Innospec Ltd v Walker

Occupational pension benefits are deferred pay earned through service. Where discrimination was lawful when the relevant service occurred, later legislation making that discrimination unlawful does not ordinarily create a retrospective claim in respect of the earlier service.

A statutory exception which deliberately preserves that position cannot be rewritten under the Marleasing principle where doing so would contradict a fundamental legislative choice. Nor can the provision be disapplied where the relevant situation falls outside the scope of European Union law.

For sexual-orientation discrimination, comparability between marriage and civil partnership is assessed in relation to the benefit concerned. A funding justification for indirect discrimination requires sufficient evidence of the scale and boundaries of the additional risk.

Mr Walker was a member of Innospec’s defined-benefit occupational pension scheme. He retired in 2003 after service completed before 5 December 2005, when section 1 of the Civil Partnership Act 2004 came into force.

The scheme provided a substantial survivor’s pension to a spouse but only a very limited benefit to a civil partner where the pension derived from pre-5 December 2005 service. The Employment Tribunal held that this was unlawful discrimination, found Schedule 9 paragraph 18 of the Equality Act 2010 incompatible with Directive 2000/78/EC, and interpreted the provision so as to permit equal benefits.

Innospec appealed. The central issues were whether paragraph 18 was incompatible with European Union law, whether it could be interpreted or disapplied if incompatible, and whether any discrimination was justified.

1. Appeal allowed. The Employment Tribunal was wrong to hold that Schedule 9 paragraph 18 of the Equality Act 2010 was incompatible with Directive 2000/78/EC.
2. Occupational pension benefits constitute deferred pay. Pension rights accrue during periods of service, although payment is deferred until retirement or a survivor’s entitlement arises. The relevant legal conditions are therefore determined by the law applicable when the pension was earned. The principles in Barber, Ten Oever, Vroege, Beune and Brouwer supported that conclusion.
3. Directive 2000/78/EC did not have retrospective effect. It required equal treatment from the date by which the Directive had to be transposed, but did not require earlier lawful discrimination to be remedied retrospectively. Römer did not establish a contrary rule, and Maruko was distinguishable because the domestic scheme considered there did not contain an equivalent temporal exception.
4. Marriage and civil partnership were sufficiently comparable for the survivor’s benefit. Section 23(3) of the Equality Act 2010 expressly provided that the different statuses were not a material difference where sexual orientation was the protected characteristic. The alleged discrimination was direct; alternatively, it was indirect and the Tribunal was entitled to find that Innospec had not shown the restriction to be a proportionate means of achieving the legitimate aim of proper scheme funding. Generalised assertions were insufficient. Adequate evidence was required concerning the scale and boundaries of the additional funding risks.
5. If paragraph 18 had been incompatible, it could not have been interpreted as requiring full retrospective equality. The provision was a specific and deliberate exception within Schedule 9, not a statutory lacuna. Rewriting it would cross the boundary between interpretation and legislation and would contradict a fundamental feature of Parliament’s choice.
6. Nor could paragraph 18 have been disapplied. At the material time the claim concerned a situation outside the scope of European Union law, applying the principles discussed in Römer, Kücükdeveci and R (Chester).

• Employment Tribunal, Manchester: held, in reasons delivered on 13 November 2012, that the pension arrangements were discriminatory, that paragraph 18 should be interpreted to permit equal treatment, and that justification was unavailable.
• Employment Appeal Tribunal: allowed Innospec’s appeal and held that paragraph 18 was compatible with Directive 2000/78/EC; the claim could not succeed.