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IBM was wrong to force UK workers off final salary pensions – judge

UK High Court rules Big Blue breached contract with staff

Angry old man

A UK High Court judge has said that IBM breached its duties to Brit workers with a company pension by kicking a quarter of them off its final salary scheme in 2009.

IBM's "Project Waltz" was implemented in 2009 to help the company meet its 2010 target for earnings per share (EPS) and cut costs.

The scheme cut benefits to thousands of workers in the UK, some of whom sued the company for breaching its duties to its staff.

In a lengthy ruling, Justice Nicholas Warren said that Big Blue had breached its contractual duty to workers relating to the way it had consulted with them over the pension changes.

"I consider that the consultation was not carried out in a way which was open and transparent," he wrote in his decision. "It did not, in my view, accord with the approach which ought - in accordance with IBM's own philosophy as set out in the Business Conduct Guidelines and Core Values - to be followed."

He also said that the company had breached its duty in terms of the reasonable expectations that staff would have had about their pensions continuing as they were.

"My judgment is that [IBM] was in breach of its contractual duty of trust and confidence in imposing the Project Waltz changes and in presenting the members with the choice of signing non-pensionability agreements or receiving no pay increases in the future," he said.

"In the light of all the evidence… it is my view that no reasonable employer in the position of [IBM] in 2009 would have adopted the Project Waltz proposals in the form which they took," he added.

IBM spokesperson Ken Saunders said that the firm planned to appeal the ruling.

"IBM respectfully, but fundamentally, disagrees with the court's decision," he said. "The court's opinion acknowledges IBM's right to make changes in its UK pension programmes, but we believe the Court applied an incorrect legal standard in invalidating IBM's exercise of that right.

"IBM fully intends to seek leave to appeal at the appropriate time, and remains committed to providing its employees and retirees compensation that is competitive and in line with market conditions."

Project Waltz shelved IBM's “defined benefit” scheme, which guaranteed retired employees a predefined portion of their final salary. Staff were left with the “defined contribution” plan, which many of them were already on, where they paid part of their wages into a pension fund with no guarantee of what they might get out of it. The move effectively shifted all financial risk for pensions onto the workers instead of the company.

Mr Justice Warren said that a future hearing would consider what remedies the court could, or should, impose on IBM for the breaches. ®

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