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In a landmark case this week, the European Court of Justice (“ECJ”) has ruled that workers in the Waterford Crystal factory are entitled to at least 49 per cent of their occupational pensions after the factory closed in 2009. A full copy of the judgement is found at this link and subsequent press release of the European Commission here.

This case originated by way of preliminary reference to the ECJ from the High Court concerning the interpretation of Articles 1 and 8 of Directive 2008/94/EC on the protection of employees in the event of insolvency of their employer. Article 1(1) of Directive 2008/94 provides that the Directive is to apply to employee’s claims arising from contracts of employment or employment relationships and existing against employers who are in a state of insolvency within the meaning of Article 2(1) of that Directive.

Article 8 of the Directive provides that Member States are to ensure that necessary measures are taken to protect the interests of employees and of persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivor’s benefits, under supplementary occupational or inter-occupational pension schemes outside the national statutory social security schemes.

The ECJ noted that the only measure of national law adopted for the express purpose of transposing Article 8 of Directive 2008/94 (previously Article 8 of Directive 80/987/EEC of 20 October 1980) is Section 7 of the Protection of Employees (Employer’s Insolvency) Act 1984, which provides that any contribution deducted by an employer, or due to be paid by that employer, during the 12 months preceding insolvency is to be paid into the supplementary occupational pension scheme.

The full facts of the case are set out in the judgement however the plaintiffs in the main proceedings (who were 10 former employees of Waterford Crystal) brought an action claiming that Ireland had not properly transposed Article 8 of Directive 2008/94.

At the beginning of 2009 a receiver was appointed for Waterford Crystal and it was found to be insolvent. The supplementary pension schemes set up by the company were wound up on 31st March 2009, when total assets came to EUR130 million, total liabilities were EUR 240 million and the deficit was therefore around EUR110 million. The actuary retained by the plaintiffs in the main proceedings considered that they would receive between 18 and 28% of the amounts to which they would have been entitled if they had received the present value of their accrued old-age pension rights. The actuary retained by Ireland was critical of that calculation and considered the percentage to be between 16 and 41% and did not approach the 49% referred to the Court in Case C-278/05 Robins and Others [2007] ECR I-1053.

Ireland maintained that it adopted, both before and after the judgement in Robins and Others numerous important measures designed to protect the interests of beneficiaries of supplemental pension schemes.

The High Court referred a series of questions to The ECJ which are set out in full in the judgement. In summary, the Court (Third Chamber) ruled:

  1. Directive 2008/94/EC of the European Parliament and of the Council of 22 October 2008 on the protection of employees in the event of the insolvency of their employer must be interpreted as meaning that it applies to the entitlement of former employees to old-age benefits under a supplementary pension scheme set up by their employer.
  2. Article 8 of Directive 2008/94 must be interpreted as meaning that State pension benefits may not be taken into account in assessing whether a Member State has complied with the obligation laid down in that article.
  3. Article 8 of Directive 2008/94 must be interpreted as meaning that, in order for that article to apply, it is sufficient that the pension scheme is underfunded as of the date of the employer’s insolvency and that, on account of his insolvency, the employer does not have the resources to contribute sufficient money to the pension scheme to enable the pension benefits owned to the beneficiaries of that scheme to be satisfied in full. It is not necessary for those beneficiaries to prove that there are other factors giving rise to the loss of their entitlement to old-age benefits.
  4. Directive 2008/94 must be interpreted as meaning that the measures adopted by Ireland following the judgment of the Court of Justice of the European Union of 25 January 2007 in Case C-278/05 Robins and Others do not fulfil the obligations imposed by that directive and that the economic situation of the Member State concerned does not constitute an exceptional situation capable of justifying a lower level of protection of the interests of employees as regards their entitlement to old-age benefits under a supplementary occupational pension scheme.
  5. Directive 2008/94 must be interpreted as meaning that the fact that the measures taken by Ireland subsequent to Robins and Others have not brought about the result that the plaintiffs would receive in excess of 49% of the value of their accrued old-age pension benefits under their occupational pension scheme is in itself a serious breach of that Member State’s obligations.

It is likely that the ruling will have much wider implications for the State in terms of its obligations towards employee pension protection. It is thought that approximately 1500 former Waterford Crystal workers will benefit from the ruling. The case will now revert back to the High Court to determine what level of cover the State may have to provide.

Watch this space!

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