Part-timers

Background

Historically part time work has been carried out by women and, until relatively recently, part timers were often excluded from occupational pension scheme membership.

Various high profile court cases in the past (see below) have determined that it is unlawful to exclude part-timers from occupational pension schemes on the grounds of indirect sex discrimination.

In practice this means that for example, if an employer has more women part-timers then men and excludes part-timers from the pension scheme, then this could be seen as indirect sex discrimination. This would also work the other way around but in the past more women have been part time than men. Part-timers who are or have been excluded from pension scheme membership have to argue that they were discriminated against. Furthermore following the EU Part-Time Workers Directive a part-time worker must be treated no less favourable than a 'comparable' full-timer. This means that unless employers can objectively justify exclusion, part-time employees have to be provided with access to pension schemes on a no less favourable basis than their full-time counterparts.

If the employer rejects the claim and can justify part-timers' exclusion from the pension scheme on objective grounds, then any claim might be unsuccessful. However, it is likely to be difficult for the employer to provide convincing grounds for exclusion.

ECJ Part-timer Cases

Following our entry into the European Union we were required to comply with Article 119 of the Treaty of Rome (now Article 141EC) which sets out the principle of 'equal pay for equal work'.

The UK was required to introduce domestic legislation to this effect which was in turn to have an impact on equal treatment in relation to occupational pension scheme membership in the years that followed.

Hence the introduction of the Equal Pay Act 1970. This act was introduced to prohibit unequal pay between the sexes. The act also incorporates the time limits under which a claim must be made. A claim can be made at any time during the employment to which the claim for unequal pay relates (or within 6 months after leaving). However the claim can only relate to the pay lost during the 2 years previous to the claim date.

It has since been clarified that pensions are deferred pay and therefore pensions need to be equalised. This was highlighted in the case of Bilka-Kaufhaus outlined below and Barber v Guardian Royal Exchange (the 'Barber Judgement'). Sex equalised benefits must now be provided from the date of the Barber judgement, 17 May 1990 . The Barber case raised as many questions as it answered and it did not require part-timers to be treated as full-timers.

In the years that followed the introduction of the Equal Pay Act 1970 a number of key cases were brought before the European Court of Justice (ECJ) in relation to part-timers.

The Bilka-Kaufhaus case in 1986 concerned a complaint by a part-time female employee who had been excluded from her employer's pension scheme as she was a part-timer. The scheme was only open to part-timers if they satisfied certain conditions that could not be met by the complainant. She claimed indirect discrimination to the ECJ. The ECJ held that membership of a scheme was within Article 119 of the Treaty of Rome and that exclusion of part-timers was in breach of Article 119 if it affected a higher number of female employees than male employees and vice versa. The employer would have a case if the exclusion was objectively justified and not on the grounds of sex. It also said that an employer could justify a policy that excluded part timers of either sex on the basis that it wished to employ as few part timers as possible provided the means chosen were appropriate and necessary to achieving that objective.

Also, on 28 September 1994 the European Court of Justice (ECJ) found in the Dutch cases of Vroege and Fisscher that exclusion of part-time employees from pension schemes could constitute indirect sex discrimination unless the employer could justify the exclusion on the basis of 'objectively justified factors unrelated to any discrimination on grounds of sex'. The court also held that this right of access could be backdated as far as 8 April 1976 . (see Defrenne V Sabena). The right to membership of an occupational pension scheme therefore falls within the scope of article 119 of the Treaty of Rome.

A plethora of British part-timer cases brought before Employment Tribunals around this time generated concern that the two time limits as introduced by the Equal Pay Act 1970 could in fact be unlawful. In the months that followed approximately 60,000 part-timers lodged claims in respect of backdated membership of their employer's pension schemes for longer periods. In all these cases it was upheld that the two year backdating limit and the 6 month after leaving time claim were correct.

Following appeal on a handful of these cases to the Employment Appeals Tribunal and the Court of Appeal, the House of Lords referred the cases to the ECJ for clarification.

Preston v Wolverhampton & Others

On 16 May 2000 , the ECJ declared in the case of Preston v Wolverhampton and Others that the principle of effectiveness precluded a national procedural rule stating that claims were limited to two years backdating. This in effect meant that part-timers claims could be backdated to the date employment commenced or 8 April 1976 if later.

The date of 8 April 1976 related to the date of judgement in the Defrenne v Sabena case where the ECJ decided that if Article 119 was breached in respect of 'equal pay for equal work' employees could take action directly against their employers to enforce it.

The ECJ said that employees would be required to pay contributions in respect of all periods of part-time employment for which they seek benefit. This is not the case if the scheme is non contributory.

N.B The Pensions Act 1995 inserted an overriding equal treatment rule into all occupational pension schemes. This means that where part-timers were excluded due to discrimination after 31 May 1995 , access to the scheme cannot be denied. The regulations dictated that employers should be liable to pay all contributions (including the member's) where the court or tribunal finds there has been a breach of the equal treatment rule.

On 8 February 2001 the House of Lords confirmed that retroactive admission to occupational pension schemes could be claimed back as far as 8 April 1976 and upheld that claims must be lodged with an Employment Tribunal within six months of the end of employment.

It is important to note that the Preston case did not decide that all claims must succeed, it was merely a test on the legality of the time limits. An Employment Tribunal must now apply the House of lord's ruling when deciding each and every claim.

Uppingham School v Shillcock

In October 1997 the Pensions Ombudsman upheld a complaint that an employee had been denied membership of a pension scheme as the employer had determined that employees earning less than the lower earnings limit were not eligible. The rule adversely affected a much higher proportion of woman than men. The Pensions Ombudsman determined that there had been indirect sex discrimination and directed the employer to admit her with three years' retrospective membership. The employer and the trustees of the pension scheme appealed to the High Court.

On 19 April 2002 the High Court ruled on Uppingham School v Shillcock and overturned the Pensions Ombudsman's Determination. The judge ruled that there is no indirect sex discrimination provided the lower earnings limit offset applies equally to all employees whether full or part time, male or female. The judge accepted the purpose of the lower earnings limit offset was to achieve a broad integration between state and occupational scheme benefits.

In addition it was the view of the High Court in this case that the Pension Ombudsman's three year backdating limit was inappropriate. This was in light of the rulings made in the Preston case regarding part-timers. However as the appeal was upheld and therefore backdated pension rights were not granted a definitive ruling was not made. It follows from this that the Pensions Ombudsman three year limit regarding part-timers may be open to challenge in the future.

EU Part-Time Workers Directive

Furthermore the UK Government adopted the EU Part-Time Workers Directive. The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 therefore came into effect on 1 July 2000 . Prior to the introduction of these regulations claims for part-timers had to be on the basis of indirect sex discrimination. To prove indirect sex discrimination there must be a significant and relevant difference between the man's case and the woman's case. This could be demonstrated by a greater number of one sex being unfavourably treated in comparison with the other sex as is often the case with part-timers. However the new regulations require a part-time worker to be treated no less favourably than a 'comparable' full-timer. Also the calculation of benefits for part-time workers must now be on a pro rata basis of the calculation of benefits for full-time workers.

This means that unless employers can objectively justify exclusion, part-time employees have to be provided with access to pension schemes on a no less favourable basis than their full-time counterparts.

Under the new Regulations, employers cannot deny access to both male and female part-time workers, unless different treatment is justified on objective grounds. Scheme rules may need to be revised, to ensure that they comply with the new legislation.

Employment Tribunals can therefore expect to deal with further test cases that cover the clarification of 'objective justification'.

It is thought that less favourable treatment will only be justified on objective grounds if it can be shown that the less favourable treatment:

• is to achieve a legitimate objective
• is necessary to achieve that objective; and
• is an appropriate way to achieve that objective.

In order for a claim to be made, part-timers will need to identify a comparable full-timer who is receiving more favourable treatment. There are several tests to establish who is a comparable full-timer. The part-timer must:

• work for the same employer as the full-timer
• do the same or broadly similar work (taking into account experience and skills where relevant) as the full-timer, and
• work under the same kind of contract as the full-timer.

There is also protection for workers who return to a part-time job from a job they previously did full-time. In this scenario the worker would compare the worker's treatment with that under the previous full-time employment (without the need for another full-time comparator).

This legislation applies to employers, and not directly to trustees and therefore the onus is placed on the employee to present their case to an employment tribunal.

These regulations provide that complaints to the tribunal will need to be presented within three months of the last day on which the worker was unfavourably treated. However the tribunal has discretion to consider a complaint made out of time if it considers it just and equitable to do so. In addition where a tribunal finds that the complainant has been treated less favourably then any order that the tribunal makes must not relate to a period earlier than two years before the date on which the complaint was presented.

These time limits appear to be in conflict with the sex-discrimination time limits.

European Court of Justice ruling in Allonby : January 2004

The Allonby ruling found that there was no need for part time employees to name a comparator when seeking access to an occupational pension scheme operated by the state (e.g. Teachers' Pensions Scheme, National Health Service Pension Scheme, Local Government Superannuation Scheme).

Firefighters Case

A recent example of 'successful' objective justification was that of Matthews & Others v Kent and Medway Towns Fire Authority and Others 02/07/04 concerning retained firefighters.

The Employment Tribunal decision was upheld at Court of Appeal.

In this case retained firefighters were employed under the same type of contract as their full-time colleagues, but they were not engaged in the same or broadly similar work, and therefore were not entitled to the same pension and sick pay benefits.

How to Lodge a Claim

In accordance with the ruling in the Preston case to lodge a claim for backdated pension rights you must do so either before you leave the employment to which the claim relates or within six months of leaving. If the case is accepted the tribunal may consider granting backdating to 8 April 1976 or the date the claimant commenced the relevant employment, whichever is the later.

To lodge a claim you will need to complete form ET1 and submit this to the tribunal. You can obtain this form and guidance on how to lodge a claim from a Citizens Advice Bureau, trade union or local office of the Employment Tribunal. You should also write to your employer to advise them of your claim.

If you left employment more than six months ago it is unlikely that you will be able to claim backdated membership in the pension scheme.

You may however consider making a complaint to the Pensions Ombudsman. He has a more generous time limit for making a claim (but less generous in terms of backdating). However he will only take a case if the period between the date he considers you knew (or should have known) about the problem and the date you make your complaint is less than 3 years. It may be difficult at this stage with all the publicity the issue has attracted to convince the Ombudsman that you are within this constraint.

If the Ombudsman does accept the complaint he can normally only award up to three years backdated service from the date the complaint was made to him (though any time spent using the scheme's internal dispute resolution procedure or consulting TPAS will usually be disregarded).

In a case brought to the Court of Appeal against a Pensions Ombudsman Determination (Trustees of Uppingham School v Mrs Shillcock) it was the view of the Court that the Pensions Ombudsman's three year backdating limit was inappropriate. This was in light of the rulings made in the Preston case regarding time limits. However the appeal was upheld and therefore as backdated pension rights were not granted a definitive ruling was not made on this point. It follows from this that the Pensions Ombudsman three year time limit regarding part-timers may be open to challenge in the future.

What you need to demonstrate to make a claim

You need to demonstrate that

• you are still in relevant employment or lodged your claim within six months of leaving
• you were employed for the period for which backdated membership is claimed
• you were excluded from the pension scheme when a comparable full-time employee was not (however see Allonby case)
• your exclusion from the scheme constituted 'indirect sex discrimination'

If you are claiming under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations that came into force on1 July 2000 you do not need to prove indirect discrimination, the fact that you were excluded from membership because of your part-time status will be enough.

It is then up to the employer, if it wished to do so, to prove that the exclusion of part-time employees from the scheme was genuinely due to a factor, other than the sex of the claimant, that could be 'objectively justified'

Other Points

If a transfer payment has been made to another arrangement then it may be permissible to pay a second transfer value relating to the enhanced benefits.

Trustees may ask part-timers for interest on backdated contributions. There is currently no standard level of interest though we believe a reasonable approach would be to require contributions plus interest at the Bank of England base rate to be paid.

It should be noted that the Pensions Act 1995 inserted an overriding equal treatment rule into all occupational pension schemes. This means that where part-timers were excluded due to discrimination after 31 May 1995 , access to the scheme cannot be denied. The regulations dictated that employers should be liable to pay all contributions (including the member's) where the court or tribunal finds there has been a breach of the equal treatment rule.

Part-timers, in time for bringing a claim, should therefore not be asked to contribute for service after 31 May 1995 , assuming the employer is not challenging the fact that there was discrimination, or arguing that there were objective grounds for exclusion.

Further information

The Pension Service publish a leaflet entitled 'Backdating membership of an occupational pension scheme. What this might mean for you'. This can be obtained from the leaflets page of their website at Direct Gov - Pension Service Guides.

In addition for an update on the recent rulings of the Employment Tribunal their website can be visited at www.employmenttribunals.gov.uk.

Q & A's