Employment update

Employment law update:
survivor spouse pension rights

In Walker v Innospec Ltd and others [2017] UKSC 47, the Supreme Court held that the appellant’s husband was entitled, on his death, to a spouse’s pension.

Background to the appeal

John Walker, the appellant in these proceedings, worked for the respondent, Innospec Ltd, from 1980 until his retirement in 2003. Throughout that time, he made regular contributions to the firm’s occupational pension scheme. Mr Walker is gay and has lived with his male partner since 1993. They entered into a civil partnership on 23 January 2006 and are now married.

… EqA Sch 9 para 18 is incompatible with EU law and must be disapplied and … Mr Walker’s husband is entitled on his death to a spouse’s pension

In 2006, Mr Walker asked Innospec to confirm that, in the event of his death, it would pay the spouse’s pension, which the scheme provides for, to his civil partner. Innospec refused because his service predated 5 December 2005, the date that civil partnerships were introduced in the UK, and any discriminatory treatment is therefore permitted under Equality Act (EqA) 2010 Sch 9 para 18. This provides that it is lawful to discriminate against an employee, who is in a civil partnership or same-sex marriage, by preventing or restricting them from having access to a benefit, facility or service the right to which accrued before 5 December 2005 or which is payable in respect of periods of service before that date. If Mr Walker was married to a woman (or, indeed, if he married a woman in the future) she would be entitled on his death to a ‘spouse’s pension’ of about £45,700 per annum. As things stood, Mr Walker’s husband would be entitled to a pension of about £1,000 per annum (the statutory guaranteed minimum).

Mr Walker’s claim for discrimination was upheld by the employment tribunal, but Innospec’s appeal to the Employment Appeals Tribunal was allowed. Mr Walker’s appeal to the Court of Appeal was dismissed, and he appealed to the Supreme Court.

Judgment

The Supreme Court unanimously allowed Mr Walker’s appeal and made a declaration that (i) EqA Sch 9 para 18 is incompatible with EU law and must be disapplied; and (ii) Mr Walker’s husband is entitled on his death to a spouse’s pension, provided they remain married. Lord Kerr (with whom Lady Hale and Lord Reed agreed) gave the lead judgment. Lord Carnwath and Lord Hughes gave a judgment concurring in part.

Reasons for the judgment

Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation (‘ the Framework Directive’) requires member states to prohibit discrimination in the field of employment and occupation on various grounds, including sexual orientation. The deadline for transposing the Directive into domestic law was 2 December 2003, and the UK did this within the deadline through legislation now incorporated into Part 5 of the EqA (para 17). Parliament also, however, provided for the exception now contained in EqA Sch 9 para 18 restricting benefits payable in respect of periods of service before 5 December 2005. The essential question in this appeal was whether Sch 9 para 18 is incompatible with the Framework Directive (paras 20–21).

Although EU law does not impose any requirement on member states to recognise same-sex partnerships, the Court of Justice of the European Union (CJEU) has held that if a status equivalent to marriage is available under national law, it is directly discriminatory contrary to the Framework Directive for an employer to treat a same-sex partner, who is in such a partnership, less favourably than an opposite-sex spouse. In the UK, parliament has chosen to recognise same-sex partnerships, first, through the introduction of civil partnerships, and subsequently through the recognition of same-sex marriage itself (paras 17–19).

The general rule under EU law, as in most modern legal systems, is that legislative changes apply prospectively. The CJEU has developed two principles to establish the temporal application of EU legislation - the ‘no retroactivity’ principle and the ‘future effects’ principle (paras 22–23). These principles draw a distinction between the retroactive application of legislation to past situations (which is prohibited unless expressly provided for) and its immediate application to continuing situations (which is generally permitted). The relevant question is whether the legal situation has become ‘permanently fixed’ (para 25). The application of these principles presents a challenge when one is dealing with entitlement to an occupational retirement pension, the right to which may accumulate over decades and it may not be easy to identify the point at which it becomes ‘permanently fixed’ (para 26).

The Court of Appeal, in dismissing Mr Walker’s appeal, wrongly concluded that entitlement to a survivor’s pension is ‘permanently fixed’ at the date of retirement (para 43) ([ 2015] EWCA Civ 1000). It was influenced in this view by a line of the CJEU’s case law exceptionally limiting the temporal application of one of its judgments relating to equal pay for men and women (ie, Barber v Guardian Royal Exchange Assurance Group Case C-262 /88, and see the Barber line of case law). In the opinion of the majority of the court, these cases are not relevant to the application of the Framework Directive in a case such as this. How the CJEU exceptionally applies a temporal limitation to one of its rulings has no inevitable bearing on the temporal application of legislation as a matter of principle (para 46).

In any event, two recent decisions of the Grand Chamber of the CJEU concerning the equal treatment rights of samesex partners to survivor’s pensions put success for Mr Walker’s claim beyond doubt (Maruko v Versorgungsanstalt der Deutschen Bühnen C-267 /06 and Römer v Freie und Hansestadt Hamburg C-147 /08) (para 46). From these cases, it is clear that unless evidence establishes that there would be unacceptable economic or social consequences of giving effect to Mr Walker’s entitlement to a survivor’s pension for his husband, at the time that this pension would fall due, there is no reason that he should be subjected to unequal treatment as to the payment of that pension (para 55). Mr Walker’s husband, provided he does not predecease him and they remain married at the time of Mr Walker’s death, is therefore entitled under the Framework Directive to a spouse’s pension calculated on the basis of all the years of Mr Walker’s service with Innospec. On that account, paragraph 18 of Schedule 9, in so far as it authorises a restriction of payment of benefits based on periods of service before 5 December 2005, is incompatible with the Framework Directive and must be disapplied (para 77].

Lord Carnwath and Lord Hughes agreed with the majority that Mr Walker’s appeal should be allowed, but on the more limited basis that the question of who qualified as his spouse fell to be determined after the Directive had come into force. They preferred to leave the broader question of whether the Barber (see above) line of case law is of any relevance to the application of the Framework Directive to be determined by the CJEU in O’Brien v Ministry of Justice [2017] UKSC 46, in which the court has decided to refer to the CJEU a question relating to the pension entitlement of part-time workers (paras 77–78).

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