THE EUROPEAN UNION’S highest court has found that the Irish state is obliged to step in and pay the pensions of some private sector workers whose pension funds have become insolvent.
The European Court of Justice said Ireland was obliged to protect former workers at Waterford Crystal who were left with only a small fraction of their contributory pension funds when they were laid off.
The ten workers were made redundant when their employer went bankrupt in 2009 – when it also emerged that their pension fund was insolvent and would only be able to cover between 18 and 28 per cent of their pensions.
Participation in the defined benefit pension scheme was mandatory for all employees in Waterford Crystal.
They had taken a case to the High Court in Dublin, arguing that the Irish state was required under European law to protect their rights and recover the difference. That court had referred several questions to the European Court of Justice.
The ECJ found that the EU’s Insolvency Directive did not draw distinctions between the various reasons why a company might go insolvent – but instead “lays down a general obligation to protect the interests of employees and leaves it to Member States to define” how those obligations are met.
It also ruled that the State contributory pension for old-age pensions should not be taken into account when examining the State’s responsibility to those workers – and that Ireland’s own economic situation does not mitigate its requirement to protect its workers.
An earlier case taken by a British worker in 2007 had found that member states had to ensure workers received at least 49 per cent of the total value of their pension.
The case will now be referred back to the High Court, which will decide the extent to which Ireland will have to cover the pensions – but the earlier ECJ ruling means sets 49 per cent as a working minimum. In the British case, the UK ended up covering 90 per cent of the worker’s pension.
Every EU member state had been contacted and briefed on their responsibilities after that ruling – but the court this morning ruled that Ireland had not fulfilled its requirements in this regard, which was “a serious breach of that Member State’s obligations”.
The case could have major ramifications for Ireland, as the successful challenge by the ten workers could open the floodgates for a series of similar claims from Waterford workers – and from employees at other firms whose pension funds disappeared in the crisis.
Some 1,500 workers lost their jobs when the Waterford Crystal plant shut down in 2009.