Pensions Board wins case against employer for pension arrears in landmark ruling

A recent High Court ruling ordered the company Limestone Construction to pay out pension contribution arrears amounting to €186,825. The case is likely to set a precedent in the construction sector and signals the tougher stance being taken by the Pensions Board against pension arrears. Compliance rates are also set to be improved through more effective enforcement measures, such as the establishment of the National Employment Rights Authority.

In the first case of its kind, the High Court (An Ard-Chúirt) issued an application against an employer to pay pension arrears – a power assigned to the Pensions Board (An Board Pinsean) under Section 87 of the 1996 Pensions (Amendment) Act. Moreover, the Pensions Board has indicated that it will be taking a more proactive stance against pension arrears than it has done in the past.

Background to case

The case concerned the Dublin-based company, Limestone Construction, which had registered some of its employees with the Construction Workers’ Pension Scheme (CWPS) from 1 July 2006, and had been deducting pension contributions from most of its 200 workers for 14 months. However, it had not paid these contributions to the CWPS.

Many of the cases of non-compliance with the CWPS involve companies that are not involved in the scheme, even though it is a legal requirement that they abide by it. However, the Pensions Board’s full powers under the Pensions Act come into play when contributions have actually been deducted from workers but not passed onto the pension scheme.

The board made an unannounced visit to the premises of Limestone Construction on 17 October 2007, armed with a District Court warrant and accompanied by members of the Irish police force (Garda Síochána). They seized computer equipment and payroll records and had them analysed by forensic accountants.

Trade union ‘tip off’

The Pensions Board’s Director of Enforcement, Mary Hutch, outlined in an affidavit to the High Court that she had been contacted by the Office of the Director of Corporate Enforcement (Oifig an Stiúrthóir um Fhorfheidhmiú Corparáideach, ODCE) about information put forward by a trade union official who had ‘concerns about Limestone’s apparent failure to comply with its obligations under the scheme’. Ms Hutch subsequently contacted the trade union official in question and proceeded to investigate the complaint.

She recounted how the Pensions Board then contacted the Construction Industry Monitoring Agency (CIMA), which had investigated complaints from certain Limestone employees about a failure to pay its pension scheme contributions. Ms Hutch explained that the company’s Director, Colm McNulty, had failed to engage with CIMA.

Details of pension arrears

Following inspection of Limestone Construction’s records, the Pensions Board set out three categories of employees for whom pension arrears regarding both employee and employer contributions were due:

• registered members of the scheme from whom deductions were made but not passed on (€101,432);

• registered members from whom no deductions were made (€1,577);

• employees from whom deductions had been made, but who had not been formally registered in the scheme (€83,816).

• amounts add up to a total of €186,825 – the figure which the High Court has now ordered the company to pay.

Improved enforcement measures

In recent years, membership of the construction industry pension scheme has increased significantly, from about 30,000 members in the early 2000s to almost 100,000 members in 2008. While this has largely been due to the expansion of employment in the construction industry, it is also as a result of changes in the monitoring system and other improved enforcement measures.

Originally, CIMA, which monitors the construction industry, was the main enforcement arm for the scheme. Many of its appointed monitors are trade union officials, who notify the agency in the event of non-compliance. Often, these cases are dealt with through local agreements between the company and trade union concerned. However, particularly difficult cases are taken to the Labour Court (An Chúirt Oibreachais) under the Registered Employment Agreement (REA) – the legal instrument that enforces the sector’s mandatory pension scheme.

The newly established National Employment Rights Authority (NERA) has further improved the compliance rates. Its predecessor, the Labour Inspectorate of the Department of Enterprise, Trade and Employment (An Roinn Fiontar, Trádála agus Fostaíochta), could pursue construction industry cases, but its resources were limited. Conversely, NERA, which was established as part of the social partnership agreement [Towards 2016 (2.86Mb PDF)](http://www.taoiseach.gov.ie/attached_files/Pdf files/Towards2016PartnershipAgreement.pdf), will have three times the number of labour inspectors and promises to be more effective in this area.

In addition, the Pensions Ombudsman, Paul Kenny, can go back as far as 1996 in seeking arrears; in 2007 alone, his offices have been active in securing €840,000 in unpaid contributions, along with a further €820,000 in the course of collection.

Brian Sheehan, IRN Publishing