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CJEU confirms that certain retirement schemes can discriminate on the grounds of age

CJEU confirms that certain retirement schemes can discriminate on the grounds of age

Dee Masters considers the CJEU’s judgment in C-159/15 Lesar v Telekom Austria AG published on 16 June 2016.  It confirms that employer-run retirement schemes, which completely replace rather than supplement any government benefits related to retirement, can freely discriminate on the grounds of age in relation to entry and exit.

Factual background

Mr Lesar, a civil servant, retired on 1 September 2004.  He had started working in 1963 before he turned 18 years old.  His former employer, Telekom Austria, refused to take into account, for the purpose of calculating pension credits, his period of service prior to reaching the age of 18.  Telekom Austria relied on federal laws which directed that these years of service should be excluded for civil servants.  As a result, Mr Lesar lost just over 5 years’ service when his pension entitlement was calculated.

CJEU’s analysis

The CJEU concluded that Telekom Austria had not contravened Article 2 of Directive 2000/78, which enshrines the principle of equal treatment in the employment sphere.  It reached that conclusion by relying on Article 6(2) which limits the principle of equal treatment as follows:

“Member States may provide that the fixing for occupational social security schemes of ages for admission or entitlement to retirement … including the fixing under those schemes of different ages for employees or groups of employees, and the use, in the context of such schemes, of age criteria in actuarial calculations, does not constitute discrimination on the grounds of age, provided this does not result in discrimination on the grounds of sex”. (Emphasis added)

There is no definition of an “occupational social security scheme” in Directive 2000/78.  Despite that, the CJEU concluded that Telekom Austria’s retirement scheme fell within this exception as it was an “occupational social security scheme”. It reached that conclusion by reasoning that:

  • It should interpret the phrase “occupational social security scheme” in accordance with the definition contained in Article 2(1)(f) of Directive 2006/54/EC of the European Parliament and of the Council of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation.   This states that an “occupational social security scheme” is a scheme “… whose purpose is to provide … employees … with benefits intended to supplement the benefits provided by statutory social security schemes or to replace them, whether membership of such schemes is compulsory or optional”.
  • Participating in the scheme operated by Telekom Austria meant that Mr Lesar was not eligible at all for the ASVG which is a state run pension insurance scheme.  Instead, he received a pension which was at least equivalent to the state run scheme, under Telekom Austria’s policy. In other words, the “private” pension scheme wholly replaced the State’s pension scheme.

The CJEU further reasoned that the exclusion of service completed before the age of 18 meant that Telekom Austria’s scheme fell into Article 2(2) as it was a means of fixing the age at which individuals could enter and exit the scheme and thereby ensured consistency across the civil service.

Accordingly, the CJEU endorsed the approach of AG Bot in his Opinion which was handed down in February 2016.

Conclusion

At first blush, it may seem surprising that there would be a carve out in relation to the principle of equal treatment in relation to a company’s retirement scheme.  But, the facts of Lesar are relatively unusual and would not arise in the UK.  That is, Telekom Austria was set up by the Austrian government, its employees are civil servants and the pension scheme it operates is, in reality, a manifestation of the Austrian government’s social security scheme, rather than being a purely private affair.  Accordingly, it falls within the carve-out created by Article 2(2) of Directive 2000/78 which is intended to preserve the autonomy of Member States in this area.

Cloisters has significant expertise in advising and representing organisations and individuals in relation to age discrimination as well as all aspects of equality and discrimination law.

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