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Peripatetic Workers and Pensions Auto-Enrolment – High Court Rules

All businesses should by now be well aware that they are, or shortly will be, required to automatically enrol their workers in an approved pension scheme. However, in a ruling which will be required reading for employers, the High Court has given important guidance on how the new rules must be applied to peripatetic employees who spend much of their working lives outside Britain.

Cruise ShipA company which employed crew on board a fleet of Bermuda-registered cruise ships argued that its seafarer employees, who spend most of their time outside British territorial waters, should be exempted from the automatic enrolment scheme. It was submitted that such employees do not work, or ordinarily work, in Britain within the meaning of Section 1(1)(a) of the Pensions Act 2008.

The seafarers lived on board the vessels during tours of duty lasting up to six months and enjoyed relatively short periods of shore leave. A Guernsey-based company handled the company’s payroll, and although many of them resided in the UK and were paid in sterling, that did not apply to all of them. However, the Pensions Regulator disagreed with the company’s interpretation of the Act.

Ruling on the dispute, the Court acknowledged that it was possible to interpret the words ‘ordinarily works’ as connoting the place where workers spend the majority of their working time. However, that would not be a reasonable or fair test to apply to peripatetic workers, including those who go on frequent business trips abroad.

The Court found that a broader interpretation, giving many such workers a right to automatic enrolment, was more likely to reflect the will of Parliament. What mattered was the location of a seafarer’s ‘base’, and that could usually be determined by identifying the country in which tours of duty began and ended.

The Court found that seafarers who work from a British base ‘ordinarily work’ in this country even if they spend most of their time outside British waters. The same applied to those who live in Britain and whose voyages habitually begin and end in this country. However, those who reside in Britain but whose tours of duty usually start and terminate elsewhere fell outside the statutory definition.