Denmark: Age-Graded Pension Ruling Appealed to Supreme Court

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By Marcus Hoy

March 17—A December 2014 Danish High Court ruling holding that a company was within its rights to require age-graded pension contributions from employees will be appealed to the Supreme Court, the complainant's legal counsel told Bloomberg BNA. According to Tina Sejr Gad, a lawyer at the white-collar employees' union HK, an appeal against the decision will be heard by the nation's highest court in November 2015. The case will likely prove relevant outside Denmark, Sejr Gad said, by helping to determine the extent to which exemptions to the European Union's Employment Equality Framework Directive (2000/78/EC) can apply to pension models.

Older Pay More

The case concerns a pension plan offered by the Danish branch of global information services group Experian. The plan was structured so that the size of the employee's and employer's contributions increased with the employee's age. Employees under 35 were required to pay 3 percent of their salaries into the plan, those under 45 4 percent and those over 45 5 percent. Company payments rose in line with the employees' contributions.

A former employee aged 29 believed that this model constituted discrimination on grounds of age and took legal action against Experian through the HK union. Denmark's Western High Court was asked to rule on whether the scheme constituted age discrimination and, if so, whether the employee had a legitimate claim to back pay based on the contributions of older employees.

During the proceedings, the Danish court referred a number of questions on interpretation of exemptions contained in Directive 2000/78 to the European Court of Justice (ECJ). While the directive generally forbids employers to discriminate against employees on the grounds of age, Articles 6(1) and (2) contain exceptions for certain employment policies such as vocational training and social security schemes. The ECJ was asked to rule on whether the age-grading of pension payments in a private employer's plan could be covered by this exemption.

‘Legitimate Aim' Required

While it recognized that Experian's pension model entailed differing treatment on grounds of age, the ECJ found in its September 2013 opinion (C-476/11) that such age-grading does not necessarily run contrary to the general prohibition of age discrimination if it pursues the “legitimate aim” of ensuring that an employee has adequate savings upon retirement. The ECJ left it to the Danish Court to assess whether the Experian plan went further than was necessary to achieve this aim. In a December 2014 ruling (B–1481–1), the Danish court dismissed the employee's claim, finding that the pension plan could be considered an “appropriate and necessary” means to pursue the legitimate aim.

An appeal has been made to Denmark's Supreme Court, Sejr Gad added, which is scheduled to hear the case on Nov. 5, 2015.

Conformance With Employment Directive Sought

According to Sejr Gad, the ECJ's decision to refer the case back to the national court could be relevant outside Denmark, although its significance would depend on the specific pension model under scrutiny.

“I believe that the European Court's interpretation will affect employees in other EU countries, as it is a general interpretation of [the directive's] provisions,” Sejr Gad said. “Whether the interpretation will be of benefit to employees may well depend on whether you are a younger or older employee and whether you are in favor of age-graded retirement savings. Its effect will also depend on which specific age-graded scheme is under evaluation.”

In a Feb. 20 statement, Sara Lochte, head consultant at the Danish Pension and Insurance Association, agreed that the ECJ's opinion would likely prove more relevant than the outcome of the Danish case.

“The Western High Court placed much weight on the concrete circumstances that apply to this particular model,” Lochte told Bloomberg BNA. “It is therefore more the ECJ's earlier ruling, rather than the Danish Court's ruling, which contributes to the interpretation of the Employment Directive. In the light of the appeal to the Supreme Court, we believe it is too early to say anything definite about any practical outcome of the judgment.”

Lochte added that the future scope of the Supreme Court ruling would likely be limited by a change in the wording of Denmark's Act on Equal Treatment (Forskelsbehandlingslov) that took effect Jan. 1, 2015 (LSF 60). Under the new wording, the use of age criteria with regard to pensions and disability benefit payment calculations is permitted within the law's legal framework.

“It is true that the act was amended with effect from the first of January as a result of a translation error in the Danish version of the Employment Directive,” Lochte said “The aim is to bring the Danish rules on differential treatment into accordance with the Employment Directive. However, it is not the legislature's intention to go beyond the directive.”

To contact the reporter on this story: Marcus Hoy in Copenhagen at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

The ECJ opinion is available in English at http://curia.europa.eu/juris/recherche.jsf?cid=93374.

For more information on Danish HR law and regulation, see the Denmark primer.