Pension action may affect all Crystal staff

A LEGAL action by 10 former Waterford Crystal workers against the state over their pension entitlements could affect the pension entitlements of all workers whose employers become insolvent.

The action arises after Waterford Crystal was placed in receivership in January 2009 and the company’s pension schemes were wound up two months later with a deficit of more than €100 million. All 10 plaintiffs ceased employment with the company on dates in 2008 and 2009, and most have now reached or are approaching the age of 65.

Given the funding levels in the pension schemes, Mercer, the administrator of the schemes, later offered each plaintiff a “transfer payment,” with the effect all will suffer reduced payments of between 18-30% — combined losses of more than €2.6m.

The plaintiffs claim, following a decision of the European Court of Justice (ECJ) in 2007, they are entitled to at least 49%.

A central issue in their action is whether the state has met its obligations under the European Insolvency Directive requiring EU member states to “protect” employees in insolvency situations. The case opened yesterday before Mr Justice Brian McGovern and has been listed to last three weeks.

Michael Collins, counsel for the plaintiffs, said key issues raised in the state’s defence relate to the interpretation of the directive and appear to require a reference to the European Court of Justice for determination.

Counsel said the directive requires each state to ensure workers are protected when their employer became insolvent. The ECJ had ruled, in the 2007 Robins case, that provisions of British law guaranteeing benefits on retirement limited to 49% of the employee’s entitlement did not amount to “protection” of employees as required under the directive.

In this case, the 10 plaintiffs were likely to receive between 18% and the high twenties of their entitlements, “very significantly less” than the 49% deemed inadequate in Robins, although the ECJ had not made clear what the true percentage requirement should be.

The plaintiffs also claim measures taken by the state in purported transposition of the directive do not meet the requirements of the directive. Those measures include 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 that Act nor any provisions of the Pensions Act 1990 provide for a minimum guarantee when there is a deficit following insolvency.

The workers also claim the pension insolvency payments scheme (PIPS) announced by the state in 2009 fails to meet the State’s obligations under the Directive. The PIPS was announced 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.