61983C0023
OPINION OF ADVOCATE GENERAL SIR GORDON SLYNN
DELIVERED ON 8 MAY 1984
My Lords,
There exist in the Netherlands State pension schemes for the elderly and for widows and orphans which are contributory and which are of general application. Civil servants participate in an additional pension scheme which is also contributory. To avoid a complete duplication of pensions, the Old-Age Pension is reduced according to the official's years of service (subject to a ceiling) and is, in effect, treated as satisfied pro tanto by the payment of the civil service pension.
Contributions due under the old-age and the widowe and orphans schemes are calculated by reference to the employed person's gross salary, subject to a maximum. For the purpose of assessing contributions, husband and wife living together are treated as one and are not liable to pay more than a single person pays.
Contributions are normally deducted by the employer from salary and paid directly to the Revenue like income tax. However, civil servants at one time paid their own contributions and were paid an equivalent amount by the State to cover them. But since 1972 the State has been required to pay these contributions to the general State schemes on behalf of the official.
Prior to 1972, also, if two civil servants were married, or one civil servant had two separate employments, the employing public authorities paid the amount appropriate to each employment. If this resulted in more than the maximum due being paid, the excess was refunded by the Revenue, in the case of a married couple to the husband.
In these proceedings the amount of the contributions paid by the public authority on behalf of civil servants has been referred to as “compensation”, the amount of any refund as “overcompensation”.
By the Law on Civil Service Pensions, which was adopted in November 1972, as supplemented by a decree of 21 February 1973, civil servants were required to provide any relevant information to the body paying contributions on their behalf; the latter was obliged to ensure that the contributions should not be paid on income above the maximum fixed. In consequence, a civil servant and his spouse have to declare their income deriving from employment in public service, that of the husband being stated first. The husband's employer pays the amount due on his salary; the wife's employer makes up any shortfall but must not pay more than the maximum due from both. As a result, “overcompensation” is avoided because the couple's employers do not pay more in respect of contributions than is due. A similar system is applied in the case of a civil servant who has more than one post in the public service.
A number of women officials, who are married to officials, brought proceedings in several Public Officials' Tribunals claiming that the “compensation” and the “over-compensation” constitute “pay” within the meaning of Article 119 of the EEC Treaty, relying in particular on Case 69/80 Worringham v Lloyds Bank [1981] ECR 767. They say that the situation is the same as if the employer had increased the salary by the amount of the contribution and then deducted it for the purpose of payment. Since no payment, or a smaller payment, is now made on behalf of the wife there is discrimination against her.
The applicants failed before the Tribunals, and the matter came on appeal before the Centrale Raad van Beroep, which is the highest court in social security matters in the Netherlands. That Court has referred to the Court of Justice for a preliminary ruling under Article 177 of the Treaty two questions :
“1.
Must the term paappearing in Article 119 of the EEC Treaty be construed as including the ‘compensation’ or, in certain cases, the amount referred to as ‘the overcompensation’ which the employing public authority used to pay to the tax authorities in excess of the maximum contributions due under the Algemene Ouderdomswet (the General Law on Old Age Pensions: ‘AOW’) and the Algemene Weduwen en Wezenwet (the General Law on Widows' and Orphans' Pensions: ‘AWW’) but which now no longer need be transferred by such an authority?
2.
If the answer to the first question is in the affirmative, must Article 119 of the Treaty be construed as meaning that the system applying in the Netherlands based on the Wet Gemeenschappelijke Bepalingen Overheidspensioenwetten (the Law on Civil Service Pensions) must be regarded as being contrary to the principle that men and women should receive equal pay for equal work laid down in Article 119 because under that system, in those cases in which the joint contributions due under the AOW and the AWW for a married couple employed in the public service exceed the maximum amounts of contributions due, the contributions are primarily paid by the husband's employer while the wife's employer continues to transfer contributions only in so far as the maximum amount of contributions due is not exceeded?”
In Case 80/70 Defrenne v Belgium [1971] ECR 445 the Court held that, although consideration in the nature of social security benefits is “not ... in principle alien to the concept of pay”, defined in Article 119 of the Treaty, that concept does not cover social security schemes or benefits “directly governed by legislation without any element of agreement within the undertaking or the occupational branch concerned, which are obligatorily applicable to general categories of workers”. These schemes, the Court said, “assure for the workers the benefit of a legal scheme, the financing of which workers, employers and possibly the public authorities contribute in a measure determined less by the employment relationship between the employer and the worker than by considerations of social policy” (paragraph 7-8). Accordingly the part due from the employers in the financing of such schemes does not constitute a direct or indirect payment to the worker (paragraph 9).
In the present case the Dutch Government and the Commission contend that the payments in question are made in the context of a statutory pensions scheme so that they fall outside the concept of pay.
The fact that a scheme is statutory is not, in my view, the conclusive test. Legislation may be used for different purposes. If it defines rights and obligations under a social security scheme for all workers, or for groups of workers who are not in any sense “employed by” the State, it is no doubt based on “considerations of social policy” rather than on an employment relationship. On the other hand, if by the same machinery, legislation, rules are adopted in respect of those “employed by” the State, those rules may be an expression of social policy, or they may equally spring from and govern the employment relationship. It is true that the latter may indeed at the same time reflect a State's ideas of social policy, but that factor cannot in my view take away their essential characteristic as rules governing the employment relationship. If it were otherwise, civil servants could not rely upon the principle of equal pay for equal work contained in Article 119, and there seems to be nothing in that article or in the case-law of the Court to justify such a result. The relevant question is thus whether what is done is done by the State essentially as an employer.
In the present case the payment made by the State in respect of the employee's contributions is one to the State social security system which itself, of course, reflects “considerations of social policy”. The payment is, however, of the contributions due from the employee, which, as a matter of machinery, are paid by the employer to the Revenue; it is not that “part due from the employers” which is referred to in paragraph 9 of the Defrenne judgment.
It seems to me that there is no difference between the situation here and that where a private employer agrees to make the pension contributions due from the employees under national social security legislation, whether the employer does so by a deduction from “ordinary basic” salary or by paying an extra amount over and above basic salary; in the latter case it is capable of being “consideration ... in cash ... which the worker receives, directly or indirectly, in respect of his employment from his employer”. The fact that in the present case the position of civil servants employed by the State was dealt with in legislation does not seem to me to make any difference.
If “compensation” and “over-compensation” are, as I consider, part of pay, is the principle that men and women should receive equal pay for equal work contained in Article 119 to be read in the sense that equal amounts must be paid to or on behalf of both sexes doing the same work in respect of social security contributions?
In this regard it is necessary to bear in mind that “Article 119, which is limited to the question of pay discrimination between men and women workers, constitutes a special rule, whose application is linked to precise factors” (Case 149/77 Defrenne v Sabena [1978] ECR 1365) and that “direct and overt discrimination which may be identified solely with the aid of the criteria based on equal work and equal pay referred to in” Article 119 are to be distinguished from “indirect and disguised discrimination which can only be identified by reference to more explicit implementing provisions of a Community or national character” (see Case 43/75 Defrenne v Sabena [1976] ECR 455).
On the face of it the gross remuneration of the married couple of officials is less than it was before 1972, since now there is no payment and subsequent adjustment in respect of the wife if the husband pays the maximum. That in itself is not sufficient to establish discrimination under Article 119.
However, the married woman official's total salary is less than that of an unmarried woman civil servant and a man civil servant of the same grade and experience, though the “disposable income”, excluding the amount of the contributions, is the same for each. It is also less than the salary of the woman official married to a nonofficial, since that woman's contributions are paid by the State even if, as the Court has been told happens, there has to be subsequent adjustment (by repayment of the excess) if the husband also pays, or has paid on his behalf, the necessary contributions. In that case, assuming that all are paid the identical basic salary, the disposable income of the couple with the husband who is not a civil servant, or the disposable income of one member of that couple, may be higher than in the case of two married officials.
On the face of it, the mere fact that a woman official married to an official gets no extra pay for contributions whereas, for example, the single official does, does not seem to me to amount to discrimination falling foul of the principle of equal pay for equal work. Both may prima facie be liable for contributions, but, because the married couple of officials are treated as one person or unit for the computation of salary and contribution liability, the married woman ceases to have any liability once her husband's contributions have reached the maximum payable. If he does not earn enough to pay the full amount due, then she pays the balance, and she only needs to be compensated to that extent. It thus follows that the single male official receives, if indirectly, the amount of contributions payable on his salary; the woman official, if married to an official, receives, either by payment on her behalf the amount of contributions calculated on her salary, to the extent that her husband's salary is not high enough to require the maximum amount in respect of them both to be paid, or she receives nothing because nothing is due. Looking at the position simply in relation to the payment of contributions, they seem to me to be on the same footing in this regard. There is paid on behalf of each of them what is due in respect of contributions and no more.
As I understand it there is a discrepancy between the position of couples when both are officials, and couples where the husband is not an official. It may be that the latter couple, or the wife if the husband pays to her any repayment he receives from the Revenue, is better off. Any discrimination is then against the other couple because both are civil servants; if there is any discrimination between individual employees it is as between the two wives and cannot in my view be complained of under Article 119. The position of the single male official vis-à-vis the civil servant wife of a nonofficial has not been canvassed in this case and I prefer to say nothing about it.
Accordingly, it seems to me that Article 119 is not to be read as prohibiting the sort of machinery adopted here for dealing with the contributions of married women seen without regard to any side effect.
It is, however, said that there are fiscal disadvantages for the civil service wife of an official, and that the lower gross salary which she receives affects unemployment benefit and sickness insurance. Since, however, the latter are geared to family income they seem to me to affect husband and wife jointly and it is difficult to see any discrimination against the woman worker in this context.
As between married women or as between couples, there is a discrepancy because the employer has chosen for civil servant couples not to pay both contributions and to repay any surplus, but to pay the net amount which is actually due. That arises, as I see it, from the State's activity as an employer, not under the social policy aspect relevant to the community as a whole, but any disadvantages which result do not seem to me to fall within Article 119, which is not dealing with discrimination between women or between couples.
As between the civil service wife of an official and a single male officiai, a distinction arises under the social security system and not as a result of the employment relationship. He is liable; she is not if her husband pays or the amount due is paid on his behalf. If nothing is paid on her behalf by way of contributions and she receives nothing back, the two are in the same position employee-wise, whatever the difference in their national social security rights. If money were paid on her behalf and then repaid, even if to the husband, she would, in fact, be benefiting at least indirectly from the higher family disposable income.
This seems to me to distinguish the case from Worringham, where the payments were wholly outside the system of social security insurance and where marriage was not a relevant factor.. Whether there are disadvantages like those referred to in paragraphs 25 and 26 of the Woningham judgment would be for the national court to investigate, but I am not satisfied that any have been shown here in respect of the married woman official living with her husband. It should be added that no question of discrimination against the married woman living separately from her husband, and who might more easily be shown to be affected by credit limitations, arises on any of these cases.
The position may well be different under Council Directive 79/7 of 19 December 1978 (OJ 1979, L6/24) but that directive has to be implemented by December 1984, so that it cannot be said that there is at present any violation of Community law in this respect which national courts are obliged to respect. The meaning of that directive is not in any event referred by the national court.
It is accordingly my opinion that the questions referred should be answered on the following lines:
1.
The term “pay” in Article 119 of the EEC Treaty includes employees' pension, contributions paid on behalf of civil servants under a national social security scheme by the employing public authority and any repayments of excess contributions made to such civil servants.
2.
Article 119 does not prohibit the payment of the statutory social security contributions on behalf of those employees alone who are liable to pay them, so long as such contributions are paid both for men and women who are so liable.
The costs of the parties to the proceedings before the referring court fall to be dealt with by the Centrale Raad van Beroep, and, in my view, no order should be made as to the costs of the Dutch Government or the Commission.