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The Pensions Regulator is successful in legal challenge

Ref: PN16-02
Tuesday 12 January 2016

The Pensions Regulator has been successful in a landmark legal battle over when peripatetic workers are eligible to be automatically enrolled into a workplace pension.

A judicial review sought by an employer challenged the regulator’s approach and guidance on peripatetic workers who travel from place to place, working in different locations, such as seafarers and airline pilots.

The employer was Fleet Maritime Services (Bermuda) Ltd, (FMSB) an organisation which employs seafarers who work on ships owned by Carnival Plc, such as P&O Cruises and Cunard.

In a High Court judgement, Mr Justice Leggatt ruled that the regulator’s approach on peripatetic workers is correct and that when establishing where such a worker “ordinarily works”, the base test, not the contract test, is the appropriate test to apply.

Chief Executive Lesley Titcomb welcomed the judgement: “This ruling comes at the end of a 12-month legal challenge and is an important legal victory for us on a number of levels.

“The judge confirmed that our approach in this particular case, and our guidance on how to assess peripatetic workers for the purpose of automatic enrolment, is correct.

“He also made clear that decisions of the regulator based on the assessment of particular facts are not ordinarily suitable for judicial review*.”

“In addition this case also demonstrates that where appropriate we are prepared to defend against judicial reviews and our commitment to upholding the principles of automatic enrolment.”

FMSB argued that many of its UK staff were not covered by the legislation as they worked in international waters and could not be said to “ordinarily work in the UK”.

In July 2014 the regulator issued FMSB with a compliance notice setting out the employer duties that FMSB needed to comply with and those categories of workers the regulator considered were covered by the legislation and therefore were eligible to be automatically enrolled.

The employer requested a review and in September 2014, the regulator affirmed its decision to issue a compliance notice, prompting the employer to seek a judicial review of the decision.

The regulator defended the challenge by arguing the location of the peripatetic worker’s base is the primary consideration when deciding if a worker falls within the definition of a jobholder under the Pensions Act 2008, not, as FMSB argued, the worker’s contract.

In relation to those workers who regularly begin and end their tours of duty in non-UK ports, the court found in favour of the employer and revoked the compliance notice to enable the regulator to look again at these workers in light of the judgment. The regulator will now be in touch with Fleet Maritime Services (Bermuda) to discuss its pension duties going forward.

This ruling confirms the position taken by the regulator in its detailed guidance on assessing a worker and in determining cases to date.

This is the first case where The Pension Regulator’s approach in relation to automatic enrolment has been subject to a judicial review.

Editor's notes

  1. The question in this case was whether seafarers employed by the claimant fall within the territorial scope of the Pensions Act 2008, as The Pensions Regulator maintains, so as to qualify for automatic enrolment into a pension scheme in accordance with the Act. This depends on the meaning of section 1(1)(a), which brings within the scope of the Act a worker 'who is working or ordinarily works in Great Britain under the worker's contract'.
  2. In his ruling delivered shortly before Christmas, Justice Leggatt concluded:
    • A seafarer may be regarded as ordinarily working in Great Britain during any period when the seafarer is working from a base situated in Great Britain even if the ship spends most of its time outside Great Britain so that the majority of the seafarer’s work is performed outside Great Britain.
    • A seafarer who lives in Great Britain and who works on a ship which – although it spends most of its time outside Great Britain – habitually begins its voyage from and returns to a port in Great Britain may be regarded as based in Great Britain and hence as a worker who ordinarily works in Great Britain under the worker’s contract.
    • A seafarer who lives in Great Britain but who works on a ship which spends all or most of its time outside Great Britain and whose tours of duty do not habitually begin and end in Great Britain cannot be regarded as based in Great Britain or as a worker who ordinarily works in Great Britain under the worker’s contract.
  3. * paragraph 20 of the judgment. “The boundary between law and fact, however, is not hard-edged. It would not generally be desirable to treat every evaluative judgment made by a body which has to apply the legislation to primary facts as a question of law amenable to judicial review. In recognition of this, there is a body of authority which treats questions of degree and the application of inherently imprecise terms to primary facts as questions of fact: see eg R v Monopolies and Mergers Commission, ex p South Yorkshire Transport Ltd [1993] 1 WLR 23. More recently, the tendency has been to adopt a "pragmatic approach" to drawing the distinction between questions of “law” and “fact” which takes account of a broader range of considerations that affect the desirability of judicial intervention. Such an approach was taken, for example, by the House of Lords in the case of Lawson v Serco Ltd [2006] UKHL 1, [2006] ICR 250, discussed below, in determining the scope for an appeal from a tribunal where appeals are limited to reviewing errors of law; and it seems to me that the same approach should in principle be taken in determining the extent to which the court should treat as reviewable for errors of law decisions made by the Regulator.”
  4. The Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).

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