Ex-Crystal staff sue state over pensions

TEN former workers with Waterford Crystal have brought a legal action against the state which has significant implications for the pension entitlements of all workers in circumstances of employer insolvency.

The workers have been told they will receive between just 20% and 36% of their pension entitlements when they reach 65 within the next 18 months, representing combined losses to them of more than €2.6 million.

They claim the pension insolvency payments scheme (PIPS), which came into effect here last month, fails to meet the state’s obligations under the European Insolvency Directive to protect workers in insolvency situations.

The PIPS only marginally improved their position, which would have been considerably better had the directive been properly transposed, they claim.

On the application of Eileen Barrington, for the workers, their action against the Minister for Social and Family Affairs was transferred to the Commercial Court yesterday by Mr Justice Peter Kelly.

The case was of relevance to other workers unfortunate enough to lose their jobs prior to retirement whose pension schemes are also insolvent, the judge observed. The workers allege “manifest disregard” of its obligations by the state under the Insolvency Directive – EC Council Directive 80/987/EC.

Article 8 of the directive requires the state to “protect” employees in insolvency situations. It is alleged the state purported to transpose the Directive via the Protection of Employees (Employers’ Insolvency) Act 1984, which limits the payments to be made by the state to an insolvent employer’s pension scheme to the 12-month period prior to insolvency. Neither the 1984 Act nor any provisions of the Pensions Act 1990, provide for a minimum guarantee when there is a deficit in the pension fund following an employer’s insolvency.

In its judgment on the British Robins case in January 2007, the European Court of Justice ruled that provisions of British law which lead to a guarantee of benefits on retirement, limited to less than half the employee’s entitlement, did not amount to “protection” of employees as required under the Insolvency Directive.

The effect of this decision means, the Waterford Crystal plaintiffs claim, they should receive 49% or more of their entitlements.

The case arose after Waterford Crystal was placed in receivership in January, 2009. The company’s pension schemes were wound up two months later in March 2009 with a deficit of more than €100 million. All 10 plaintiffs ceased work with the company on dates in 2008 and 2009.

Given the funding levels in the pension schemes, Mercer, the trustee of the schemes, later offered each plaintiff a “transfer payment,” with the effect all will suffer reduced payments of between 18%-33% and have sustained a combined total loss of €2.6m.

In April 2009, the minister announced the PIPS with the aim of reducing the liability of a pension scheme to its pensions where there is a deficit on the winding up of a scheme. PIPS came into effect on February 1 last.

The plaintiffs claim PIPS only resulted in a small improvement for them in that they will now receive payments representing between 20% and 36% of their entitlements. The 2007 ECJ decision in the Robins case means they should be paid at least 49%, they claim.

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