The Norm on Recalculation of the Invalidity Pension is Incompatible with the Satversme
On 31 January 2013 the Constitutional Court passed a judgement in Case No. 2012-09-01 “ On Compliance of Para 16 (1) of Transitional Provisions of the Law “On State Pensions”, insofar as It Applies to Invalidity Pension Recalculation Formula in Case of Change of the Invalidity Group Provided that the Beneficiary of Invalidity Pension before the Change of the Invalidity Group was an Employee or Made Social Contributions, with Article 91 and Article 109 of the Satversme.”
The Contested Norms
Para 16 and its subparagraph 1 of Transitional Provisions of the Law “On State Pensions” provide that the pensions, which have been granted before the law “On State Pensions” came into force, but as regards invalidity pension – prior to 1 January 1997, are not recalculated, except in case, if the insurance period accrued before 1 January 1996 has been supplemented, if the family composition has changed, affecting those family members, who are entitled to survivor’s pension, and if the invalidity group has changed.
These pensions are to be recalculated by using a particular formula, taking into account the average salary subject to insurance contributions, applied in establishing the amount of pensions prior to the recalculation of the pensions, the years of the insurance period and the number of those family members, who are entitled to a survivor’s pension.
Norms of Higher Legal Force
Article 91 of the Satversme: “All human beings in Latvia shall be equal before the law and the courts. Human rights shall be realised without discrimination of any kind.“
Article 109 of the Satversme: “Everyone has the right to social security in old age, for work disability, for unemployment and in other cases as provided by law.
The Facts
The Applicant – the Department of Administrative Cases of the Senate of the Supreme Court – is adjudicating a case concerning a decision adopted by the State Social Insurance Agency (SSIA) on recalculation of an invalidity pension. Uldis Strautkalns, the recipient of the pension, was granted 3rd invalidity group, however, he continued to work and to make social insurance contributions. At a later stage he was granted 2nd invalidity group, however, upon recalculating the invalidity pension, SSIA took into account only the accrued insurance period, but did not take into account the social insurance contributions that had been made.
SSIA is using the contested norm as the grounds for its decision. Thus, the Applicant holds that the contested norm infringes upon a person’s right to social security and also envisages unequal treatment of those persons, who received 3rd group invalidity pension, continued to work and later acquired the 2nd invalidity group, compared to those persons, who had been immediately granted the 2nd invalidity group and with regard to who, when defining the amount of their invalidity pension, the social insurance contributions are taken into account. In the concrete case the calculated invalidity pension is allegedly almost three times smaller than the one that would have bee calculated, if the social insurance contributions were taken into account.
The Court Findings and Ruling
On the scope of the claim and the procedure of review
The Constitutional Court noted that the legislator’s actions, when adopting decisions in the field of social rights, must always comply with the norms and principles of the Satversme, inter alia, the principle of equality. Hence the Court first of all examined the compliance of the contested norm with Article 91 of the Satversme. Moreover, the Constitutional Court recognised that the Applicant contests the compliance of the norm with the principle of equality, comprised by the first sentence of Article 91 of the Satversme, therefore the Court examined the compliance of the contested norm with the first sentence of Article 91 of the Satversme. [9, 10]
To assess, whether the contested norm complies with the first sentence of Article 91 of the Satversme, the Constitutional Court had to establish:
- whether and which persons are in similar and according to particular criteria comparable situations:
- whether the contested norm envisages identical or different treatment of such persons;
- whether this treatment has objective and reasonable grounds, i.e., whether it has a legitimate aim and whether the principle of proportionality has been abided by. [11]
Regarding persons, who are in identical and according to particular criteria comparable situations
The Constitutional Court noted that in those cases, when the common and different features of groups of persons receiving social service are examined, the making of social insurance contributions is a significant unifying feature. [12.1] Thus, all persons, who have been awarded the 2nd invalidity group and for whom previously social insurance contributions have been made, are in identical situation. However, the contested norm envisages different treatment of these persons, i.e., as regards those persons, whose pension is recalculated due to the change of the invalidity group, the social insurance contributions are not taken account. However, as regards those persons, who were not receiving invalidity pension previously, but for whom the social insurance contributions were made, these contributions are taken into account. [13]
On substantiation of different treatment
The Court established that the contested norm has the purpose to protect the right to social security of those persons, who, after having been granted invalidity status and continuing to work, have income that is smaller than the one before acquiring the invalidity status. [14.1] As regards such persons, when recalculating the invalidity pension, its amount might decrease, if the social insurance contributions were taken into account. However, the legislator did not take into consideration that the loss of capacity for work per se does not mean that the person will, indeed, incur loss of income in the same amount, i.e., also in the case, when a person has been granted invalidity status, the person’s income from paid work may increase, if the person successfully develops his or her professional career. [14.3] The Court also noted that a social service may not be provided to a person, if in setting its scope the social contributions made by the person are not taken into account at all, if taking them into account would ensure more beneficial conditions to the persons and if other persons are given the corresponding social insurance service by linking its amount with the social contributions made by these persons. [12.1]
Thus, the Court concluded that in such circumstances, which are examined in the case under review, the contested norm does not reach its legitimate aim and a different treatment of comparable groups of persons cannot be justified. [14.3]
The Constitutional Court declared Para 16(1) of Transitional Provisions of the Law “On State Pensions”, insofar as it applies to invalidity pension recalculation formula in case of change of the invalidity group, provided that the beneficiary of invalidity pension before the change of the invalidity group was an employee and made social contributions for at least three years, as being incompatible with Article 91 and Article 109 of the Satversme.
On the moment when the contested norm becomes invalid
The Constitutional Court established that the contested norm becomes invalid as of 1 October 2013. However, with regard to Uldis Strautkalns and other persons, who have started to protect their infringed rights with general legal means of protection, the norm shall be declared invalid as of the moment of its adoption.
The Judgement is final and not subject to appeal, it comes into force as of the day of its pronouncement.
Linked case: 2012-09-01