A landmark ruling finding that veganism is a philosophical belief will have a wider impact in the pensions industry, experts say, but warn trustees to avoid making knee-jerk changes to their schemes.
Employment judge Robin Postle found on January 3 that ethical veganism was worthy of protection under the Equality Act 2010.
In the case brought by Jordi Casamitjana, it was claimed that he was unfairly dismissed by the League Against Cruel Sports, an animal welfare charity, for raising concerns about the way the League’s pension scheme was invested – including in companies that experimented on animals.
Stuart O’Brien, partner at Sackers, explained: “His employer offered a contract-based pension, which until 2015, auto-enrolled its staff into an ‘ethical’ fund. The employer subsequently changed the default fund, and offered an ethical fund only as a ‘self-select’ option for employees.”
There’s money to be made in veganism, and big business is catching up and embracing this
Penny Cogher, Irwin Mitchell
Even though Mr Casamitjana was able to choose to invest his own pension in the self-select ethical fund and did so, his concern was that donors to animal protection charities have the right to expect their donations will be invested in a way that is compatible with their beliefs.
He argued that it was not merely sufficient to give employees the option to select an ethical fund.
In defence of its pensions stance, the League stated on its website: “There are pension funds available that offer more ‘ethical’ choices – but these are generally not available for organisations to offer automatically, because they often have higher financial risk and higher administration charges that fall outside the regulations.”
Mr O’Brien added: “This raises the question about what default funds affinity group employers should choose to use for auto-enrolment purposes – balancing the financial interests of their staff with reputational issues for the employer.”
Wider impact for pensions industry
Experts say this case opens the door for veganism to form part of the pension trustees’ environmental, social and governance considerations, and could have a wider impact in the pensions industry.
Penny Cogher, partner at Irwin Mitchell, said: “Employers will need to take their employees’ views on ethical veganism seriously and ensure that they are not directly or indirectly discriminated against, harassed or victimised for expressing their belief on ethical veganism.”
She added that as veganism becomes even more popular, it will be interesting to see which fund manager first develops a vegan pension fund proposition.
She noted that Greggs announced on Thursday that it will share a £7m bonus between their 25,000 workers, giving them £300 each as a reward for the launch of their hugely successful vegan sausage roll that boosted Gregg’s sales and profits.
“There’s money to be made in veganism, and big business is catching up and embracing this,” she added.
Schemes challenged by personal beliefs
However, Sackers Mr O’Brien argued that the tribunal’s decision does not really change anything as far as pensions law is concerned.
He said: “In trust-based pension schemes, trustees should still act on ESG issues as financial factors – but issues which are non-financial in nature (such as member ethical views) may only be taken account of in limited circumstances.”
Nevertheless, Carolyn Saunders, head of pensions and long-term savings at Pinsent Masons, said this case illustrates the importance of trustees and providers understanding exactly how pension scheme assets are invested.
“Member interest in issues such as climate change can enhance engagement, but the flip side is the increased risk of criticism on trustees and providers for their investment choices. Strong governance around investment is essential so that choices can be justified.”
Jane Kola, partner at Arc Pensions Law, stressed: “For defined contribution default funds, the primary objective is to provide good member outcomes and value for money.
“As the focus is on good financial outcomes for members, this presents real challenges in taking account of member beliefs where there is no consensus view among members, and the impact of taking belief into account is potentially financially detrimental.”
Case did not set a binding precedent
The tribunal ruling did not conclude whether the claimant had been unfairly dismissed and discriminated against because of his philosophical belief, and there will be a further hearing to decide that based on the facts of the case.
Trustees sitting on hands over ESG investment
A new survey has raised serious doubts as to whether pension funds will take meaningful action in the short term on sustainable investment issues, despite new regulations coming into force in October.
Ms Kola warned: “Employment tribunal decisions are not legally binding precedents, so there is no certainty that another case would be decided in the same way.
“Press reports suggest that the equality law status of ethical veganism was not challenged in legal argument, so weakening its value as a guide to other employers.”
Nevertheless, Mr O’Brien noted that “now may be the time to dust off equality and diversity policies”.
