Regulator’s approach withstands first AE judicial review

The definition of ‘overseas worker’ under auto-enrolment legislation has caused confusion among multinational and offshore employers assessing the eligibility of their workforce.

In the Pensions Act 2008, the government defined eligible workers as those “ordinarily working in Great Britain”, but a checklist for assessing overseas workers issued by the regulator provides further guidance for employers.

The regulator is keen to ensure that workers it deems to be covered by the legislation are covered by it

Marcus Fink, Ashurst

Employers must consider factors including:

• where the worker begins and ends their work;

• where their private residence is, or is intended to be;

• where the worker’s headquarters is;

• whether they pay national insurance contributions in the UK;

• what currency they are paid in.

These factors are particularly important in assessing airline pilots, seafarers and sales personnel who move regularly between countries but are based in the UK.

High Court ruling

In September 2014, Fleet Maritime Services Bermuda, a Guernsey-based company which supplies workers to cruise ships, sought judicial review after the regulator issued the company with a compliance notice setting out FMSB’s auto-enrolment employer duties.

FMSB argued that because many of its staff work in international waters they could not be deemed to “ordinarily work in the UK” and were therefore ineligible under AE legislation.

However, the regulator proposed that the location of a worker’s base is the primary consideration for deciding if they fall within the definition of a jobholder under the Pensions Act 2008, rather than, as FMSB argued, the worker’s contract.

In the High Court decision, Mr Justice Leggatt endorsed the regulator’s approach to what are termed ‘peripatetic’ workers; when establishing where such a worker “ordinarily works”, employers should prioritise the worker’s base location over their contract.

Leggatt also ruled that the regulator’s decisions, where reasonable and based on a particular set of facts for assessment, “should not be regarded as a question of law for the purpose of judicial review”.

However, in relation to those workers who regularly begin and end their work in non-UK ports, the court came down in favour of FMSB and quashed the compliance notice, allowing for further assessment of the workforce in light of this additional clarification.

The regulator’s chief executive Lesley Titcomb said in a statement: “The judge confirmed that our approach in this particular case, and our guidance on how to assess peripatetic workers for the purpose of automatic enrolment, is correct.

“This case... demonstrates that where appropriate we are prepared to defend against judicial reviews and our commitment to upholding the principles of automatic enrolment.”

‘Close call’ 

Lesley Harrold, senior knowledge lawyer at law firm Norton Rose Fulbright, said the case was a “close call”.

“It wasn’t a victory in the eyes of the court,” she said. “It clarifies what we already know and from that point of view, it’s a good thing.”

Marcus Fink, partner at law firm Ashurst, said the ruling would clear up a “grey area” for the industry.

“The regulator is keen to ensure that workers it deems to be covered by the legislation are covered by it,” he said.

Clarifications and explanations on points of legislation are beneficial, Fink added, particularly in the case of auto-enrolment.

“Once more practical examples are uncovered, and more case law is developed, we will be able to reach a better point of certainty,” he added.