Report for the Hearing in Case C-132/92

I — Facts and procedure

1. The national rules in issue

The Unilever Group introduced an occupational pension scheme for the employees in its various companies which provided for the grant of a pension to women at the age of 60 and to men at the age of 65, those ages being the same as those required for receipt of a State pension.

In parallel to this arrangement, a number of United Kingdom undertakings belonging to the Group also systematically make ex gratia payments to employees who are compelled to take early retirement on grounds of ill health.

Such payments are made where the employee is not yet entitled to a State pension by reason of the fact that the normal age for entitlement has not been reached and where he is entitled to an occupational pension only at a reduced rate in accordance with the number of years still to be completed. They arc designed to place the employee in the position in which he would have been if ill health had not forced him to discontinue his employment, and also to equalize the overall financial treatment of men and women in identical situations.

To this end, an additional sum is granted to the employee concerned to make up the difference between what he actually receives and what he would have received if he had remained at work and paid contributions to the system until he reached the normal retirement age, that is to say, the ‘gross retirement pension’ equivalent to the aggregate of the full State and occupational pensions. This additional amount is currently described as a ‘bridging pension’.

a) Until the age of 60, neither a woman nor a man can satisfy the conditions governing payment of a State pension. For that reason, the bridging pension includes for both men and women an amount corresponding to the proportion of the State pension attributable to the period of the employee's service with Unilever companies. It also includes the difference between the fullrate occupational pension and that at reduced rate, there being a possibility that the corresponding amount may differ for a man and a woman by reason of the different amount of occupational pension received at a reduced rate.

b) From the age of 60, a woman is entitled to receive a State pension. For this reason, the bridging pension is reduced by the reference to the amount of that State pension, while no such reduction is made in respect of a man aged 60, who does not meet the age requirement for receipt of a State pension.

c) From the age of 65, a man is also entitled to a State pension. For that reason, he himself will also see his bridging pension reduced by an amount corresponding to the State pension. In addition, the bridging pension actually paid to him may be lower than that paid to his female comparator by reason of the fact that a proportion of the State pension, higher than that of a woman, is attributed to his period of employment within the undertaking in question.

It should be stressed that the reference is to a deemed State pension in so far as it does not take account of whether the employee is entitled to receive it or whether he has exercised his rights in that regard.

2. The facts in the main proceedings

Mrs F. M. Roberts was employed as a packer by Birds Eye Walls Ltd (‘Birds Eye Walls’), which is a subsidiary of Unilever. She was obliged to leave her job on health grounds at the age of 57 years and two months.

From that time, and until her 60th birthday, she received a bridging pension which included an amount of State pension to which she was not yet entitled and an amount corresponding to the reduction of the occupational pension paid to her at a reduced rate. A man in the same position as Mrs Roberts would have been treated in the same way. Specifically, since Mrs Roberts was entitled only to an occupational pension, at a reduced rate, of £383 per annum, her bridging pension amounted to £919 per annum (£749 for the State pension not received, £163 corresponding to the unacquired entitlement to the occupational pension and a £7 supplement to reach the level of the gross retirement pension (£1302). Her male comparator would have received a slightly higher bridging pension (£1031) in order to compensate for a smaller amount of occupational pension (£271) and to reach a total figure identical for both (£1302). Mrs Roberts does not dispute this slight difference.

With effect from Mrs Roberts' 60th birthday, Birds Eye Walls deducted from the bridging pension paid the amount of the State pension which she could have claimed in respect of the period of her service with Unilever companies, that is to say, £749 per annum, with the result that payments to Mrs Roberts in respect of the bridging pension were reduced from £919 to £170, whereas her male comparator would not have incurred any such reduction until the age of 65.

In this context, it must be pointed out that, in actual fact, Mrs Roberts was not entitled to a State pension since she had elected to pay contributions at a reduced rate. As a widow, however, she was entitled to an equivalent pension.

Mrs Roberts took the view that this difference in treatment was contrary to Article 119 of the EEC Treaty, and she brought the matter before an Industrial Tribunal sitting in Bristol, which found against her. The Employment Appeal Tribunal, on the other hand, upheld the appeal brought by Mrs Roberts but gave leave to appeal to the Court of Appeal. Prior to giving judgment, the latter court took the view that it ought to refer the following questions to the Court of Justice for a preliminary ruling:

1) Is it a breach of Article 119 of the EEC Treaty for an employer to operate a discretionary occupational pension scheme, using a formula common to male and female cx-employccs, whereby the same total retirement pension (occupational and State in the aggregate) is calculated for them and there is deducted from that total that part of the State retirement pension in respect of which contributions were paid by the employer and the ex-employee during the ex-employee's pensionable employment with that employer, and the employer pays directly to the employee that reduced amount, the object being to equalize the total retirement pension (as calculated under the common formula) for male and female ex-employees alike, with the result that between the ages of 60 and 65 the employer pays less to a female employee than to a male employee because a deduction is made for female ex-employees by reason of their entitlement to State pension from the age of 60 whereas no such deduction is made for male ex-employees since they are not entitled to State pension until the age of 65?

2) Is the answer to Question 1 affected in circumstances where the female is not entitled to a State pension because, as a married woman, she has a choice of paying national insurance contributions at the full rate, entitling her to a full State pension in her own right, or at a reduced rate, not entitling her to a State pension (or entitling her only to a reduced pension) and she chooses the latter?

3) Are the answers to the foregoing affected in circumstances where the employee, though not entitled to a State retirement pension (or entitled only to less than the full pension) is in fact entitled to, and receives, a State widow's pension equal in amount to a full State retirement pension?

3. The procedure before the Court

The order of the Court of Appeal was received at the Court of Justice on 24 April 1992.

Pursuant to the second paragraph of Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by Mrs F. M. Roberts, represented by Patrick Elias QC, instructed by Pattinson & Brewer, Solicitors, by Birds Eye Walls Limited, represented by Jeremy Lever QC and Andrew Hillier, Barrister, instructed by Beachcroft Stanleys, Solicitors, and by the Commission of the European Communities, represented by Karen Banks, of its Legal Service, acting as Agent.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry and to assign the case to the Second Chamber pursuant to Article 95(1) of the Rules of Procedure.

II — Summary of the written observations submitted to the Court

1. Birds Eye Walls Ltd (‘Birds Eye Walls’) submits that, in calculating bridging pensions, it does not treat employees differently on grounds of sex but rather according to their entitlement to a State pension. The case is therefore not one of direct discrimination since the bridging pension system is operated through the application of a formula based on objective factors that treats male and female employees in the same way and irrespective of their sex, even if the application of that formula results in an employee of one sex receiving more pay than another employee of the opposite sex for equal work. Article 119 of the EEC Treaty does not prohibit, as such, a formula for the quantification of occupational pensions that takes into account ex-employees' access to entitlement to benefits from a third party (whether that third party is the State or some other person). It is also not a case of indirect discrimination based on sex. The fact that, from the age of 60, Mrs Roberts incurred a reduction in her bridging pension in contrast to her male counterpart, who was not yet entitled to a State pension, merely reflects the differences in their respective starting positions, a difference arising from the sexually discriminatory pensionable ages under the UK State pension scheme. Where (as in this case) a rule that is attacked by a person of one sex reduces or neutralizes the consequences of antecedent discrimination in favour of persons of that sex, that rule is not sexually discriminatory even though, inevitably, it affects only, or to a greater extent, persons of that sex rather than of the other. In the alternative, Birds Eye Walls argues that if its practice is held to constitute indirect discrimination, it would nevertheless be justified and would for that reason not contravene Article 119. Referring in particular to the principles established by the Court of Justice in its judgments in Case 170/84 Bilka-Kaufhaus v Weber von Hartz [1986] ECR 1607 and in Case C-33/89 Kowalska v Freie und Hansestadt Hamburg [1990] ECR I-2591, Birds Eye Walls submits that Article 119 does not require that where a male and female employee are doing equal work they should receive equal pay, but rather that any difference in their pay must be justified on objective grounds which are unrelated to any discrimination based on sex. In the present case, the differentiation of the amounts of bridging pensions made to men and women between the ages of 60 and 65 is justified by reference to a genuine material difference between them, namely, their differential access to another source of income in the form of a State pension. Furthermore, it is necessary to take account of the objective pursued by the system of bridging pensions, which is to eliminate age differences in respect of the State pension in order to arrive at a uniform overall income for men and women in identical situations. That objective is wholly consistent with the purposes of Article 119.

2. According to Mrs Roberts, the case-law of the Court of Justice shows that two types of situation may arise in the context of an application under Article 119. Where a difference in pay is based exclusively on the difference of sex of the workers in question, the case is one of ‘direct’ discrimination prohibited per se by Article 119 and no justification is possible (Case C-262/88 Barber v Guardian Royal Exchange Assurance Group [1990] ECR I-1889 and Case C-177/88 Dekker v Stichting Vormingscentrum voor Jong Volwassenen (VJV-Centrum) Plus [1990] ECR I-3941, in particular, are cited in this connection). On the other hand, where a requirement or condition is applied irrespective of the sex of the worker but in practice affects detrimentally a significantly larger proportion of members of one sex than of the other, this constitutes ‘indirect’ discrimination. Such discrimination, however, will be in breach of Article 119 only if it cannot be justified by objective factors unrelated to any discrimination on grounds of sex (reference is made in this regard to the judgments in Bilka and Kowalska, cited above). Mrs Roberts argues that the disputed reduction constitutes direct discrimination based on her sex since it was made by reason of the fact that she was a woman deemed to be entitled to a State pension from the age of 60. In the case of direct discrimination, no justification is permissible. In particular, there cannot in any case be justification on the basis of a discriminatory domestic legal provision concerning retirement ages for State pensions, as such a provision is in any event based on an express derogation under secondary Community law (Article 7(1 )(a) of Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security (OJ 1979 L 6, p. 24)), which, according to the case-law of the Court, must be strictly interpreted and can have consequences only with regard to other social security benefits. However, if the Court should be inclined to examine the soundness of the explanations submitted by Birds Eye Walls, it ought to be pointed out that to rely on differences in pensionable age for national schemes is tantamount, in effect, to relying on discrimination based on sex which, by definition, cannot be justified. In any event, Birds Eye Walls cannot justify the difference between the amount of the bridging pensions by arguing that it was attempting thereby to minimize the discriminatory effects of different retirement ages. Since social security matters arc not included within the scope of Article 119, they cannot be used to distort the meaning or reduce the scope of its provisions. With regard to Questions 2 and 3, Mrs Roberts argues that if her submission that an employer should not be able to pay a smaller pension to a woman than a man because of differences in the rights to a State pension is correct, the discrimination will be even more clearly unfair where she is not in fact receiving the full pension which she is deemed to be receiving. The fact that she may have chosen as a married woman to take a lower State pension and pay lower contributions accordingly ought not to impinge in any way on the right to equal pay as against her employer. Similarly, if she should be so unfortunate as to be widowed, the fact that she can as a consequence become entitled to a widow's pension equal to a full State pension ought not to affect in any way her rights against her employer. The principle of equal pay cannot sensibly fluctuate with the married status of the employees.

3. The Commission also takes the view that the present case is one of direct discrimination. Since all women automatically fall into the category which receives the lower amount of occupational pension, and all men into the group which receives more, it seems artificial to treat this case in the same way as one treats a rule capable of affecting both men and women identically, but which statistically impacts more severely on one sex than on the other. The fact of direct discrimination, however, does not imply that it cannot in any way be justified, since it is inherent in the concept of discrimination that a distinction is unlawful only if it is unjustified. Thus, it is lawful to treat different situations differently, so long as the difference on which one focusses is directly relevant to the ensuing difference in treatment. That must logically be true just as much for direct differentiations between the sexes as for indirect distinctions. In this case, the Commission is of the opinion that there is justification and points to the fact that Birds Eye Walls is attempting to achieve substantive equality between the sexes by compensating for an inequality (difference in pensionable ages) in a particular set of circumstances where the inequality would otherwise cause considerable hardship, that is to say, in the situation of a male employee obliged to retire early because of the state of his health and (unlike his female counterpart) not qualifying for a State pension until he reaches the age of 65. Any initiative in favour of substantive equal treatment should benefit from a presumption of legality. There is furthermore nothing to criticize in the fact that an employer establishes a social policy in relation to the level of income of those of its employees who are obliged to retire early for health reasons, and that in implementing this policy it takes account of all aspects of the surrounding reality. The employer cannot in fact implement an effective policy in this regard if it ignores the difference between men and women in relation to the availability of a State pension between the ages of 60 and 65. In the Commission's view, the fact that the aim and the effect of the different payments made by the employer is the achievement of a level of income which is equal as between the sexes is enough to justify the difference. One may say that different situations are being treated differently. The difference in question is the disparity between men and women as regards access to a State pension, and this difference is directly relevant to the different treatment accorded by the employer to its male and female ex-employees. The result is that the difference in treatment is no discrimination within the meaning of Article 119. The Commission takes the view that a negative answer should be given to Question 2 since it would be inequitable not to deduct from the amount of bridging pension that of the State pension which a woman would have been entitled to receive at age 60 by making contributions at the full rate, and which she docs not receive, or receives only at a reduced rate, having chosen freely, as a married woman, to make the lower level of contributions, which enabled her to make substantial savings. A fortiori, Question 3 should also be answered in the negative. If it makes no difference to the justification of the difference in pay which is the subject-matter of this case whether a particular woman receives a full State pension or not, there is no need to consider the further question as to whether she receives another State benefit, in this case a widow's pension, which might be considered to be a substitute.

G. E Mancini

Judge-Rapporteur

1 Language oí the case: English.