NLC Update (01/04/16)

I wrote to all MSPs in the North Lanarkshire area before the Scottish Parliament dissolved last week highlighting there dispute that is underway with the local Labour-run council over equal access to the local government pension scheme.

Here's the less than enthusiastic response I received from Labour's Elaine Smith, a self-styled socialist and feminist of course: 

-----Original Message-----
From: Elaine.Smith.msp 
To: markirvine 
Sent: Tue, Mar 22, 2016 3:38 pm
Subject: FW: North Lanarkshire Council - Pensions and Equal Pay

Dear Mark,

Thank you for your email regarding equal pay claims in North Lanarkshire Council.

As you will know, the Scottish Parliament is rising tomorrow for the elections. Due to this I can only deal with constituents who have been in touch prior to dissolution. I will of course be happy to try to assist anyone who gets in touch in the next few hours. 

Yours,

Elaine

Now Elaine, like most Labour politicians, has kept a very low profile during the long fight for equal pay, avoiding any criticism of North Lanarkshire Council and insisting that MSPs cannot  get directly involved.

Contrast Elaine's attitude with that of Alex Neil, the SNP member for Airdrie and Shotts who responded positively and also provided a contact email address for people in North Lanarkshire to use during the election campaign. 

-----Original Message-----
From: Neil A (Alex), MSP 
To: Mark Irvine 
Sent: Tue, Mar 22, 2016 12:43 pm
Subject: RE: North Lanarkshire Council - Pensions and Equal Pay

Many thanks Mark. As you know, I've been a big supporter of the fight for equal pay right from the start. I will be pursuing this issue vigorously if I am successful in being re-elected to the Scottish Parliament and here is an email address that local constituents can use between now and polling day on Thursday 5 May 2016. 

 “member@neil100.freeserve.co.uk”

Now I don't know about anyone else, but I know who I'd be voting for on election day.

Dear MSP

North Lanarkshire Council - Pensions and Equal Pay

Action 4 Equality Scotland represents thousands of clients in North Lanarkshire Council (predominantly women in low paid jobs) who are currently fighting for equal access to the local government pension scheme.

North Lanarkshire Council is refusing to accept that recent equal pay settlements achieved by A4ES on behalf of its NLC clients should qualify for pension purposes, even though these payments represent 'arrears of pay' which have been subject to tax and National Insurance deductions at the appropriate rate.

The dispute with North Lanarkshire Council has now been referred to the Scottish Public Pensions Agency (SPPA) by HBJ Gateley (the lawyers acting for A4ES clients) and the Agency will process the appeal on behalf of Scottish Ministers and the Scottish Government.

The crux of the issue is the right of women workers in NLC to access the local government pension scheme on the same terms as their male colleagues which seems to me to be a throughly ridiculous dispute to be having in this day and age, especially as the Labour-run Council claims to be an equal opportunity employer.

I enclose a copy of the letter of appeal registered by HBJ Gateley with the SPPA and two posts from my blog site, for your interest and information.

I am sure that the A4ES clients will welcome your support in this dispute by making representations to Scottish Ministers and the Scottish Government, and I will be encouraging local constituents to contact you directly in this regard.

Kind regards

Mark Irvine

Enclosures x 4

1 Letter from HBJ Gately to SSPA

2 Paper from HBJ Gateley setting out the Appellants' case

3 Blog site article dated 20 March 2016

4 Blog site article dated 18 March 2016

 Dear Ms Linge 

EQUAL PAY CLAIMS v NORTH LANARKSHIRE COUNCIL

Stage 2 Appeal under the Local Government Pension Scheme (Scotland) Regulations 2014 (the 'Regulations') 

I am instructed by the Appellants listed in the attached schedule in relation to the above matter. At present we are in dispute with North Lanarkshire Council regarding the Council's refusal to treat back pay paid by way of settlement of equal pay claims as pensionable pay. 

We have been unable to resolve matters at the Stage 1 of the Internal Dispute Resolution Procedure (IDRP) and my clients wish to exercise their Stage 2 right of appeal under the Regulations to the Scottish Ministers. 

This appeal is being lodged on behalf of the 294 Appellants named in the Schedule. We represent a further 387 claimants whom the issue affects and who may seek to join the appeal in due course.

I would therefore be grateful if this letter and its enclosures could be treated as a Stage 2 appeal under Regulation 74 of the Regulations. 

I would be obliged if you could confirm receipt. 

I look forward to hearing from you. 

Yours sincerely

Sarah Gilzean

Associate

Enc. 

Local Government Pension Scheme Regulations

1. The Complainants all brought equal pay claims against North Lanarkshire Council (the Council).  The claims related to the period following the Council's implementation of the Single Status pay agreement in January 2007.  The claims are commonly referred to as 'second wave claims', on the basis that they followed the 'first wave claims'. The first wave claims related to the period of pay inequality from 2000 to January 2007, prior to the implementation of Single Status.

1. The second wave claims were the subject of a settlement whereby arrears of pay were paid by the Council covering the period January 2007 to March 2015.  The settlement payments were paid by the Council in batches from May 2015 onwards.  The Council agreed to pay Tax and National Insurance in respect of the arrears of pay that these settlements represented and have agreed a composite rate with HMRC in this regard.  A sample copy of the settlement agreement signed by the Complainants is attached at page 47.

1. The Complainants are members of the Local Government Pension Scheme administered by SPF.  As a result of the settlements the Complainants' pensionable pay for the relevant period has increased. The Complainants are therefore entitled to have their pensions recalculated, to be paid pensions arrears and to have any future pension entitlements adjusted including any spousal entitlements.  

1. The Council has refused to treat the settlements paid to the Complainants as pensionable pay and has failed to take the necessary steps to ensure that the Complainants' pension entitlements are re-calculated in the light of the settlements.  SPF's position is that the matter is between the Council and the Complainants and that SPF is not the appropriate body to make a determination as to whether the settlement sums are pensionable pay.  The Complainants disagree with SPF's position and it is their view that that SPF has failed in its duties to the members of the scheme in failing to progress this matter with the Council and by failing to seek the information from the Council that is required in order to recalculate the entitlements of the members of the scheme.

1. The Complainants now seek resolution of this disagreement with SPF via Stage 1 of the Internal Dispute Resolution Procedure under section 72 of the Local Government Pension Scheme (Scotland) Regulations 2014 ('the 2014 Regulations').  

1. A separate complaint was lodged against the Council under section 72 of the 2014 Regulations on 3 December 2015.  A copy is enclosed at Enclosure 1.  A response was received from the Council on 2 February 2016 (Enclosure 2).  The Council disputes that the amounts paid by way of settlement amount to pensionable pay under the 2014 Regulations.  The Complainants are now appealing the Council's decision to Scottish Ministers via the Stage 2 appeal process under section 74 of the 2014 Regulations.

1. By way of background, the first wave claims connected to the equal pay litigation against the Council resulted in the claimants in those cases being awarded compensation for arrears of pay by the Employment Tribunal in July 2015 (page 7).  It will be noted from the Council's response at Enclosure 2 that the Council now accepts that the Employment Tribunal award represents pensionable pay under the 2014 Regulations.  It is understood that SPF is now in the process of re-calculating the pension entitlements of these claimants.

Settlement Payments

1. The settlements paid to the Complainants were based on the difference in pay between what the Complainants should have earned in comparison with male comparators during the period January 2007 to March 2015. The figure in the Settlement Agreement was described as 'back pay' and was calculated net of deductions for income tax and National Insurance. The Council assumed liability for this income tax and National Insurance and agreed a composite rate with HMRC.   

1. Following payment of the settlement amounts by the Council, many of the Complainants advised SPF that they wished to have the back pay that they received treated as pensionable and offered to pay the necessary employee contributions.  Those Complainants who wished to do so submitted a form of authority to SPF at the time that they received their settlement monies.  An example of this form is at page 14.  

1. SPF has advised these Complainants that they cannot progress the matter without the Council confirming that the sums are pensionable and the amount that has been paid (see letter from SPF to Mrs Pigott 21 August 2015 at page 15).  When Mrs Pigott contacted the Council to advise them of this she was told that the issue of whether or not her settlement is pensionable was between herself and SPF (see email exchange between Mrs Pigott and NLC at page 16).  

Local Government Pension Scheme (Scotland) Regulations 2014

1. It is clear that equal pay settlements which represent arrears of pay are pensionable.  Reference is made to Regulation 20(2)(h) of the Local Government Pension Scheme (Scotland) Regulations 2014 which provides that:

'…(2) But an employee's pensionable pay does not include:

…

(h) any award of compensation (excluding any sum representing arrears of pay) for the purpose of achieving equal pay in relation to other employees;' 

1. The settlements paid to the Complainants in this case represent arrears of pay calculated on the basis of what the Complainants should have earned in comparison with male comparators during the period January 2007 to March 2015. The figure in the Settlement Agreement was described as 'back pay' and was calculated net of deductions for income tax and National Insurance. The Council assumed liability for this income tax and National Insurance and agreed a composite rate with HMRC in this regard.   On that basis there should be little doubt that the sums are pensionable.

1. Reference is made to the SPF Technical Bulletin No 13 of October 2005 (Enclosure xx) which provides that equal pay settlements are likely to fall within the definition of pensionable pay.  Whilst the Bulletin was issued under the previous pensions regulations (LGPS(S) Regulations 1998) it is submitted that the definition of pay under Regulation 12 of the 1998 Regulations is very similar to that under Regulation 20 of the 2014 Regulations.  Furthermore the Bulletin notes that regulation 12(10) regarding the tax treatment of the settlement payments is likely to be important in determining whether the sums are pensionable pay.

1. It is submitted that if equal pay settlements were likely to be deemed pensionable pay under the 1998 Regulations, the case is even stronger under the 2014 Regulations.  Whilst Regulation 22(2)(h) of the 2014 Regulations excludes from the definition of pay 'any award of compensation … for the purposes of achieving equal pay', this is with the express exception of 'any sum representing arrears of pay'.  The exception was inserted to avoid the ambiguity caused by similar wording in Regulation 4(2)(g) of the Local Government Pension Scheme (Benefits Membership and Contributions) Regulations 2007 that applies in England and Wales, which provided that 'any payment of compensation for the purposes of achieving equal pay' would not be pensionable.  The UK government at the time made clear that the intention behind this regulation was that the back pay element of any payments would be pensionable and only any damages element would be non-pensionable.  This was made clear in LGE Circular No 239 July 2010 (Enclosure xx), which was copied to COSLA, and which appends a letter dated 5 March 2010 from the Department for Communities and Local Government clarifying the matter.  It is therefore noteworthy that when the 2014 Regulations were brought in in Scotland several years later, these included an express carve out for sums paid in relation to arrears of pay.

1. Furthermore, there is little doubt that HMRC would treat the sums paid to the Complainants as arrears of pay, regardless of the fact that they were paid by way of settlement rather than under a Tribunal award.  The HMRC Employment Income Manual  (EIM02530, updated 4 February 2016, Enclosure xx) provides that:

"Awards in respect of claims under the Equal Pay Act are arrears of pay whether or not the employer settles or the dispute results in an award from a Tribunal……Some employers may describe the award as 'compensation' and refuse to accept that the payments are earnings. Do not accept these claims.  The character of the aggregated payments does not change when paid as a lump sum." (emphasis added)

1. In addition it should be noted that in the sphere of social security legislation, equal pay settlements have been found to be remuneration to be taken account for the purposes of entitlements to benefits.  The decision of the Court of Appeal in Minter v Hull CC and Potter v Pensions Secretary ([2012] HLR 3, Enclosure xx) held that payments received in settlement of equal pay claims were to be treated as income to be taken into account in calculating the Complainants' entitlements to Housing Benefit and Jobseeker's Allowance.  

1. The Court held that what was necessary was to determine the 'true characteristic' of the payments and why it was being paid - the method of settlement was not relevant. The Court held:

"… it is clear from the underlying dispute and the terms of the settlement agreement that what was being settled was nothing more or less that her claim for underpayment of her wages because of a failure to observe equal pay legislation.  Its true characteristic was therefore clearly compensation for past lost income." (at para 25).

"In my view, on this test, the payment was for a consideration that derived from Miss Minter's employment; it did not derive from her entering into a settlement agreement as distinct from her employment, as the settlement was a settlement of what should have been paid to her during her employment. It was therefore remuneration or a profit derived from her employment." (at para 29)

1. It is submitted that the 2014 Regulations should be interpreted in the same way.  The Complainants have been paid arrears of pay for what they should have earned between January 2007 and March 2015 in comparison with their male comparators.  The payment was not made as a payment in damages or in consideration for entering into a settlement agreement.  The payment was in respect of back pay and was calculated on the basis of what the Complainants should have been paid by the Council had they not been discriminated against.  Furthermore the calculations took account of deductions for tax and National Insurance for which the Council has assumed liability.  

Conclusion

1. SPF's position is that the matter is between the Council and the Complainants and that SPF is not the appropriate body to make a determination as to whether the settlement sums are pensionable pay.  The Complainants disagree with SPF's position and it is their view that that SPF has failed in its duties to the members of the scheme in failing to progress this matter with the Council.

1. SPF has been aware for some time that its scheme members wish to make their settlements pensionable and SPF has done nothing to obtain the necessary information from the Council.

1. SPF is aware of those individuals who wish to have their settlement monies treated as pensionable. SPF has been in receipt of forms of authority from those individuals for many months. SPF has also been contacted by several individuals seeking to resolve this matter. However, no steps were taken by SPF to progress these matters with the Council. 

1. The Council has advised SPF that the settlements are not pensionable. It is the Complainants’ position that SPF should not have taken the Council's assertion at face value without further authority to back up such claims and should be actively seeking to progress matters on behalf of the scheme members.   

1. The result of the failures on the part of SPF and the Council is that former and current employees of the Council who were discriminated against in relation to their pay will continue to suffer inequality because of the impact on their pension. The Complainants were paid less than their male comparators in breach of the Equal Pay Act 1970 (now the Equality Act 2010).  The Complainants were paid a settlement sum based on this inequality in pay.  If the Complainants are unable to rely on the increase to their salary that the settlement sums represent in the relevant years of their employment prior to retirement, that inequality will be perpetuated for many years to come, resulting in significant financial loss to the Complainants. 

1. The following example illustrates the scale of the loss to the Complainants:

Mrs A has been in service for 20 years and has made a contribution to her pension for the full period of her employment. Prior to the settlement offer Mrs A received £3,838 pension per year with a non-taxable lump sum payment of £11,512.  After taking into account the additional earnings that Mrs A received in the settlement and contributing £960 in additional contributions, Mrs A would receive an increased pension of £5,375.00 per year with a non-taxable lump sum payment of £16,125.  Mrs A would therefore have a gain of £1,537 extra in her pension per year and an additional £4,613 as a lump sum.   Over her lifetime Mrs A would stand to gain an additional £43,800 from her increased pension entitlement. 

1. If the Complainants are denied the increase to their pension to which they are entitled as a result of the settlement, the potential loss to the 294 Complainants named in this appeal is £3.933 million.

1. The Complainants seek a resolution to this matter through the Stage 1 appeal process under Regulation 72 of the 2014 Regulations.  

1. The Complainants have attempted to resolve matters informally with SPF. Correspondence with the Principal Pensions Officer regarding this issue is attached (Enclosures 7 and 8).  The Complainants disagree with the position taken by SPF and on that basis they are left with no alternative but to exercise their right to seek a resolution through the Stage 1 appeal process.   

1. If the Complainants are unable to resolve matters at Stage 1 they intend to exercise their Stage 2 right of appeal to the Scottish Ministers and will not hesitate to seek a determination from the Pensions Ombudsman if necessary.

North Lanarkshire Update (20 March 2016)

I wrote recently about the significance of equal pay settlements being processed on a 'pensionable basis'.

Now this does not apply to everyone, only to people who retired before 2012, but the benefits are potentially considerable.

So here are a few examples to illustrate the difference that a pensions based settlement would make to a person's lump sum and annual pension - along with an indication of the likely cost.  

The only health warning is that these are 'broad brush' examples and that individual outcomes would vary depending on a person's length of pensionable service, hours of work and the amount of their equal pay settlement.

		Based on a £15,000 Annual Salary			Based on a £15,000 salary  with a £15,000 settlement over 5 years.
Category	Number of years in Pension	Current Pension Entitlement per Year	Current Standard Tax Free Lump sum	Total Cost for making settlement Pensionable	Pension per Year with Settlement	Lump Sum Payment with Settlement	Increase in Pension Per Year	Increase in Tax Free Lump Sum	Life Time Benefit for the cost of £825
Example 1	10	£2,500	£5,625	£825	£3,000	£6,750	£500	£1,125	£12,125
Example 2	20	£5,000	£11,250	£825	£6,000	£13,500	£1,000	£2,250	£24,250
Example 3	30	£7,500	£16,875	£825	£9,000	£20,250	£1,500	£3,375	£36,375

If any A4ES clients would like more detailed information about their individual situation, please contact Karl in the Action 4 Equality Scotland office.

Action 4 Equality Scotland

Here are contact details for Action 4 Equality Scotland - including a new telephone number . 

Action 4 Equality Scotland
10 York Place
Edinburgh
EH1 3EP

Email: enquiries@action4equality.co.uk

Phone: 0131 659 9958 

Pensions and Equal Pay (18 March 2016)

HBJ Gateley are the lawyers representing A4ES clients in the ongoing dispute with North Lanarkshire Council over pensions and equal pay - and they've done a great job if you ask me, in setting out the employees' case in a formal appeal to Scottish Ministers which is now underway.

Here's an extract of the appeal letter which explains the scale of the financial loss being suffered by former NLC employees (mainly women) who are not being allowed by the Council to retire on the same basis as their male colleagues doing traditional jobs, such as refuse workers and gardeners.

"21 The following example illustrates the scale of the loss to the Appellants:

"Mrs A has been in service for 20 years and has made a contribution to her pension for the full period of her employment. Prior to the settlement offer Mrs A received £3,838 pension per year with a non-taxable lump sum payment of £11,512. After taking into account the additional earnings that Mrs A received in the settlement and contributing £960 in additional contributions, Mrs A would receive an increased pension of £5,375.00 per year with a non-taxable lump sum payment of £16,125. Mrs A would therefore have a gain of £1,537 extra in her pension per year and an additional £4,613 as a lump sum. Over her lifetime Mrs A would stand to gain an additional £43,800 from her increased pension entitlement." 

I can't even begin to understand how Labour-run North Lanarkshire can claim to be an equal opportunities employer when the Council is arguing that a retiring woman worker can be treated so much less favourably than a comparable male employee.

In fact, it's a complete disgrace if you ask me and I only hope that Scottish Ministers have the sense to uphold the appeal from A4ES clients.

I'll be writing shortly to all MSPs and MPs in North Lanarkshire with a copy of the appeal letter and will be urging them to support their local constituents by making representations to the Scottish Government.