deadline for transposing the Directive should be taken into account when calculating the amount of the retirement pension of a part-time worker, if they would be taken into account when calculating the pension of a comparable full-time worker?
Note: The Supreme Court has now considered Walker v Innospec and agreed in Lord Kerr’s words:
“I would allow Mr Walker’s appeal and declare that, in so far as it authorises a restriction of payment of benefits based on periods of service before 5 December 2005, paragraph 18 of Schedule 9 to the 2010 Act is incompatible with the Framework Directive and must be disapplied. I would make a further declaration that Mr Walker’s husband is entitled to a spouse’s pension calculated on all the years of his service with Innospec, provided that at the date of Mr Walker’s death, they remain married.”
Judicial pensions and O’Brien (from 2013 and mostly superseded but with some info on the substantive case)
A note on Barber: This (extracted below) says a court may take account of the serious financial difficulties of backdating and hence “by way of exception” bar people from gaining the full benefits otherwise due to them. In other words it does not set out a legal principle that that should always happen. It is for the judge to decide on the day. In O’Brien the judges seem to assert “no backdating” as a legal principle rather than an option. Furthermore the Barber judges can point to specific EU legislation that could reasonably lead employers to have believed discrimination was allowable in contracted out schemes – the implication being that it would therefore be wrong to stick them with a huge bill because their reasonable view turned out to be wrong. Can the MoJ or Lewison et al point to any such legislation suggesting discrimination was allowable against part-timers before the Part Time Workers Directive? Arguably such discrimination was always unreasonable and the Directive was passed to remedy a known and notorious nuisance, not to create a novel or unusual law.
Barber v Guardian Royal Exchange (1990)
This European Court case relates to the differential pensionable age between men and women (62 versus 57) in a private pension scheme – giving Mr Barber lesser benefits than a comparable woman. For our purposes the relevant paragraphs state:
Effects of this judgment ratione temporis
40 In its written and oral observations, the Commission has referred to the possibility for the Court of restricting the effect of this judgment ratione temporis in the event of the concept of pay, for the purposes of the second paragraph of Article 119 of the Treaty, being interpreted in such a way as to cover pensions paid by contracted-out private occupational schemes, so as to make it possible to rely on this judgment only in proceedings already pending before the national courts and in disputes concerning events occurring after the date of the judgment. For its part the United Kingdom emphasized at the hearing the serious financial consequences of such an interpretation of Article 119. The number of workers affiliated to contracted-out schemes is very large in the United Kingdom and the schemes in question frequently derogate from the principle of equality between men and women, in particular by providing for different pensionable ages .
41 As the Court acknowledged in its judgment of 8 April 1976 in Case 43/75 Defrenne, cited above, it may, by way of exception, taking account of the serious difficulties which its judgment may create as regards events in the past, be moved to restrict the possibility for all persons concerned of relying on the interpretation which the Court, in proceedings on a reference to it for a preliminary ruling, gives to a provision. A restriction of that kind may be permitted only by the Court in the actual judgment which gives the ruling on the interpretation requested.
42 With regard to this case, it must be pointed out that Article 7(1) of Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security (Official Journal 1979, L 6, p. 24) authorized the Member States to defer the compulsory implementation of the principle of equal treatment with regard to the determination of pensionable age for the purposes of granting old-age pensions and the possible consequences thereof for other benefits. That exception has been incorporated in Article 9(a ) of Directive 86/378/EEC of 24 July 1986 on the implementation of the principle of equal treatment for men and women in occupational social security schemes ( Official Journal 1986, L 225, p . 40 : corrigendum published in Official Journal 1986, L 283, p . 27 ), which may apply to contracted-out schemes such as the one at issue in this case .
43 In the light of those provisions, the Member States and the parties concerned were reasonably entitled to consider that Article 119 did not apply to pensions paid under contracted-out schemes and that derogations from the principle of equality between men and women were still permitted in that sphere.
44 In those circumstances, overriding considerations of legal certainty preclude legal situations which have exhausted all their effects in the past from being called in question where that might upset retroactively the financial balance of many contracted-out pension schemes. It is appropriate, however, to provide for an exception in favour of individuals who have taken action in good time in order to safeguard their rights . Finally, it must be pointed out that no restriction on the effects of the aforesaid interpretation can be permitted as regards the acquisition of entitlement to a pension as from the date of this judgment.
45 It must therefore be held that the direct effect of Article 119 of the Treaty may not be relied upon in order to claim entitlement to a pension with effect from a date prior to that of this judgment, except in the case of workers or those claiming under them who have before that date initiated legal proceedings or raised an equivalent claim under the applicable national law. (Emphases added)
Lewison LJ in O’Brien (2015):
“To interpret paragraph 18 so as to allow the claim to be made would be to make new law which Parliament has plainly rejected. It is, in my judgment, clearly a question of policy whether survivor’s pensions should be extended to same-sex couples, whether in civil partnerships or marriages. That very question was raised in connection with the Marriage (Same Sex Couples) Act 2013, section 16 of which required the government to review the differences in survivor benefits in occupational pension schemes; and, in the light of the review, to consider whether changes in the law were needed. That, to my mind, is a clear indication that we are in the realms of policy rather than interpretation. For the same reasons, the argument that paragraph 18 should be interpreted compatibly with the European Conventionon Human Rights and Fundamental Freedoms must also fail. The legislation is clear and cannot be interpreted in such a way as to enable Mr Walker to succeed.” (Para 46)
Note: The EU Framework Directive (2000/78/EC) established a general framework for combating discrimination on a number of grounds, including sexual orientation. The United Kingdom was required to transpose that directive into domestic law by 2 December 2003. The Civil Partnership Act 2004 came into force on 5 December 2005.
Bruno and Pettini (2010)
The temporal scope of the Framework Agreement
52 The INPS [Istituto nazionale della previdenza sociale ie social welfare provider for the private sector] submits, in essence, that the Framework Agreement may be applied only to periods of employment after the entry into force of the national measure implementing Directive 97/81, namely Legislative Decree No 61/2000. As regards Ms Bruno, Ms Lotti and Ms Matteucci, the calculation of the period of service required to qualify for a retirement pension relates, wholly or in part, to periods before the expiry of the deadline for transposing Directive 97/81, which do not therefore fall within the scope of the Framework Agreement.
53 According to settled case-law, new rules apply, unless otherwise specifically provided, immediately to the future effects of a situation which arose under the old rule (see, to that effect, inter alia, Case 68/69 Brock  ECR 171, paragraph 7; Case 270/84 Licata v ESC  ECR 2305, paragraph 31; Case C-290/00 Duchon  ECR I-3567, paragraph 21; Case C-334/07 P Commission v Freistaat Sachsen  ECR I-9465, paragraph 43; and Case C-443/07 P Centeno Mediavilla and Others v Commission  ECR I-10945, paragraph 61).
54 As the Advocate General pointed out at point 39 of her Opinion, neither Directive 97/81 nor the Framework Agreement derogates from the general principle referred to in the preceding paragraph.
55 Accordingly, the calculation of the period of service required to qualify for a retirement pension such as the pensions at issue in the main proceedings is governed by Directive 97/81, including periods of employment before the directive entered into force.
From the Innospec Employment Appeal Tribunal case
This also rejected Walker’s claim for retroactivity re gay couples’ pension rights: “In short, Ten Oever demonstrates that where a pension accrues on a discriminatory basis at a time when that discrimination is not unlawful, but it is unlawful at the time the pension comes into payment, the payer is not obliged by law to remedy the past discrimination at the time of payment. Though it might through modern eyes seem unfair, the result can in principle be no different as between differing grounds for holding discrimination unlawful.”
The Ten Oever question (1993):
15 In essence, the second question asks the Court to state the precise scope of the limitation of the effects in time of the Barber judgment.
16 The precise context in which that limitation was imposed was that of benefits (in particular, pensions) provided for by private occupational schemes which were treated as pay within the meaning of Article 119 of the Treaty.
17 The Court’ s ruling took account of the fact that it is a characteristic of this form of pay that there is a time-lag between the accrual of entitlement to the pension, which occurs gradually throughout the employee’ s working life, and its actual payment, which is deferred until a particular age.
18 The Court also took into consideration the way in which occupational pension funds are financed and thus of the accounting links existing in each individual case between the periodic contributions and the future amounts to be paid.
19 Given the reasons explained in paragraph 44 of the Barber judgment for limiting its effects in time, it must be made clear that equality of treatment in the matter of occupational pensions may be claimed only in relation to benefits payable in respect of periods of employment subsequent to 17 May 1990, the date of the Barber judgment, subject to the exception in favour of workers or those claiming under them who have, before that date, initiated legal proceedings or raised an equivalent claim under the applicable national law.
20 The answer to the second question submitted to the Court must therefore be that by virtue of the judgment of 17 May 1990 in Case C-262/88 Barber v Royal Guardian Exchange the direct effect of Article 119 of the Treaty may be relied upon, for the purpose of claiming equal treatment in the matter of occupational pensions, only in relation to benefits payable in respect of periods of employment subsequent to 17 May 1990, subject to the exception in favour of workers or those claiming under them who have, before that date, initiated legal proceedings or raised an equivalent claim under the applicable national law. Gerardus Cornelis Ten Oever v Stichting Bedrijfspensioenfonds voor het Glazenwassers- en Schoonmaakbedrijf (1995).
Article 119 Treaty of the EEC
Each Member State shall during the first stage ensure and subsequently maintain the application of the principle that men and women should receive equal pay for equal work.
For the purpose of this Article, ‘pay’ means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which the worker receives, directly or indirectly, in respect of his employment from his employer.
Equal pay without discrimination based on sex means:
- (a) that pay for the same work at piece rates shall be calculated on the basis of the same unit of measurement;
- (b) that pay for work at time rates shall be the same for the same job.