Part-time workers have been campaigning to win compensation for exclusion from membership of company pension schemes. This month, the House of Lords is due to publish its decision on key test cases which were heard in January looking at the validity of time limits on the backdating of claims. If the Lords support the employees, British businesses could face a hefty postbag full of legal claims. How likely is that outcome and how huge could those claims really be?
The part-timers are seeking compensation for exclusion from pension schemes on the grounds of their sex. The Lords has to decide the time limits on claims. The UK's Equal Pay Act requires that claims be commenced no later than six months after retirement, and that backdated compensation be limited to two years. The part-timers argue these limits are incompatible with European law, pointing to last year's decision of the European Court of Justice (in the Magorrian case) that additional benefits could be calculated from 8 April 1976.
Though most of the employers in the Lords' test cases come from the public sector, Midland Bank is also in the firing line, facing claims from members of BIFU, the union for banking, insurance and finance staff. A BIFU spokesperson says over 4,000 cases against financial institutions involving its own members have been lodged. The total number of claims registered with tribunals is believed to exceed 60,000, and any employer of part-timers could be affected. 'If the time limit arguments go against the employers, there will be a lot of administrative inconvenience dealing with the claims,' says Harold Lewis, head of pensions litigation with solicitors Eversheds.
At the time Management Today went to press, the likely outcome of the Lords' decisions was still uncertain. 'There is a strong indication that the two main questions, the six-month time limit and the backdating period, will be referred to the European Court,' says Lewis. The unions would be reasonably happy with such an outcome. A spokesperson for Unison, representing public sector part-timers, believes a referral to Europe would ultimately go the part-timers' way. 'We have a good case,' she says. 'We think Europe has already spoken,' adds BIFU's spokesperson.
But what could removing the two-year time limit on claims ultimately cost? Back-of-fag-packet estimates have reached £7-£10 billion. 'The maximum potential cost is very large indeed,' says Lewis. 'However, the largest estimates are based on all those cases being proven in full, and there are lots of other hurdles that they have to get over. They have to show discrimination on the grounds of sex.' Some claims may also be frustrated by the fact that claimants could have to pay in funds themselves.
'If individuals are granted backdated membership, they are going to be asked to make contributions for the period concerned, which will be a large capital sum,' says Brian Wilson, head of benefits research at pension fund consultants Bacon & Woodrow. 'Some unions have offered interest-free loans, but people could still be put off.'
Even if the final cost falls to millions rather than billions, business representatives are still horrified at the prospect. 'We think it's unfair for businesses to have to pay up extra money they didn't expect to have to pay,' says Stephen Davies, economic research executive at the Institute of Directors. 'Retrospective windfall remuneration doesn't seem particularly fair.' But, as the National Association of Pension Funds sums it all up, if claims can be backdated to 1976, businesses could be facing a 'nightmare'.