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Crew work-based pensions in the UK – recent developments

Seafarers, airline pilots, international management consultants, salesmen, and the like often perform their duties in multiple locations, working outside of their “normal” work base, or sometimes without an easily discernible “normal” base. Such peripatetic workers can sometimes become the object of legal-head scratching in circumstances where their entitlement, or otherwise, to certain statutory rights comes into question, and the spotlight fell recently on the UK’s pension rules in such context in the judicial review case of R (On the application of Fleet Maritime Services (Bermuda) Limited) -v- The Pensions Regulator [2015] EWHC 3744.

Briefly, the key question posed before the Court was whether or not seafarers employed by a Bermuda-based employer (of itself a wholly owned subsidiary of an English company) to work on, predominantly, Bermuda-registered cruise ships, fell within the scope of the UK’s “automatic enrolment” pension rules as prescribed in the Pensions Act 2008 (“the Act”). The employer in question had no place of business in the UK, employed both UK resident and foreign crew, and used a Guernsey-based company to process payroll and administration. The cruise ships on which the seafarers were engaged plied their trade mostly outside UK territorial waters. So why did the Pensions Regulator take an interest in crew employed by Fleet Maritime Services (“Fleet”) given this particular fact pattern?

The answer lies in section 1(1)(a) of the Act which requires employers to enrol eligible “jobholders” into an “automatic enrolment scheme”, a “jobholder” being defined as a worker “who is working or ordinarily works in Great Britain under the worker’s contract”. The Regulator, who is responsible for enforcing the obligations imposed by the Act in the UK, determined in the context of Fleet’s seafarer employees that:

1. Workers living in the UK who work on British or foreign-flagged vessels which ply their trade in UK and foreign waters, will be considered as ordinarily working in the UK for the purposes of the Act if their join and leave their vessel from a UK port;

2. Workers living in the UK who are employed under a permanent contract of employment (e.g. a contract other than a fixed term, or a voyage, contract) and join and leave the vessel outside the UK, but whose travel arrangements support the view that their work begins and ends in the UK, should also be assessed as ordinarily working in the UK;

3. Workers living in the UK who are employed under a fixed term contract and join and leave the vessel outside the UK, will not be considered to be ordinarily living in the UK; and

4. Workers who do not live in the UK will not fall within the “automatic enrolment scheme”.

Fleet challenged the Regulator’s decision arguing that its UK-resident seafarers seconded to ships which spend a significant majority of their time outside UK waters should not fall within the definition provided for in section 1(1)(a) of the Act. In order to resolve the matter the Court needed to put the phrase “working or ordinarily works in Great Britain” under scrutiny.

In his carefully reasoned judgment, Mr Justice Leggatt approached the issue with a view to seeking to strike a “proper balance between providing useful guidance and avoiding micromanagement”, in other words, not commenting on any individual seafarers employed by Fleet, but by focussing on a general approach towards the interpretation of the part of the Act in question. In doing so, the Court analysed past cases involving peripatetic employees concluding that, in the context of the UK’s pension rules, the concept of a worker’s base should be determined by reference to what actually happens under the employment contract, over time, rather than on the position as it appeared when the contract was made. Moreover, the worker’s “base” would not be considered to be the ship itself, but instead the place from which the worker set off, and to which the worker returned, for each tour of duty (this approach being in line with earlier case law) – one would need to look at the location of the ship at the relevant time in assessing this particular aspect.

As such, and looking to the 4 categories outlined above, there was no debate as to the third and fourth, but the Court’s view on the first two was as follows:

1. The Regulator’s interpretation was correct, provided that it was not intended to simply refer to situations encompassing a single tour of duty, but those where there are multiple tours which “habitually” begin and end in an UK port – an individual seafarer’s assessment would come down to an analysis of their individual pattern of working under their employment contract; and

2. The Regulator’s interpretation was not correct, as the key question to be posed in determining whether a peripatetic worker “ordinarily works” in the UK was to ask where their tours of duty began and ended by reference to the place where seafarers actually join (and leave) their ships, travel from and to their UK home being deemed to amount to “commuting”.

Simply put, seafarers engaged on ships which are, at all times, situated outside the UK will not be caught by the Act. However, those working from a base situated in the UK may be regarded as ordinarily working in the UK even if the ships on which they are employed spend most of their time outside the UK. The determination will, in each case, come down to a careful assessment of the individual seafarer’s pattern of working.

So what happens if, on the other hand, a vessel undergoes a refit in the UK for example? At paragraph 40 of the judgment, Mr Justice Leggatt helpfully observes as follows:

It is not reasonable to suppose that if, for example, a foreign worker is sent to Britain by their employer for a few months to carry out a particular project, the worker’s employer is obliged to automatically enrol the worker in a qualifying pension scheme provided only that their earnings exceed the requisite threshold. To make sense of the provision, I think the test must be whether the individual is working in Great Britain in the sense of working with their base in Great Britain rather than doing work here on a temporary visit.

The Fleet case provides useful guidance to those employing UK crew on their ships, the focus in the context of UK pension rules being not just on the place of establishment of the employer and the vessel’s flag state, but the seafarer’s base and working pattern.

The content of this article is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content herein.

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