Pensions legislation and case law update: the latest developments week ended 26th February 2021

In this week’s update we report on the Supreme Court’s decision that Uber app drivers are ‘workers’, draft legislation on a potential extension of CIGA’s temporary easement provisions, the EC’s draft data protection adequacy decisions, the Regulator’s latest compliance and enforcement bulletin and its regulatory intervention report on the theft of funds from a charity’s pension scheme, the deferral of deficit repair contributions to the British Airways pension scheme and the potential joint application for judicial review of the alignment of RPI with CPIH in 2030.

Supreme Court decides that Uber drivers are 'workers' - potential pensions implications

Development: 

The Supreme Court has unanimously confirmed that drivers who used the Uber app were 'workers' with statutory employment rights. 90,000 drivers have been active for Uber since this claim began with the Employment Tribunal in 2016 and so this decision could have significant ramifications for Uber on a number of fronts. 

The 'gig economy' business model which Uber uses has become increasingly prevalent in recent times and this 'self-employed' contractor model has led to a number of legal challenges in relation to employment status and worker rights. 

The Uber case is generally seen as the one most likely to be used in relation to similar employment status challenges in the future.

The lower courts decided that the reality of the Uber drivers' work arrangements meant that the drivers were workers rather than self-employed as Uber claimed. 

The Supreme Court agreed that the drivers were indeed workers because Uber had, in reality, exercised control over how the drivers provided their services and that the drivers had ‘little or no ability to improve their economic position through professional or entrepreneurial skill’. Whilst the contract between the parties was a useful starting point, the relationship between the parties must be considered along with all relevant circumstances to determine the true nature of the individual’s employment status. As regards what periods constituted 'working time', it was decided that all the time the drivers spent logged into the Uber app which connected passengers to drivers was working time as they were ready and willing to work even if not driving throughout. 

Key point: 

The Supreme Court decision confirms the status of the Uber drivers as 'workers' with an entitlement to a range of employment benefits (and is likely to extend to other firms operating in the gig economy). This could include a potential right to be auto-enrolled into an occupational pension scheme. 

However, former Pensions Minister, Steve Webb, has noted that the decision does not automatically mean that the Uber drivers will come within the scope of the auto-enrolment provisions as the auto-enrolment criteria refers to an 'eligible jobholder' which 'may be subtly different' from 'worker' and 'further court cases' may be needed to achieve clarity. 

Draft regulations prepare for a potential extension of the corporate insolvency and governance act 2020 (CIGA) temporary easements

Development: 

The Government has published draft regulations extending the backstop date on which the power under CIGA to make temporary amendments to corporate insolvency and governance legislation expires, by a year to 29 April 2022. 

The temporary provisions under CIGA were designed to help UK companies mitigate the economic effects which many have suffered as a result of the pandemic – the temporary amendment power was used to suspend personal liability of company directors through wrongful trading between 26 November 2020 to 30 April 2021. 

Key point:

The draft regulations prepare the way for further temporary changes to be implemented should there be an urgent need to do so. They are an indicator that the Government plans to extend the temporary easements further. Although the regulations do not generally have a direct impact upon pension schemes, the new moratorium and restructuring plan processes and other temporary easements introduced under CIGA could affect the amount of assets recoverable upon an employer's insolvency and the ability of the scheme to bring insolvency and legal proceedings against a company. Our insight article provides further detail of the pension implications of CIGA.

Data protection – EC assessment of the adequacy of the UK's data protection regime 

Development: 

In recent months the European Commission (the EC) has been assessing the UK's data protection legislation and practice and has concluded that the UK ensures an 'essentially equivalent' level of protection to the one guaranteed under the EU data protection regime. 

It has now started the 'adequacy' process by publishing two adequacy decisions for the transfer of personal data from the EU to the UK: one under the General Data Protection Regulation and the other under the Law Enforcement Directive. These decisions will be considered by the European Data Protection Board which will then give its opinion to the EC and relevant EU member state representatives.

Key point: 

Should the final adequacy decisions be adopted, this would mean that the continued free flow of personal data from the EU to the UK will be permitted for an initial four-year period with the possibility of renewal if protection levels continue to be adequate. Until the adequacy decisions have been finalised organisations can continue to transfer data from the EU under the temporary 'bridging mechanism' agreed as part of the withdrawal arrangements under the EU-UK Trade and Co-operation Agreement. 

The development has been welcomed by both the Government and by Elizabeth Denham, the Information Commissioner.

Regulator's Q4 2020 compliance and enforcement bulletin shows the increase in enforcement activity

Development: 

The Pensions Regulator's (the Regulator) latest compliance and enforcement bulletin covering enforcement activity between October to December 2020 shows an increase in the Regulator's use of its statutory powers by almost 50% from the previous quarter. This is "in line with expectations" and follows the removal of the easements which the Regulator introduced to support employers at the onset of the pandemic, and a return to 'normal levels' of enforcement. 

The increase in enforcement activity was shown in several areas including auto-enrolment, with an increase in the use of the Regulator's auto-enrolment enforcement powers from 16,599 occasions in Q3 2020 to 24,799, and the issuing of penalty notices rising considerably from 90 to 11,319. 

Regulator publishes regulatory intervention report on director's theft from charity's pension scheme

Development:

Following on from our report that the Regulator had obtained its first confiscation order under the Proceeds of Crime Act against the director of a charity's pension scheme corporate trustee, the Regulator has published a regulatory intervention report in connection with the case.

The director was ordered to pay £286,852 to the pension scheme after being sentenced to five years in prison. He was also stripped of his MBE in February 2021. 

Key point:  

The intervention report sets out the 'full story' behind the fraud and the Regulator's prosecution and outlines how the Regulator is prepared to 'use all powers available to it' to bring criminals to justice working with other regulators and law enforcement agencies as needs be.

Whistle-blowers were 'pivotal' to the case. 

British Airways has deferred £450m of deficit repair contributions to the New Airways Pension Scheme

Key development:

The Trustee of the New Airways Pension Scheme (the Scheme) has confirmed that, following a request from British Airways Plc (BA), it has agreed to BA deferring payment of deficit repair contributions (DRCs) with a value of £450m for a twelve month period. Security covering the full amount of this deferral has been provided and the deferred DRCs with interest will be paid back at the end of the existing recovery plan which ceases in March 2023. The Trustee has confirmed that the Regulator was kept fully informed during the discussions with BA. 

Key point: 

The Regulator believes that only a small proportion of employers have requested that contributions be suspended or reduced as a result of the pandemic and that around 10% of schemes have agreed to a temporary reprieve. The Scheme now falls into this group – the deferral is a direct result of the particularly significant effect that the pandemic has had on the travel industry. 

The Trustee concluded that it would be in the best interests of the Scheme beneficiaries to agree to the request after considering whether the Scheme was 'being treated fairly under the agreement' and after taking advice. 

The Regulator has published COVID-19 guidance which details its expectations of trustees when responding to DRC deferral requests and trustees should refer to this when considering any request from an employer. COVID-19 DB scheme funding guidance for employers can be accessed here; they should also read the trustee guidance so that they know what is expected of trustees by the Regulator.

Potential joint application for judicial review of the alignment of RPI with CPIH from 2030

Development: 

The Trustees of the BT, Ford and Marks and Spencer pension schemes have released a joint statement confirming that, following a joint application, they have been granted an extension until 7 April 2021, to decide whether to apply for judicial review of the Government and the UK Statistics Authority joint response on aligning RPI with CPIH from 2030. 

Key point: 

Further details of the consultation on reforming RPI can be found in our article.