Mr Walker had worked for Innospec from 1980 until his retirement in 2003. Throughout that time he had made regular contributions to his employer’s occupational pension scheme. He and his partner had been living together since September 1993. They later entered into a civil partnership in January 2006 and subsequently married.
Innospec’s pension scheme provided a member’s surviving spouse with an annual pension of two thirds of the member’s pension. Following the introduction of the Civil Partnership Act 2004, the rules of the scheme were amended “to the extent necessary to comply with legislative requirements relating to benefits payable to surviving civil partners”. Under an exemption set out in Schedule 9 of the Equality Act 2010 (which does not apply in Northern Ireland), occupational pension schemes were permitted to restrict a person who is not married to a person of the opposite sex from having access to the benefits of the pension which accrued before 5 December 2005 or which is payable in respect of periods of service before that date. This meant that with regards to pensionable service that was completed before 5 December 2005, civil partners were only entitled to contracted-out spouse benefits which accrued for the tax year 1988-89 and subsequently.
Applying the Schedule 9 exemption, the Respondent therefore argued that since all of Mr Walker’s service pre-dated 5 December 2005, his civil partner would only be entitled to an annual pension of approximately £1,000, as opposed to a pension of around £45,000 if pensionable service before 5 April 2005 was to be included.
Mr Walker complained to the Employment Tribunal, which found that the scheme had directly and indirectly discrimination against Mr Walker on the grounds of his sexual orientation. The Tribunal held that if Mr Walker had had an opposite-sex spouse, they would be entitled to the more substantial pension benefit of £45,000, which was therefore incompatible with European case law. The Employment Appeal Tribunal overturned this decision and a further appeal by Mr Walker to the Court of Appeal was subsequently dismissed.
The Court of Appeal found that the partial exemption in Schedule 9 of the Equality Act 2010 was not incompatible with EU law. They found that EU legislation was bound by the principle of ‘no retroactivity’ meaning in this case that that EU anti-discrimination, in particular the Equal Treatment Framework Directive, did not have retroactive effect unless, exceptionally, it was clear that the legislator intended this, that the purpose to be achieved requires this and that legitimate expectations of those concerned are respected. Mr Walker again appealed the matter, this time to the UK Supreme Court.
The Supreme Court considered the essential question in Mr Walker’s appeal to be whether the exemption contained in Schedule 9 of the Equality Act 2010 to be incompatible with the Equal Treatment Framework Directive, which requires member states to prohibit discrimination in the field of employment and occupation. The Court held that whilst EU law does not impose a requirement on member states to recognise same-sex partnerships, either as civil partnerships (which are legal throughout the UK, including Northern Ireland, by virtue of the Civil Partnerships Act 2004) or by same-sex marriage (which is not presently permitted in Northern Ireland but is legal throughout the rest of the UK), the European Court of Justice 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.
The Supreme Court unanimously allowed Mr Walker’s appeal and declared the December 2005 exemption under the Equality Act 2010 to be incompatible with EU law. It found that the Court of Appeal had wrongly concluded that entitlement to a survivor’s pension is ‘permanently fixed’ at the date of retirement. Indeed, the Supreme Court considered a recent line of cases from the European Court of Justice which set out clearly than unless evidence establishes that there would be unacceptable social or economic consequences of giving effect to Mr Walker’s entitlement to a survivor’s pension for his spouse, 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.
This decision has made clear that the UK Courts will not permit schemes providing pensions on a defined benefits basis to discriminate on the basis of sexual orientation, despite the fact that such schemes were applying an exemption specifically provided for under law. Whilst the impact of Walker v Innospec may be less relevant in Northern Ireland where the Equality Act 2010 does not apply, it is important for employers to ensure that all occupational pension schemes, if they are not already doing so, are set up to provide survivors’ benefits to civil partners on the same basis as those provided to other opposite-sex married members.
Employers are advised to seek professional legal advice when applying any changes to their occupational pension schemes given the complexity of the case law in this area.
Maxine Orr is a Partner in Worthingtons Commercial Solicitors, Belfast, where she specialises in Employment Law and can be contacted on 028 9043 4015 or firstname.lastname@example.org.