A US agricultural machinery business found itself before the Chancery Division of the High Court arguing whether employees over 50 who had been given redundancy both voluntary and compulsory were entitled to receive an
immediate and undiscounted pension. The case revolved around a rule in the pension scheme which said that if an employee retired from service at the request of the employer after their 50th birthday, they would be entitled to a normal, undiscounted retirement pension.
The employer, which ran a tractor manufacturing plant in Coventry with a 1,300-strong workforce, announced a plant closure in two stages, involving numerous job losses. Following trade union negotiations, two classes of employees were asked to leave. The larger group would be made redundant compulsorily and dismissed from employment, with redundancy volunteers sought from the second group. But the question asked was: did any employee made redundant after their 50th birthday become entitled to claim an undiscounted pension?
Arguments ensued, as the employer believed that there was no such entitlement. In its eyes, a dismissed employee was not a person who retires from service at the request of the employer. However, the judge disagreed and concluded that it was indeed the same someone retired by his employer was the same as one dismissed.
The word request depended on the context. One might argue that it should be in a situation where the worker was free to agree to it or reject it. However, there would be cases where the request was to be complied with such as where a bus driver should stop if requested to do so at a request stop.
So far as the word retires was concerned, this also depended upon its context so that it might or might not include dismissal. The basic point was that, as a matter of language, a retirement not of the employees own free will would be a dismissal.
This conclusion had the implication that an employee who was over 50 and dismissed for misconduct was also entitled to an immediate, undiscounted pension. But although this was an anomaly, it was not enough to persuade the judge to agree with the employers arguments. There was some comfort though; the judge noted that, of around 1,000 proposed dismissals at the plant, not a single one appeared to have involved misconduct by any employee.
Those who had volunteered for redundancy also encountered problems. The pension scheme catered for any employee who retired from service of his own free will leaving these employees excluded from the right to receive an undiscounted pension. Had volunteers for redundancy retired of their own free will or at the request of the employer? The fact that it was the employer who had initiated a redundancy procedure did not, in the judges view, prevent an employees retirement being of his own free will.
However, the judge concluded that those taking voluntary redundancy had retired from service at their employers request, and so were also entitled to an undiscounted pension. The request for volunteers was based on the understanding that if too few workers volunteered for redundancy, further employees would be made involuntarily redundant. Staff were not being asked to resign from service, but were being asked to put themselves forward for redundancy that is, to be dismissed. There was also no guarantee that a volunteer would in fact be laid off; this was a decision for the employer. In other words, there was an obvious risk of being pushed if the employee did not jump.
After the judgment, the employer estimated that the impact of the decision on the pension plan would be an increase in plan liabilities of between $50 million and $60 million. This would require additional funding to the pension plan of an average of some $10 million a year for the first three years, and around $5 million a year for the next seven years.
It all goes to show that one little word can make quite a difference.
janet.gaymer@haynet.com
Janet Gaymer is head of employment law at Simmons & Simmons
