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UNISON v The First Secretary of State (High Court) - 27 September 2006

UNISON failed in its application for judicial review of the Government's decision to remove the "Rule of 85" from the Local Government Pension Scheme.

Broadly, the Rule of 85, allows local government workers to retire early on full pensions where the sum of their age and years of membership totals 85 or more.

In brief, the Court’s view was that the Rule of 85 was age discriminatory. However, it did not criticise the Government’s decision to phase in its removal over the next few years, rather than removing it immediately.

Background

The EU Framework for equal treatment in employment Directive (2000/78/EC) (the "Directive") requires Member States to take measures in relation to discrimination on grounds of age by 2 December 2006.

On 2 December 2005, the Minister for Local Government, Phil Woolas, announced that the Government was about to consult on proposed amendments to the Local Government Pension Scheme (the "Scheme") which would include the removal of the Rule of 85 as from 1 October 2006.  During the consultation, discussions took place with, amongst others, the relevant government department, UNISON and the Government Actuary's department (GAD).  The Government's reasoning for the change was, "to ensure compliance with European Union age discrimination legislation…, and to secure ongoing cost stability”.

The regulations implementing the change were made on 29 March 2006 (the "Amending Regulations").

UNISON brought a claim for judicial review of the Government's decision to remove the Rule of 85 from the Scheme.

Application for judicial review

UNISON’s arguments were as follows:

(1)  In putting the change forward as necessary to comply with the Directive, the Government misconstrued the Directive and its application.

UNISON argued, the Directive did not apply to the Rule of 85, because:

• it did not constitute discrimination on the grounds of age, or
• because it was excluded from the scope of the Directive, or
• because any age discrimination in the Rule of 85 was justifiable and the Directive permits age discrimination which is justified.

(2)  The projections used by the Government as to the costs and benefits of the change were seriously flawed.

Hearing

The Government argued that there were two independent reasons leading it to abolish the Rule of 85, namely: (1) the requirements of the Directive, and (2) the need to control the costs of the Scheme.

The court was satisfied that, even if the Government had made a mistake in its approach to the Directive, it would still have made the decision to abolish the Rule of 85.

It was not therefore strictly necessary for the Court to consider whether the Rule of 85 is discriminatory on the grounds of age.  However, it decided to do so, as UNISON considered it might be a material point in any further discussions with the Government.

The Court therefore also ruled on the following questions:

1. Does the Rule of 85 amount to age discrimination?

Decision: Yes.  The Rule of 85 is discriminatory because it produces different outcomes for benefit where the distinguishing characteristic is age. 

The Court approved the following illustration:

“Member A and Member B join the Scheme at the same time.  Member A joins the scheme at 30 and leaves after 15 years service.  Member A satisfies the 85 year rule at 60 and may take the 15 years of preserved benefits at age 60 without reduction.  Member B joins the scheme at age 45 and leaves after 15 years service.  Member B does not satisfy the 85 year rule until age 65.  Therefore Member B cannot take 15 years of benefits without reduction until he is 65.  The only difference between the two members is the age at which they joined the Scheme”.

2. Is the Rule of 85 taken out of the scope of the Directive by Article 6(2)?

Article 6(2) allows Member States to provide that certain provisions of pension schemes are not discriminatory on age grounds.  The illustrations used in the Directive include that schemes can fix ages for admission, and for entitlement to benefits.

Decision: No.  In the court's view, the Rule of 85 did not come within these illustrations.

3. Did the government err in law when it decided that the Rule of 85 could not be justified under Article 6(1)?

Article 6(1) provides that, "Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary."

The Court made clear that this case was not like a Tribunal case considering whether it would be possible to justify keeping the Rule of 85.  Rather, it had to apply public law principles to determine whether the Government’s decision that it could not successfully defend the Rule of 85 was one which was legally open to it.  That did not mean deciding whether the Government's judgment was correct, but rather considering whether a reasonable decision-maker could have come to that conclusion or whether the conclusion was irrational.

The Court concluded that the Government's view was not irrational or otherwise unlawful.

It is also worth noting here the Government has taken the view that the continuation of the Rule of 85 in the Scheme for existing members for a transitional period (extending in some cases to 2020) is justifiable as a means of protecting members closest to retirement who do not have time to make alternative arrangements to offset the impact of the removal of the benefit.

4. Were the Amending Regulations or its preceding consultation legally flawed because of the  information or projections on which they were based?

Decision: No.  The Defendant was entitled to rely on the advice it received from GAD, both for the figures which the Government put forward in its consultation and, after the competing views had been taken into account, as the basis on which the Amending Regulations should be made.  UNISON would have had to show that the choices the government had made were irrational.  They were not.

Conclusion

Application for judicial review dismissed.

Comment

This case concludes that the Rule of 85 in the Scheme is discriminatory within the terms of the Directive.

Although there are some helpful views on objectively justifying phasing out the Rule of 85 for a transitional period, the Court did not consider whether the objective justification test was satisfied.  UNISON meanwhile are indicating a willingness to fight on.