Court of Justice 11-03-1981 ECLI:EU:C:1981:63

I — Facts and written procedure

1. Lloyds Bank Limited, hereinafter referred to as “Lloyds”, whose headquarters are in the United Kingdom, provides in respect of all permanent staff two retirement benefits schemes, one for men and the other for women. Membership of these schemes, which are contracted-out retirement schemes, is compulsory for both male and female employees at the commencement of their employment.

In both schemes, the trust funds are controlled and administered by trustees to whom the contributions payable to the fund are paid and by whom all benefits payable under the fund are paid.

The same conditions apply for both men and women to qualify upon retirement for benefit under the pension scheme: the employee must have completed five years' service and have attained the age of 26. Moreover, the main benefits provided under the two schemes are essentially the same. Thus the retirement age is 60 for those members in service on or first employed by Lloyds since 1 July 1974 in both cases and both sexes' entitlement to pension benefit is 1/720th of annual salary at retirement for each completed month of service. However, there are differences from other points of view: for example, the men's scheme but not the women's scheme provides for the payment of pensions to the surviving spouse and dependent children.

Male and female employees who leave Lloyds's service before completion of five years' service or attaining the age of 26 are entitled:

• either to the transfer of the accrued rights to another approved retirement benefits scheme; or

• to the payment by Lloyds to the State of the “contributions equivalent premium”, which places the employee in the same position that he or she would have been in in the State scheme had he or she been a member of the State scheme instead of a member of the particular retirement benefits scheme.

In the latter case, where the employer pays the contributions equivalent premium, the employee is entitled to a refund of his or her past contributions to the particular scheme with interest. However, precisely on this point differences arise between the two schemes in question.

By the terms of the men's retirement benefits scheme all male staff are required to contribute 5% of their salary to the fund from the commencement of their employment and regardless of their age: the amount of that contribution is considered as part of the employee's “salary”. By the terms of the women's retirement benefits scheme all female staff are required to contribute 5% of their salary to the fund but only upon attaining the age of 25.

Thus in the case of an employee leaving Lloyds' service before completing five years' service or attaining the age of 26, the consequences under the two schemes in question are not the same according to whether the employee is male or female.

A male employee who has paid contributions to the fund from the commencement of his employment before having attained the age of 25 receives those contributions back subject to deductions, with interest, whereas a female employee who has paid no contributions before attaining the age of 25 receives no sum by way of refund of contributions in respect of employment under that age.

Moreover, since the amount of the 5% increment is incorporated in the total amount of “a week's pay”, a man receives indirect advantages which are not enjoyed by a woman. In fact, in so far as collateral benefits are calculated on the basis of “a week's pay” (unemployment benefits, redundancy payments, credit facilities, etc.), the fact that the 5% contribution is incorporated in that pay gives a man under 25 higher benefits than those to which a woman under 25 is entitled.

In May and September 1977, two Lloyds employees, Susan Jane Worringham and Margaret Humphreys, commenced proceedings before an Industrial Tribunal under the provisions of Section 1 (2) (a) of the Equal Pay Act 1970 as amended seeking relief from the alleged contravention of the equality clause incorporated in their contracts of employment by virtue of the provisions of that act.

When that claim was rejected by the tribunal, the two applicants appealed to the Employment Appeal Tribunal, which allowed the appeal, holding that in this case there was an inequality of pay within the meaning of the Equal Pay Act, without further examining the arguments put forward by the parties under Community law.

In its turn, Lloyds appealed against that decision to the Court of Appeal, London. That court, pointing out that the problem in question involves provisions of Community law, submitted to the Court of Justice under Article 177 of the Treaty questions for a preliminary ruling worded as follows:

1. 1. contributions paid by an employer to a retirement benefits scheme, or

   2. rights and benefits of a worker under such a scheme

   “pay” within the meaning of Article 119 of the EEC Treaty?

2. 1. contributions paid by an employer to a retirement benefits scheme, or

   2. rights and benefits of a worker under such a scheme

   “remuneration” within the meaning of Article 1 of the EEC Directive of 10 February 1975 (75/117/EEC)?

3. If the answer to Question 1 or 2 is in the affirmative, does Article 119 of the EEC Treaty or Article 1 of the said directive, as the case may be, have direct effect in Member States so as to confer enforceable Community rights upon individuals in the circumstances of the present case?

4. If the answers to Questions 1 and 2 are in the negative:

   1. 1. contributions paid by an employer to a retirement benefits scheme, or

      2. rights and benefits of a worker under such a scheme within the scope of the principle of equal treatment for men and women as regards “working conditions” contained in Article 1 paragraph 1 and Article 5 paragraph 1 of the EEC Directive of 9 February 1976 (76/207/EEC)?

   2. If so, does the said principle have direct effect in Member States so as to confer enforceable Community rights upon individuals in the circumstances of the present case?

2. The order for reference was entered on the Court Register on 3 March 1980.

Written observations were submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC by Susan Jane Worringham and Margaret Humphreys, represented by A. Lester, QC, and C. Carr, Barrister, instructed by Lawford & Co, Solicitors, by Lloyds, represented by D. Hunter, QC, instructed by G. N. Johnson, Solicitor, Lloyds Bank Legal Department, by the Government of the United Kingdom, represented by P. Scott, QC, instructed by R. D. Munrow of the Treasury Solicitor's Department, acting as Agent, and by the Commission of the European Communities, represented by its Legal Adviser, A. Toledano-Loredo, acting as Agent, assisted by M. Beloff, Barrister.

After hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.

II — Written observations submitted to the Court

Susan Jane Worringham and Margaret Humphreys, the plaintiffs in the main action (hereinafter referred to as “the plaintiffs”), observe that the immediate issue raised by this reference is whether the principle of equal pay laid down in Article 119 of the Treaty and in Article 1 of Directive 75/117/EEC and the principle of equal treatment laid down in Articles 1, 2 and 5 of Directive 76/207/EEC entitle female employees to be paid the same refund of pension contributions as male employees engaged in the same work are paid, but that underlying this issue is a broader question: whether those principles require that contributions paid under retirement benefits schemes on behalf of male and female employees or benefits received by them under such schemes should be equal.

According to the plaintiffs, by excluding retirement benefits schemes from the requirement of equality without sex discrimination despite the fact that United Kingdom courts and successive governments have recognized that pensions are an aspect of pay, the law of the United Kingdom violates the principles of equal pay and other aspects of employment which it has nevertheless expressly recognized.

Although this discrimination is completely unjustified, it is, however, specifically permitted by the Equal Pay Act 1970 and the Sex Discrimination Act 1975. Consequently, the only means of overcoming such discrimination is to prove that it is incompatible with Community law.

The plaintiffs consider that Questions 1 and 2 are closely linked and that it is therefore convenient to consider them together.

If the principle of equal pay were not applied to protect the rights of workers under occupational pension schemes, the double aim of Article 119 would be frustrated; that aim consists on the one hand in guaranteeing equal conditions of competition for the undertakings of the various Member States and, on the other, in improving the living and working conditions of female workers.

The concept of pay to which the principle of equality applies is a broad one under Community law. Retirement benefits are clearly covered by this concept. In fact, they are funded by contributions paid by the employer which, in any case, are part of the consideration which the employee indirectly receives in the form of a right to specified benefits under the retirement benefits scheme. The employee's rights under the scheme are earned by him as part of the reward for his service and are therefore consideration received in respect of his employment.

In modern economic conditions, many of the benefits of employment are received in forms other than cash. It is no doubt because the drafters of Article 119 recognized the realities of the modern concept of pay that it also means consideration in kind; Article 1 (1) of Directive 75/117/EEC, with its reference to “all aspects and conditions of remuneration” moreover confirms this.

It follows from the judgment of the Court of Justice in Case 80/70, Defrenne v Belgian State (hereinafter referred to as “Defrenne No l”that a retirement pension established within the framework of a social security scheme laid down by legislation does not constitute consideration which the worker receives indirectly in respect of his employment from his employer, within the meaning of Article 119. That judgment was fully consistent with the opinion of Mr Advocate General Dutheillet de Lamothe that retirement benefits schemes with the following characteristics come within Article 119:

1. The pension benefit is paid to the worker because he has a particular post in the employment of a particular employer and not because of his status as a worker generally;

2. The management and funding of the scheme are organized on an occupational basis independent of the State social security system;

3. The pension benefit is linked to the contributions payable by the employer, so that it is not payable if the employer defaults in making those contributions;

4. The pension scheme is voluntary in origin and the subject of collective agreement between the employer and the trade union.

According to the plaintiffs, when a retirement benefits scheme is considered in the light of these criteria the clear conclusion is that such schemes are not part of the social security system and that the rights enjoyed under such a scheme are part of the consideration which the worker receives, in respect of his employment, from his employer. In fact, those schemes have all the above characteristics.

The judgment in Defrenne No 1 was consistent with the above-mentioned opinion of the Advocate General that social security schemes, including pension schemes, do not fall within Article 119 if (a) they are directly governed by legislation; (b) they are obligatorily applicable to general categories or workers; and (c) they are established and operated without any element of agreement within the undertaking or the occupational branch concerned. However, the retirement benefits schemes operated by British undertakings do not satisfy any of these criteria. Moreover, the contributions to those schemes are determined by the rules of the pension scheme and the amount of the contributions is frequently stated in the contract of employment, whereas, in the judgment in Defrenne No 1, the Court held that the contributions to schemes which do not fall within Article 119 are determined more by considerations of social policy than by the employment relationship between the employer and the worker.

The rights of a worker to benefits under a retirement benefits scheme operated by his employer are part of the consideration the worker receives in respect of his employment and hence are “pay”hin Article 119.

In fact, a worker does not receive these benefits as a result of his status as a worker or as a result of his membership of a particular occupational category but solely by virtue of his contract of employment. Numerous factual considerations (for example, the differences between the schemes, their voluntary origin, the fact that membership is sometimes voluntary and that benefits are not guaranteed by the State) reinforce the conclusion that rights under a retirement benefits scheme arise from contract and not from status.

As regards the practical application of the principle of equality, this may be achieved in two different ways : either by guaranteeing both equal contributions and similar rights and benefits for men and women, which would be possible by using unisex actuarial tables, or else by guaranteeing only equal benefits, which implies the payment of higher contributions by or on behalf of workers of the relevant sex to produce equal benefits. The second solution is permissible provided that the higher contributions payable by the workers of one sex are paid by the employer and not by the workers concerned.

As regards Question 3 the plaintiffs consider that the circumstances of the present case clearly fall within the scope of the direct application of Article 119, as defined by the case-law of the Court. It is in fact accepted by Lloyds that the plaintiffs were at all material times employed on equal work with men in the same establishment and that there are differences based, on sex between the treatment of men and women who leave Lloyds's service before attaining the age of 26. There is therefore a form of direct and overt discrimination which may be identified solely with the aid of the criteria of equal work and equal pay referred to in Article 119.

If the Court does not accept this argument, contrary to the plaintiffs' primary submissions, the plaintiffs submit in the alternative that it is necessary to rely on Article 1 (1) of Directive 75/117/EEC which requires the elimination of all discrimination on the grounds of sex “with regard to all aspects and conditions of remuneration”. By that expression Article 1 plainly includes also the rights and benefits of a worker under a retirement benefits scheme in the circumstances of the present case. In such circumstances, the principle of equal pay outlined in Article 119 of the Treaty and further defined in Article 1 of Directive 75/117/EEC has direct effect in Member States so as to confer enforeceable rights upon individuals.

As regards Directive 75/117/EEC, the plaintiffs submit that it contains a standard aimed at facilitating the practical application of the principle of equal pay laid down in Article 119. This aim cannot be effectively attained if individuals are prevented from relying upon the provisions of the directive in national courts. Article 1 (1) of the directive is sufficiently clear and precise to have direct effect, so that since the expiry of the period for compliance, it has become complete and unconditional.

In the judgment in Case 149/77, Dejrenne v Sabena (hereinafter referred to as “Dejrenne No 3”), the Court implied moreover that once the period for compliance had expired some provisions of the Equal Treatment Directive would have direct effect. By parity of reasoning Article 1 of the Equal Pay Directive now has direct effect in the circumstances of the present case.

With regard to Question 4, the plaintiffs consider that if the principle of equal pay does not apply to the contributions paid by an employer to or to the rights and benefits of a worker under a retirement benefits scheme, the principle of equal treatment as defined in Directive 76/207/EEC applies to such contributions, rights and benefits and has direct effect in Member States. They observe that the fourth paragraph of the preamble to that directive refers to “working conditions, including pay”, which shows that the phrase “working conditions” encompasses more than the term “pay” in Article 119 of the Treaty and in Article 1 of Directive 75/117/EEC even if the latter is understood in the broadest sense. Moreover, as indicated by Article 5 (1) of the same directive, working conditions also include the “conditions governing dismissal”. It follows a fortiori that they also include the contributions paid by an employer to a retirement benefits scheme and the rights and benefits of a worker under such a scheme. Indeed, working conditions include all terms and conditions of employment other than pay.

Article 1 (1) of the directive is sufficiently clear and precise to have direct effect.

Lloyds first of all makes several general remarks as an introduction to the examination of the questions.

It begins by explaining the characteristics of the occupational pension schemes existing in the United Kingdom and points out that the benefits in fact received under one of those schemes can never be exactly the same for two people except purely by accident since they vary in each case according to a variety of personal factors including the options taken up by the person concerned, family circumstances and the age to which he or she lives. For the same reasons, actual receipts cannot be known until after the interests of the member and, where applicable, of his or her dependants, cease. It is therefore necessary to consider that even if the sex of members were not taken into account it would in any case be impossible to achieve equality of benefits between them or. to fix a priori the total amount of benefits which will be paid to a member.

The pension funds set up by retirement benefits schemes are administered on the basis, inter alia, of actuarial statistics on the life expectation of members. It is a group calculation reflecting a group average and not the behaviour of any individual member, and it cannot be otherwise. It is, however, necessary to make a distinction according to sex for the purposes of that calculation since the result is necessarily influenced by differences of sex and sexual behaviour patterns. In fact, a woman's greater expectation of life means that the cost to the fund of providing identical benefits is greater in the case of a woman than in that of a man. Since, as has been seen, the benefits received by the person concerned can only be known after, and in many cases years after, the relevant employment ends, the same applies to the contributions necessary to maintain those benefits.

Moreover, the contributions paid by a worker do not correspond to the benefits that he will receive in the future. The contributions are received and administered by the trustees of the pension fund. There is and can be no apportionment between members or actual or notional attribution to any particular member.

Finally, the difference between contributory and non-contributory schemes is irrelevant in the present case since the contributions of Lloyds's workers are funded by Lloyds.

On the basis of these considerations, it may therefore be concluded that it is impossible to calculate the value to him or her of membership of a retirement benefits scheme of the type established in the United Kingdom and that the value of the benefits can never, save by pure chance, be identical or equal.

The value of prospective benefits could only be ascertained on the basis of an actuarial assessment of an “average” person but the apparent equality which might well be produced if the scheme terms were identical would not be produced in fact.

Consequently, if either “pay” or “consideration” are sought to be construed as embracing pension benefits or pension contributions those words would have to be read as extending to such an actuarial assessment of value and as requiring a comparison not of true but of apparent value.

As regards Question 1 Lloyds observes that the expression “wage or salary and any other consideration, whether in cash or in kind, which the worker receives directly or indirectly” in Article 119 intends to bring into account also benefits which are akin to pay which are known and received or enjoyed at the time when the (assumed) like work is being performed and which are capable then of being calculated, quantified and compared. In fact, the purpose of the definition contained in Article 119 is to identify the constituents of pay in order to enable such comparison readily and simply to be made by employers and workers of both sexes and therefore to identify, quantify and correct any inequality.

There are, however, other terms of a contract of employment which might become or develop into a source of financial advantage or disadvantage to either sex but the effects of which depend upon future events or contingencies. In such cases quantification is only possible after the happening and in the light of such events. If the word “consideration” were widely construed to include such elements the purpose of the definition would be frustrated because contemporary comparison would become either impracticable or impossible.

Moreover, according to the case-law of the Court in Defrenne No 3, the field of application of Article 119 must be determined within the context of the system of the social provisions of the Treaty which are set out in the chapter formed by Article 117 et seq. Articles 117 and 118 provide for a programme to be implemented through subordinate legislation. They are supplemented but not contradicted or duplicated by Article 119, provided that the criteria therein provided are strictly construed. In the present case the fact of differential nominal pay scales and like work is present, but the scales are the product of the different fund rules and if Article 119 were applied, which could only be done by equalization of those scales alone, this would, as the facts demonstrate, produce even more glaring inequality. In fact, the discrimination in this case is “indirect” or “disguised” and could only be abolished by amending one or other of the pension schemes.

Broaching point (a) of Question 1, Lloyds observes that the contributions paid by the employer or by the worker to the pension schemes cannot constitute pay within the meaning of Article 119 since they are received by the trustees of the pension fund and are not receivable by the worker himself.

In support of this interpretation, it may be recalled that the Court in its judgment in Defrenne No 1 held that the part due from the employers in the financing of State pension schemes does not constitute a direct or indirect payment to the worker. It follows from the same judgment that this characteristic is also shared by “special schemes which... relate in particular to certain categories of workers”. This ruling is precisely applicable to retirement benefits schemes in general and to the instant schemes in particular.

That conclusion is confirmed by the consistent case-law of the Court and by the wording of Directive 76/207/EEC on equal treatment and of Directive 7/79/EEC on social security (Official Journal 1979, L 6, p. 24). In fact, a wide construction of the word “pay”, which would cover many of the matters dealt with in the Equal Treatment Directive, has been expressly rejected by the Court. Moreover, Article 1 (2) of the Equal Treatment Directive excludes from the scope of that directive “matters of social security”, whereas Article 3 (3) of the Social Security Directive leaves the principle of equality in “occupational schemes” in matters of social security to be implemented by subsequent rules. These provisions are consistent only with the view that “occupational schemes”, in particular occupational pension schemes, are matters of social security, not pay, are not yet the subject-matter of any Community provision and fall to be dealt with in the future under the provisions of Article 118.

With particular reference to the judgment in Defrenne No 1, Lloyds states that the only difference between the pension scheme operated by Sabena (the Defrenne case) and those operated by Lloyds is that the former was established by Royal Decree and the latter by trust deeds: this is a matter of form and not of substance. In fact, the applicability of Article 119 should not turn upon differences of domestic law or practice in any Member State or upon the means by which any particular scheme is in consequence established. The characteristics of the scheme and not its mode of creation should be decisive.

Lloyds asks moreover whether the phrase “within the framework of a social security scheme laid down by legislation” used by the Court in the judgment in Defrenne No 1 should be read as descriptive of the scheme before the Court or as laying down an essential precondition for the exclusion of a pension scheme from the scope of Article 119.

It replies as follows:

1. This phrase is simply descriptive;

2. Alternatively, any pre-condition should be satisfied all the same if the relevant scheme is validly established under the relevant domestic law taking into consideration the fact that, for example, in the United Kingdom the statutory creation of such schemes is very rare;

3. Even if a scheme can only be excluded from the application of Article 119 if it comes within a national legislative framework, this is the case in the United Kingdom where private schemes must be approved under the Finance Act 1970 and certified under Part III of the Social Security Pensions Act 1975;

4. The categorization of schemes suggested by Mr Advocate General Dutheillet de Lamothe was not accepted or approved by the Court and is not therefore authoritative.

According to Lloyds, the construction contended for confines the meaning of the word “pay” within clear, manageable, practicable limits, understandable to employers and workers alike, and avoids conflicts or overlaps between Article 119 and Articles 117 and 118.

With regard to point (b) of Question 1, Lloyds observes first of all that it follows from the judgment in Defrenne No 1 that “the worker will normally receive the benefits legally prescribed not by reason of the employer's contribution but solely because the worker fulfils the legal conditions for the grant of benefit”. These words apply equally both to a typical State scheme and to a typical occupational scheme.

These benefits are not consideration paid directly or indirectly by the employer. The funds arising under the pension schemes are vested in the trustees of the pension fund who act independently of the bank. No person entitled to any benefit under the scheme has any claim in respect of such benefit except against the fund. Thus it is clear that benefits are received from the fund and not from the employer.

The benefits received by a worker from the trustees of the fund are in no way dependent upon a term in the contract of employment for remuneration or otherwise, or upon any calculation made under such contract but wholly and fundamentally upon the rules of the particular scheme.

The nature and amount of the benefit depend upon a variety of factors personal and peculiar to the individual worker. The benefit is receivable only after the termination of the employment and may continue after the death of the person concerned. There is therefore no “close connexion” between the nature of the services provided and the benefit received. The receipt is quite unrelated to any particular work done or past contribution. Equality of benefits between workers is quite unattainable. Further it may be asked how sums received after retirement and not calculable until death or later can be treated for comparative purposes as pay earned during a working life and how such total receipts are to be apportioned over such working period. All that a worker receives in consequence of his employment is the benefit of membership of a pension scheme, the benefit of a package of rights and expectations which remain contingent until the employment ceases. Any attempt to treat the benefits actually received by the worker or his dependants as “pay” or “consideration” with a resultant requirement of equality is an attempt to achieve the impossible.

It should moreover be recalled that the equalization of the terms of retirement benefits schemes for men and women raises highly complex problems for the solution of which the provisions of Article 119 are inadequate and inappropriate but are reserved by Articles 117 and 118 to the discretion of the authorities referred to therein. These problems require solution in principle by the legislators. The first problem is that created by the woman's greater expectation of life. There are at least two schools of thought as to how equality between sexes should be measured or defined. The approach consisting of fixing identical terms and provisions for men and women seems, however, unfair because it can never neutralize the natural female advantage. The other view is on the other hand that true equality can only be reached by providing a package of benefits of equal value to men and women, which would involve the definition of precise actuarial standards. Each of these solutions could, moreover, be modified.

However, in addition to resolving this fundamental issue, the legislation should consider and determine what is to constitute equality over a wide field of problems including maternity provisions, differences in retirement age, the position of the surviving spouses of members and differences in career patterns and so forth.

The difficulties in the above fields could explain both the terms of Article 3 (3) of the Social Security Directive and the absence as yet of the provision therein referred to.

Article 119 can operate directly upon pay clauses in individual contracts of service but is not intended to meet and cannot be construed as meeting the essential requirements specified in the preceding paragraphs.

As regards Question 2, Lloyds considers that the intent and effect of Directive 75/117/EEC was to extend the concept of equal pay to cover both the same work and “work to which equal value is attributed” but not by the use of the phrase “all aspects and conditions of remuneration” to vary or extend the scope or meaning of the definition of pay in Article 119 itself.

Article 4 of the directive, according to which the Member States must take all necessary measures to declare null and void or amend any provisions appearing “in collective agreements, wage scales, wage agreements or individual contracts of employment” shows the absence of any intention to extend the concept of pay and in particular the absence of any intention to cover pension schemes in that directive.

In these circumstances, there is no need to reply to Question 3.

With regard to Question 4, Lloyds observes that the express exclusion of matters of social security by Article 1 (2) of Directive 76/207/EEC, coupled with the absence of any reference to pension schemes in Article 5 (2) (b), show that the general provisions of that directive were not intended to affect pension schemes.

Alternatively, assuming that Question 3 or the second part of Question 4 are relevant, Lloyds maintains that Article 119 of the Treaty, Directive 75/117/EEC and Directive 76/207/EEC are each insufficiently precise to have direct effect, both as regards pension contributions and in respect of the rights and benefits under retirement benefits schemes. Moreover, with regard to Directive 76/207/EEC, the period for the implementation of that directive in the United Kingdom expired in August 1978, so that the question of direct effect cannot arise in proceedings commenced in 1977.

Finally, also in the alternative, Lloyds draws attention to the consequences which would be likely if the Court were to uphold the plaintiffs' argument. As Lloyds annually employs in the order of 21 500 women, of whom about 13 800 are under the age of 25, such claims for the retrospective adjustment of pay scales covering a period of years could run into millions of pounds altogether. Lloyds therefore suggests that the Court, as it has already done in Case 43/75, Defrenne v Sabena, should limit the power to rely upon the direct effect of Community provisions in support of claims relating to periods prior to the date of the judgment which it delivers to workers who have already brought legal proceedings or made an equivalent claim.

The United Kingdom considers, with regard to Question 1, that neither contributions to a retirement benefits scheme nor rights or benefits enjoyed under such a scheme are, as such, “pay” within the meaning of Article 119.

It observes first of all that the order for reference refers solely to “contributions paid by an employer” without making a distinction between sums compulsorily deducted from the employee's pay, other sums paid on the employee's behalf, sums which the employer is required to pay in order to enable the scheme to function (“the employer's contribution”) or a mixture of these. It is, at least at first sight, surprising that the Court of Appeal and/or the parties see no relevant distinction between these types of contribution.

Under the system applied by Lloyds, the problem is whether the 5% described as forming part of the “salary” of male employees under 25 and paid direct by Lloyds to the trustees of the pension scheme is “pay” or not.

If the 5% is pay, it is pay precisely because it can be identified as such without regard to any terms related to death or retirement or to any provision made in connexion with death or retirement. It is therefore necessary to concentrate solely on the relationship between employer and employee. The conclusion tnat the 5% is pay would seem to involve finding that on the facts the 5% forms part of the sum due to the employee but is notionally handed back to the employer to be paid on the employee's behalf to the trustees of the scheme. On the facts, such an approach presents certain difficulties since the employee is at no time entitled to insist on the sum being paid to him by the employer. The question whether in all the circumstances the sum is pay is one primarily for the national court. The United Kingdom expresses no view on the facts of the present case beyond pointing out that, whichever view prevails, the answer will not depend on the consequences of the payment to the trustees but upon the nature of the sum in terms of a payment by the employer to the employee (or to his order) for a given amount of work.

With regard to the rights and benefits under a retirement benefits scheme, the arguments against such rights and benefits being “pay” are a fortiori those relating to “contributions paid by the employer”. The extent and amount of such rights and benefits are not related to the work done but are the product of a number of different factors (contributions, income from the trustees' own investments and other factors). There is no difference in principle between such a scheme and that to which public authorities may contribute. As follows from the case-law of the Court (the judgment in Defienne No 1), the part due from an employer in the financing of a social security scheme does not constitute a direct or indirect payment to the worker: the latter receives the benefits legally prescribed solely by reason of the fact that he fulfils the legal conditions required for their being granted. The rights and benefits are related to such matters as length of service, wage or salary at retiring age, age at time of death and so forth. They are paid by the trustees of the scheme, not the employer.

There are differences in terms of the value and amounts of such benefits, as between men and women, for example the retiring age, life expectancy and the pattern of working life, which are far more complex than simple questions of equal pay for equal work. These factors are relevant to the construction of a retirement benefits scheme, though they are irrelevant to simple comparisons of the amount of pay for a given amount of work..

There is a further objection to treating either the employer's contribution or the rights or benefits as “pay” in any general sense. In the United Kingdom, there is in fact a State pension scheme and occupational schemes supplementary to the former which must now fulfil certain detailed statutory criteria which ensure that the benefits received by workers are adequate in terms of the social policy pursued by the legislation of the United Kingdom. It would be odd if the legal requirements imposed by Community law on the occupational pension schemes were different from those imposed on the United Kingdom State scheme to which some 13 million employees have to look for the entirety of their benefits.

With regard to Question 2, the United Kingdom considers that Directive 75/117/EEC of 10 February 1975 is not concerned to widen the meaning of the principle of equal pay, still less to widen the meaning of the word “pay”. That directive in fact makes no mention whatsoever of pensions, retirement benefits schemes, or the like.

The intention to deal with matters of social security separately from pay is moreover confirmed by the recitals of the preamble to Directive 76/207/EEC which contrasts pay and matters of social security, and by Article 1 (2) of the same directive which contemplates the progressive implementation by other measures of the principle of equal treatment in matters of social security.

After putting forward these considerations, the United Kingdom observes that if these submissions are correct, it is unnecessary to reply to Question 3. For the sake of completeness it, however, also examines that question.

In the opinion of the United Kingdom it is clear that if, contrary to its submissions, Article 119 applied to pensions, it could not have direct effect. The forms of discrimination in question cannot be identified solely with the aid of criteria based on equal work and equal pay. It is not clear how equality is to be achieved in this field since it is possible to achieve it either by equal benefits or by equal contributions but not by both solutions together so long as retiring ages and life expectancies vary as between men and women.

The need thus established to define through appropriate measures at the Community or national level detailed criteria for the attainment of the principle of equality therefore precludes Article 119 from having any direct effect.

In this respect, it is necessary to recall that according to the case-law of the Court “it is... impossible to widen the terms of Article 119 to the point... of jeopardizing the direct applicability which that provision must be acknowledged to have in its own sphere”.

With regard to Directive 75/117/EEC it is necessary to take into account the fact that a provision of a directive can only have direct effect if it is clear, unconditional, and leaves no discretion to the Member State as to the substance of its implementation.

Where the indefinite nature of the concepts used by a provision leaves the Member States a margin of discretion on matters of substance, a discretion of that kind precludes any possibility of according direct effect to the provision in question. However, this would be exactly the situation, as already seen in relation to Article 119, if Article 1 of Directive 75/117/EEC applied also to pensions. The need to produce criteria with a view to equality in occupational pension schemes has been recognized, moreover, by the Council and by the Commission. The Commission is engaged in drafting a new directive dealing only with those schemes.

The United Kingdom then draws attention to the consequences which the recognition of direct effect would have in the United Kingdom. First of all, the pattern of employment could be severely disturbed if the relationship between private schemes and the State scheme were to be destroyed. The direct financial consequences would also be substantial for employers and the administrators of occupational pension schemes. If for example the retirement age of men were reduced from 65 to 60, as for women, the cost to be borne by the pension funds would immediately increase by up to UKL 200 million a year, reducing to about half this figure after several years, in addition to UKL 100 million for benefits for surviving spouses, regardless of the cost of any payments made to recompense male workers who have already retired. Employers would have to face a massive financial burden of immediate impact. Many of them would then be prompted to discontinue occupational pension schemes or reduce their benefits to a substantial extent.

With regard to Question 4, the United Kingdom considers that Directive 76/207/EEC on equal treatment as regards working conditions cannot relate to social security since it expressly excludes matters of social security from its field of application.

With regard to direct effect, the arguments against the direct effect of Directive 75/117/EEC are valid a fortiori with regard to Directive 76/207/EEC. It is possible to add that Article 5 of the directive shows that detailed legislation is contemplated to give effect to the general principle of equal treatment. Finally, the time-limit for the implementation of the directive in the United Kingdom expired on 12 August 1978, in other words after proceedings were commenced in the main action.

The Commission of the European Communities considers, as regards Questions 1 and 2, that contributions paid by an employer to a retirement benefits scheme are paid within the meaning of Article 119 of the Treaty and remuneration within the meaning of Article 1 of Directive 75/117/EEC on equal pay.

In this case, the additional sum received by male workers for Lloyds below the age of 25 is described as salary and it is treated as salary for the purpose of calculating certain collateral benefits. It is thus part of the “ordinary... salary” of a worker within the meaning of Article 119.

The additional sum, however, has certain distinctive features since it is paid by Lloyds only because of the requirements of the retirement benefits scheme for the workers concerned and is paid not to these workers themselves but to the trustees of the fund. Strictly speaking, it is not an employer's contribution but rather a worker's contribution in respect of which he is indemnified by the employer. It is therefore a contribution paid by an employer on the worker's behalf. On this analysis it also falls within the definition of pay in Article 119. It is in fact consideration which the worker receives, directly or indirectly, in respect of his employment from his employer.

The question submitted to the Court of Justice by the Court of Appeal however relates to employers' contributions strictly so-called. According to the Commission, such contributions fall as a matter of language within the definition of pay in Article 119.

The Commission, moreover, considers that the case-law of the Court favours an affirmative answer to Questions 1 and 2. In its opinion, the retirement benefits scheme in the present case and schemes of which it is an example fulfil the conditions laid down by Mr Advocate General Dutheillet de Lamothe in Defrenne No 1 and do not display any of the factors which, according to the judgment delivered by the Court in that case, exlude State social security schemes from the ambit of Article 119. It should be noted that in that judgment the Court approached the question precisely from the standpoint of employers' contributions.

An interpretation of Article 119 that construed pay and remuneration as embracing contributions of employers to pension schemes might promote the economic and social aims of that article, in other words the promotion of fair competition and the advancement of living and working conditions of people within the Community, particularly for that sector made up of female workers and their dependants.

With regard to the second part of the two questions, the Commission considers that workers' rights and benefits are pay within the meaning of Article 119 of the Treaty and remuneration within the meaning of Article 1 of Directive 75/117/EEC.

In this case, the refund of contributions to male workers of Lloyds before the age of 25 falls within the definition of Article 119. Moreover, such rights and benefits generally fall within that definition. The arguments advanced in relation to “employers'” contributions are repeated mutatis mutandis with regard to benefits under a retirement benefits scheme. Benefits under such a scheme are commonly and properly considered to be “deferred pay” and the Court itself held in Defrenne No 1 that future pay falls within the scope of Article 119.

With regard to Question 3 the Commission considers that Article 119 and Article 1 of Directive 75/117/EEC have direct effect in Member States.

According to the case-law of the Court Article 119 is directly effective where direct as opposed to indirect discrimination is involved. The Commission is of the opinion, as it has already said, that the additional sum in question forms part of the salary and that accordingly the pre-condition of direct discrimination is satisfied in this case.

With regard to the directive, Article 1(1) thereof in fact constitutes a definition of the concept in Article 119, If, therefore, Article 119 is directly effective the same must apply to Article 1 of the directive.

With regard to Question 4, the Commission is of the opinion that it is not necessary to reply to it since that question is only put on the premise that Questions 1 and 2 have been answered negatively.

In the light of the foregoing considerations, the Commission submits that the answers to the questions put by the Court of Appeal should be as follows :

“Question 1: Contributions paid by an employer to a retirement benefits scheme and rights and benefits of a worker under such a scheme are ‘pay ’ within the meaning of Article 119 of the EEC Treaty.

Question 2: Contributions paid by an employer to a retirement benefits scheme and rights and benefits of a worker under such a scheme are ‘remuneration’ the meaning of Article 1 of the Equal Pay Directive.

Question 3: (i) Article 119 of the Treaty and (ii) Article 1 of the directive have direct effect in Member States so as to confer enforceable Community rights upon individuals in the circumstances of the present case.

Question 4: No answer need be given.”

III — Oral procedure

Susan Jane Worringham and Margaret Humphreys, represented by A. Lester, QC, and C. Carr, Barrister, Lloyds, represented by D. Hunter, QC, the United Kingdom, represented by P. Scott, QC, and the Commission of the European Communities, represented by A. Toledano-Laredo, acting as Agent, and by M. Beloff, Barrister, presented oral argument at the hearing on 29 October 1980.

During the hearing Lloyds completed the statement of facts in this case as follows :

“Since 1968 in the United Kingdom wage scales for junior staff have been agreed nationally. Exceptionally, amongst the banks, Lloyds pension schemes were not only contributory but also provided for the men to contribute at the start of their pensionable employment whereas the women started to contribute from the age of 25.

Accordingly because of the difficulties involved in altering the fund rules and for the sole purpose of producing as nearly as possible equality of take-home pay within Lloyds and between Lloyds staff and the staff of other banks, Lloyds adjusted their salary scales by increasing the national scale by 5% for all contributory members, that is all men and women over 25.

In this way Lloyds provided all contributions required by the fund rules from men and women over 25 and as between itself and these members in substance converted a contributory into a non-contributory scheme.

Under the existing rules of the two pension schemes to have paid the same nominal salaries to men and women under 25 would have produced glaring inequalities. It was recognized by Lloyds and by the staff that the only step towards equal treatment between men and women was to alter the scheme rules or to amalgamate the two schemes. This process which was started was not within the power of the bank and the staff representatives alone but required the consent of the Trustees, the Inland Revenue, the Occupational Pensions Board and a 75% vote of any affected class of member”.

The Advocate General delivered his opinion at the sitting on 11 December 1980.

The first question

12 The first question submitted by the national court is worded as follows :

“1. Are

1. contributions paid by an employer to a retirement benefits scheme,

   or

2. rights and benefits of a worker under such a scheme

‘pay’ the meaning of Article 119 of the EEC Treaty?”

13 It is clear from the information supplied by the national court that the first question asks essentially, first, under (a), whether sums of the kind in question paid by the employer in the name of the employee to a retirement benefits scheme by way of an addition to the gross salary come within the concept of “pay” within the meaning of Article 119 of the Treaty.

14 Under the second paragraph of Article 119 of the EEC Treaty, “pay” means, for the purpose of that provision, “the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which the worker receives, directly or indirectly, in respect of his employment from his employer”.

15 Sums such as those in question which are included in the calculation of the gross salary payable to the employee and which directly determine the calculation of other advantages linked to the salary, such as redundancy payments, unemployment benefits, family allowances and credit facilities, form part of the worker's pay within the meaning of the second paragraph of Article 119 of the Treaty even if they are immediately deducted by the employer and paid to a pension fund on behalf of the employee. This applies a fortiori where those sums are refunded in certain circumstances and subject to certain deductions to the employee as being repayable to him if he ceases to belong to the contractual retirement benefits scheme under which they were deducted.

16 Moreover, the argument mentioned by the British Government that the payment of the contributions in question by the employer does not arise out of a legal obligation towards the employee is not in point since that payment is in fact made, it corresponds to an obligation by the worker to contribute and is deducted from his salary.

17 In view of all these facts, it is therefore necessary to reply to Question 1 (a) that a contribution to a retirement benefits scheme which is paid by the employer in the name of the employees by means of an addition to the gross salary and which helps to determine the amount of that salary is “pay” within the meaning of the second paragraph of Article 119 of the EEC Treaty.

18 In view of this reply, there is no need to examine the second part of the first question, Question 1 (b), which is subsidiary to Question 1 (a).

The second question

19 In its second question, which is almost identical to the first, the national court puts the same problem to the Court with reference to Article 1 of Council Directive 75/117/EEC of 10 February 1975.

20 Since the interpretation of Directive 75/117/EEC was requested by the national court merely subsidiarily to that of Article 119 of the EEC Treaty, examination of the second question is purposeless, having regard to the interpretation given to that article.

21 Moreover, Directive 75/117/EEC, whose objective is, as follows from the first recital of the preamble thereto, to lay down the conditions necessary for the implementation of the principle that men and women should receive equal pay, is based on the concept of “pay” as defined in the second paragraph of Article 119 of the Treaty. Although Article 1 of the directive explains that the concept of “same work” contained in the first paragraph of Article 119 of the Treaty includes cases of “work to which equal value is attributed”, it in no way affects the concept of “pay” contained in the second paragraph of Article 119 but refers by implication to that concept.

The third question

22 The national court asks further in its third question whether, if the answer to Question 1 is in the affirmative, “Article 119 of the EEC Treaty... [has] direct effect in the Member States so as to confer enforceable Community rights upon individuals in the circumstances of the present case”.

23 As the Court has stated in previous decisions (judgment of 8 April 1976 in Case 43/75, Defrenne [1976] ECR 455 and judgment of 17 March 1980 in Case 129/79, Macarthys Ltd [1980] ECR 1275), Article 119 of the Treaty applies directly to all forms of discrimination which may be identified solely with the aid of the criteria of equal work and equal pay referred to by the article in question, without national or Community measures being required to define them with greater precision in order to permit of their application. Among the forms of discrimination which may be thus judicially identified, the Court mentioned in particular cases where men and women receive unequal pay for equal work carried out in the same establishment or service, public or private. In such a situation the court is in a position to establish all the facts enabling it to decide whether a woman receives less pay than a man engaged in the same work or work of equal value.

24 This is the case where the requirement to pay contributions applies only to men and not to women and the contributions payable by men are paid by the employer in their name by means of an addition to the gross salary the effect of which is to give men higher pay within the meaning of the second paragraph of Article 119 than that received by women engaged in the same work or work of equal value.

25 Although, where women are not required to pay contributions, the salary or men after deduction of the contributions is comparable to that of women who do not pay contributions, the inequality between the gross salaries of men and women is nevertheless a source of discrimination contrary to Article 119 of the Treaty since because of that inequality men receive benefits from which women engaged in the same work or work of equal value are excluded, or receive on that account greater benefits or social advantages than those to which women are entitled.

26 This applies in particular where, as in this instance, workers leaving their employment before reaching a given age are, in certain circumstances, refunded in the form of a “contributions equivalent premium” at least a proportion of the contributions paid in their name by the employer and where the amount of the gross salary paid to the worker determines the amount of certain benefits and social advantages, such as redundancy payments or unemployment benefits, family allowances and mortgage or credit facilities, to which workers of both sexes are entitled.

27 In this case the fact that contributions are paid by the employer solely in the name of men and not in the name of women engaged in the same work or work of equal value leads to unequal pay for men and women which the national court may directly establish with the aid of the pay components in question and the criteria laid down in Article 119 of the Treaty.

28 For those reasons, the reply to the third question should be that Article 119 of the Treaty may be relied upon before the national courts and these courts have a duty to ensure the protection of the rights which this provision vests in individuals, in particular in a case where, because of the requirement imposed only on men or only on women to contribute to a retirement benefits scheme, the contributions in question are paid by the employer in the name of the employee and deducted from the gross salary whose amount they determine.

The temporal effect of this judgment

29 In its written and oral observations, Lloyds had requested the Court to consider the possibility, if the answer to the third question is in the affirmative, of limiting the temporal effect of the interpretation given by this judgment to Article 119 of the Treaty so that this judgment “cannot be relied on in order to support claims concerning pay periods prior to the date of the judgment”.

30 It maintains for this purpose, first, that the problem of the compatibility of the national law with Community law was raised only at the stage of the appeal brought before the Employment Appeal Tribunal and, secondly, that acknowledgment by the Court of the direct effect of Article 119 of the Treaty would lead, in a case such as the present, to “claims for the retrospective adjustment of pay scales covering a period of years”.

31 As the Court acknowledged in its above-mentioned judgment of 8 April 1976, although the consequences of any judicial decision must be carefully taken into account, it would be impossible to go so far as to diminish the objectivity of the law and thus compromise its future application on the ground of the repercussions which might result, as regards the past, from such a judicial decision.

32 In the same judgment the Court admitted that a temporal restriction on the direct effect of Article 119 of the Treaty might be taken into account exceptionally in that case having regard, first, to the fact that the parties concerned, in the light of the conduct of several Member States and the views adopted by the Commission and repeatedly brought to the notice of the circles concerned, had been led to continue, over a long period, with practices which were contrary to Article 119 and having regard, secondly, to the fact that important questions of legal certainty affecting not only the interests of the parties to the main action but also a whole series of interests, both public and private, made it undesirable in principle to reopen the question of pay as regards the past.

33 In this case neither of these conditions has been fulfilled, either in respect of the information available at present to the circles concerned as to the scope of Article 119 of the Treaty, in the light in particular of the decisions of the Court in the meantime on this subject, or in respect of the number of the cases which would be affected in this instance by the direct effect of that provision.

The fourth question

34 As the fourth question was only submitted to the Court of Justice by the national court in case the first two questions were answered in the negative, examination of it has become purposeless.

Costs

The costs incurred by the Government of the United Kingdom and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.