HSBC leads way over pensions for part-timers

Removal of the two-year limit on backdated pension rights for part-timers
has prompted bank to make a settlement with UNIFI

On 6 February 2001, the House of Lords gave its judgment in the part-time
pensions case Fletcher and others v Midland Bank and others, 2001, IRLR 237.
This, however, was not the end of the process. Now HSBC (formerly Midland Bank)
has announced that it has become the first major bank to reach a settlement
with UNIFI (representing employees and ex-employees) on the claims.

Background

Their Lordships had been asked to rule, as a preliminary point, on two
specific issues:

– What was the time limit within which claims should be brought?

– How far back could any remedy be backdated?

The tribunals then had to consider each individual application. The
preliminary point arose in 1994 when the European Court of Justice held in
Vroege and Fisscher (Vroege v NCTV Instituut voor Volkshuisvesting BV and anor,
1994, ECR I-4541) that, under European law, the right to claim retrospective
pension scheme membership could be backdated to 1976.

This followed from a number of ECJ decisions to the effect that to exclude
part-time employees from pension schemes can constitute indirect
discrimination. Until 1994, employers had understood that they could lawfully
restrict pension scheme membership to full-time employees.

As a result of the 1994 decision, some 100,000 claims were launched over the
following few years claiming that the failure to provide pension scheme
benefits to those who worked part-time was a breach of the Equal Pay Act 1970
and indirectly discriminatory on the grounds of sex.

Under the Equal Pay Act 1970, an individual can only bring a claim for equal
pay within six months of the end of employment with the employer and, if successful,
such a claim can only be backdated for two years. These limits were upheld
until the House of Lords’ ruling. The HoL, however, referred the matter to the
ECJ before then giving its ruling.

House of Lords’ decision

The House of Lords decided:

– Claims must be brought within six months of leaving employment, and

– The remedy on a successful claim can be backdated to 1976, or the date on
which employment commenced, whichever is later.

The effect of this was that each claim lodged at the tribunals had to be
assessed against a number of issues arising out of the House of Lords’ ruling:

– Had the claim been brought while the individual remained employed or
within six months of the end of that employment?

– Had the individual been excluded from the employer’s pension scheme

– Was the reason for that exclusion attributable solely to discriminatory
grounds (ie because he/she was employed on a part-time basis) or some other
reason that was not discriminatory?

Effect of the ruling

The House of Lords ruled that the provision in the Equal Pay Act 1970, which
only allowed claims on pensions to be backdated two years, was contrary to
European law. Consequently, UK law has to be changed.

When the Part Time Workers (Prevention of Less Favourable Treatment)
Regulations 2000 were first passed, inequitable treatment of part-timers
regarding access to an occupational pension scheme could only be backdated two
years. The decision in Fletcher v Midland Bank, means the Government must now
amend the Regulations and get rid of this limit.

The amendment has already been issued for consultation. The Government has
no choice but to introduce the amendment, which is likely to come into effect
on 10 July 2002, along with the Fixed Term Contract Regulations.

By Tom Flanagan, managing partner and Charlotte Hamer a professional
support lawyer in the Employment and Pensions Group of international law firm
Stephenson Harwood. The firm acted for Midland Bank (now HSBC) in the case.

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