Adams & Others v Lancashire County Council & Another [Court of Appeal, 15 May 1997]
The Court of Appeal has ruled that pension fund members do not accrue pension rights for future service, following the transfer of an undertaking. The ruling reveals a gaping hole in the legislation.
Adams concerned school meals staff employed by Lancashire County Council. The school meals service was put out to tender and the contract was awarded to BET Catering Services Limited.
It was accepted on all sides that the transfer of the catering contract was a business transfer and the TUPE Regulations applied. As a result the staff remained on the same terms and condition of employment as before, with the exception of their pension rights.
In all but the rarest of circumstances, an employee is not able to remain a member of the former employer's occupational pension scheme following the transfer of the undertaking to the other employer. Inland Revenue restrictions prevent continuing membership as the employees concerned will only have access to the new employers pension scheme (if there is one).
The pension already earned in the old employer's pension scheme will be frozen. That much is uncontroversial. The controversy concerns the right to earn further pension benefits for future service.
The TUPE Regulations and its parent, the Acquired Rights Directive, contain an exception to the general rule that employment rights continue after a business transfer on the same basis as before. The exception is pension rights.
The Adams case concerned the extent of this exception. The staff, supported by their unions, UNISON and GMB, argued that the exception related only to the pension rights already earned up to the point of transfer. It was argued that the terms of employment relating to future pension rights were protected after the transfer as they had been before. The new employer had to offer a "broadly comparable" pension scheme for the staff who transferred.
The Court of Appeal disagreed and said domestic or European legislation does not require the transferee to offer a "broadly comparable" pension scheme for the future.
This appears to leave a gaping hole in the protection offered to pension scheme members if the business for which they work is transferred to another employer. The intention which lies behind the Directive is clearly to protect employees in this situation. But according to the appeal court this protection does not extend to pension rights which, in many cases, constitute a significant part of the remuneration package which led the employees to take the job in the first place.
However, the Conservative Government's Legal Advisers said in 1990, that transferred employees who were not offered broadly comparable pension benefits, following a business transfer would be entitled to treat themselves as constructively dismissed and claim compensation for unfair dismissal.
This view has subsequently been repeated in advice given by the Attorney-General and Lord Advocate to all Government Departments and it has been repeated in the Government Guide to Market Testing. The result is that most public sector tendering exercises now require prospective purchasers to offer broadly comparable pensions to transferring employees.
This view was not revised by the Government Law Officers following the earlier decision of the High Court in the Adams case and it has not yet been tested in any litigation. It remains to be seen whether it will be revised following this ruling. No decision has yet been taken by the unions involved whether the case will be appealed to the House of Lords.
Equal pay at last for British Coal employees
British Coal Corporation v Keeble, [26 March 1997]
Two former British Coal employees, supported by the NUM and represented by Thompsons have won their battle for equal pay despite the fact that they were outside the time limit set by the Sex Discrimination Act for bringing the case. The Employment Appeal Tribunal ruled that it was fair - "just and equitable" in the legal jargon - to extend the time limit.
In particular it addressed the extent to which the principle on claims out of time set out in Biggs v Somerset County Council affected the Tribunals discretion in such cases.
The two women had received redundancy payments lower than expected because British Coal operated a voluntary redundancy scheme which reduced the payments according to age. For men the reductions applied only to those over of the age 60 whereas for women it was 55. British Coal agreed that the claim was unanswerable and their only defence was that the claims were out of time.
It was the second occasion that the claims had been before the EAT. The claims had initially been heard by an Industrial Tribunal in 1994. On that occasion British Coal had appealed the decision that the claims were in time.
The Employment Appeal Tribunal remitted the case for a re-hearing, saying that the issue of whether or not it was fair to extend the time should be decided after considering the circumstances of each individual case. The EAT suggested that the IT should adopt as a checklist the factors mentioned in Section 33 of the Limitation Act 1980 when reaching their decision as to whether the claims should proceed to a full hearing.
At the re-hearing of the cases the Industrial Tribunal decided it was fair for the claims to proceed having given detailed consideration to the case of Biggs v Somerset County Council and various cases decided under the provisions of Section 33 of the Limitation Act 1980. British Coal appealed this decision to the EAT.
The only ground upon which British Coal relied at the Appeal was that the IT had applied the principle on out of time claims in the wrong way. The IT had taken into account the women's excuses that the delay in presenting the claim was due to a misunderstanding of the true position under European Law.
British Coal argued that the guidance given by Lord Justice Neill in Biggs was to apply to all cases in which an IT could exercise discretion to extend time. The particular passage relied upon by Counsel for British Coal was this: "It would be contrary to the principle of legal certainty to allow past transactions to be re-opened and limitation periods to be circumvented because the existing law at the relevant time had been not explained or had not been fully understood."
It was agreed between all parties and the IT that the discretion given under Section 76 (5) of the Sex Discrimination Act is much wider than Section 67 (2) of the 1978 Act which was under consideration in Biggs. The EAT took the view that if British Coal's interpretation of Biggs was accepted, then the IT would not be able to consider the reason for delay and the effect would be that there would be no excuse for the delay.
The consequences being that unless the delay was very short the Tribunal would have to refuse to extend time. Therefore, an Applicant who had delayed making an application through excusable ignorance of their rights would be no better than somebody who had simply delayed because they could not be bothered to present their claim in time.
The EAT were satisfied that the comments in Biggs were intended to apply only in the interpretation of the time limits under Section 67 (2) of the 1978 EPCA and did not apply to section 76 (5) of the Sex Discrimination Act. The EAT also took the view that the IT was right to consider the principles in the Biggs case as only one factor to be taken into account when considering what was just and equitable in all the circumstances.