The first judicial review of a decision of the Pensions Regulator relating to UK auto-enrolment has been published.

The High Court, in The Queen on the application of Fleet Maritime Services (Bermuda) Limited v. The Pensions Regulator, considered the appropriate test for determining whether a worker “is working or ordinarily works in Great Britain under the worker’s contract” under the Pensions Act 2008. An employer must meet its obligations to a worker under the UK auto-enrolment regime if the worker meets this test, and the Court’s decision will be relevant to any employer whose workforce is “peripatetic” or spends significant time away from Great Britain / the UK.

The High Court gave leave for the decision to be heard under judicial review, rather than the normal statutory process of appeal to a tribunal. Failure to comply with auto-enrolment duties can result in criminal liability on the part of an employer and the Court therefore considered it appropriate for clarity on the law to be sought through judicial review.

The case also highlights that the UK Courts will grant no “special status” to opinions expressed by the Pensions Regulator about how legislation should be interpreted.

The Facts

Fleet Maritime Services (Bermuda) Limited employed a crew to work on cruise ships, trading as P&O Cruises and Cunard, which spent a significant majority of their time outside British territorial waters. Some of the crew were British residents and some resided outside Great Britain. Of the British residents, some began and ended their voyages from British ports and some travelled to and from ports outside of Great Britain to begin and end their voyages. The Pensions Regulator issued a compliance notice expressing the view that, in effect, all the British residents should be regarded as ordinarily working in Great Britain. The Pensions Regulator did not argue in this case that a worker resident outside of Great Britain “is working or ordinarily works in Great Britain”.

The Decision

Fleet Maritime Services (Bermuda) Limited sought judicial review of the Pensions Regulator’s decision and the High Court concluded that:

1. The correct approach to the interpretation of whether a worker “is working or ordinarily works in Great Britain under the worker’s contract” for auto-enrolment purposes is to determine a worker’s “base”. Following the approach taken in Lawson v. Serco in relation to claims for unfair dismissal from employment, the primary basis for doing so should be the performance of the contract in practice and not the wording of the contract itself.

2.  Even if most of a worker’s duties are performed outside Great Britain, the worker can be viewed as ordinarily working in Great Britain if the worker’s base is in Great Britain.

3.  The crew members who were British residents and who routinely began and ended voyages from British ports should be viewed as based in Great Britain.

4.  The crew members who were British residents but who routinely began and ended voyages from ports outside Great Britain should not be viewed as based in Great Britain. This was the case even where the worker’s contract provided that days spent travelling from the worker’s residence in Great Britain to the foreign port are days of work for the purposes of the worker’s pay and leave entitlement. In the Court’s view, the reality was that the worker was commuting rather than working on those days.

The Impact

When assessing its auto-enrolment duties, an employer whose workers spend significant periods in jurisdictions other than Great Britain should consider where the workers are “based” in light of this ruling, and how workers’ contracts are operating in practice.

The decision also confirms that the enforcement powers provided to the Pensions Regulator under the Pensions Act 2008 do not mean that its interpretation of the legislation is given “special status” over any other interpretation, in particular that of the UK Courts. This acts as a reminder that – although often useful – the guidance published by the Pension Regulator is just that and, ultimately, it is for the UK Courts to decide how the law should be interpreted.

When considering the responsibility for payment of the parties’ costs for the case, Counsel on behalf of Fleet Maritime Services (Bermuda) Limited suggested that it would be like “recounting the victory at Quatre Bras but ignoring Waterloo” to argue that the Pensions Regulator had “succeeded on most of the issues”. Needless to say, the Pensions Regulator struck a different tone in its press release, reporting that it has been “successful in a landmark legal battle”. Whichever side won this battle, the much needed clarification from the High Court should help us all to win the war.