Where employers offer enhanced contractual maternity pay to mothers, can they only offer statutory shared parental leave (ShPL) pay? Does a failure to match contractual enhanced maternity pay for fathers taking ShPL amount to direct or indirect sex discrimination?
These questions have been the baby elephant in the room for some time. There is no express obligation on employers in the voluminous ShPL legislation to match enhanced contractual maternity pay. Indeed, Government guidance is that employers are not so obliged. But are employers obliged to do so under the Equality Act 2010?
The Court of Appeal in the combined cases of Ali v Capita Customer Management Ltd and Chief Constable of Leicestershire Police v Hextall has emphatically held that employers who pay enhanced contractual maternity pay but only statutory ShPL pay do not directly or indirectly discriminate against men and are not in breach of equality of terms (equal pay) legislation.
In April 2015 the options of family-friendly leave available to new parents were expanded with the birth of ShPL. A mother can elect to curtail her maternity leave period two weeks after giving birth (i.e. after the compulsory maternity leave period). She can then elect to convert any unused portion of her remaining maternity leave, so that up to 50 weeks' statutory leave and 37 weeks' statutory pay can be shared between both parents.
The default position in relation to ShPL pay is that it is paid at the flat statutory rate - currently £148.68 per week. Some employers offer enhanced contractual ShPL pay that is more favourable than the basic statutory entitlement. What has always been clear, even before this decision, is that an employer cannot offer enhanced contractual ShPL pay to mothers only. If an employer chooses to offer enhanced contractual ShPL pay it must offer it to anyone eligible to take it (both mothers/primary adopters and fathers/mothers' or primary adopters' partners).
BUT - and this is the big question - what is the position for employers who offer enhanced contractual maternity pay but only statutory ShPL pay for men and women?
Why the uncertainty?
The Government's view is that there is no legal requirement for employers who offer enhanced maternity leave pay to offer corresponding enhancements to ShPL pay. Employers are free to offer more generous enhanced arrangements if they wish, but are not obliged to do so (the 'Employer's Technical Guide to Shared Parental Leave and Pay' September 2014). This is the Government's view but is not binding on Employment Tribunals.
Under section 13(6)(b) of the Equality Act 2010 when a man is looking to establish less favourable treatment for the purpose of a sex discrimination claim, 'no account is to be taken of special treatment afforded to a woman in connection with pregnancy and childbirth' (the so-called "maternity exception").
The introduction of ShPL allowing for conversion of maternity leave to ShPL after only two weeks, has intensified the focus on the underlying aim of maternity leave. Does there come a point in time when maternity leave is no longer designed to protect a woman's biological condition following pregnancy and childbirth and instead becomes childcare?
The cases before the Court
Mr Ali is employed by Capita as a business customer adviser and Mr Hextall is a serving police constable. Both decided to take ShPL upon becoming new fathers. Both Capita and Leicestershire Police offer enhanced maternity pay to women taking maternity leave - 14 weeks' full pay followed by statutory maternity pay (SMP) in the case of Capita, and 18 weeks' full pay followed by SMP in the case of Leicestershire Police. However, both only offer the statutory rate of ShPL pay. Mr Ali and Mr Hextall separately brought employment tribunal claims, arguing that the failure to pay them the equivalent of enhanced maternity pay amounted to direct discrimination contrary to section 13 of the Equality Act 2010 (EqA). Mr Hextall also claimed indirect discrimination contrary to section19 EqA.
Before the Employment Appeal Tribunal (EAT), Mr Ali lost his claim for direct discrimination. The EAT held that the tribunal was wrong to find the purpose of maternity leave and pay after the two week compulsory maternity leave period is for the care of the child. That finding was contrary to the purpose of the Pregnant Workers Directive which requires that women receive statutory maternity leave and pay for a minimum of 14 weeks. Mr Ali's circumstances were not comparable to a woman who had recently given birth. The correct comparator was instead a woman on ShPL, who like Mr Ali, would only receive statutory ShPL pay under the employer's policy. In Mr Hextall's case, the EAT held the tribunal had incorrectly approached the questions of comparators and the relevant provision, criterion or practice (PCP) and remitted that claim to a differently constituted tribunal. In doing so, it rejected Leicestershire Police's cross appeal that the tribunal had incorrectly classified the claim as one of indirect discrimination rather than equal terms/pay.
What did the Court of Appeal decide?
The Court of Appeal rejected Mr Ali's argument that, after the compulsory two weeks of maternity leave, the purpose or predominant purpose of maternity leave is the same as ShPL, namely the facilitation of childcare. Maternity leave and pay are afforded to new mothers to assist them with recovering from the physical and psychological effects of pregnancy and childbirth. In particular:
- to prepare for and cope with the later stages of pregnancy;
- to recuperate from the pregnancy;
- to recuperate from the effects of childbirth;
- to develop the special relationship between the mother and the newborn child;
- to breastfeed the newborn child; and
- to care for the newborn child.
ShPL gives families, in particular the mother, a greater choice, but there are still important differences compared to maternity leave:
- maternity leave is in part compulsory, whereas ShPL is entirely optional;
- maternity leave can begin before birth, whereas ShPL cannot;
- maternity leave is an immediate entitlement from day one of employment, whereas ShPL is not;
- ShPL can only be taken with a partner's agreement, whereas maternity leave can be taken regardless of whether the woman has a partner or of that partner's views;
- maternity leave is acquired through pregnancy and maternity, whereas ShPL is acquired by a mother choosing to give up maternity leave and effectively to donate it as ShPL;
- a birth mother is entitled to maternity leave and pay even if there is no child to look after (because the child dies or is given for adoption), whereas, for a father, mother or partner to take ShPL, there must be a child to look after.
The Court of Appeal concluded that ShPL does not alter the predominant purpose of maternity leave, being the special protection of women in connection with the effects of pregnancy and childbirth The maternity exception under section 13(6)(b) EqA is not simply a derogation from a general principle of non-discrimination but rather "the preservation and promotion of a protection required by EU legislation". Accordingly, Mr Ali was not directly discriminated against.
Equal terms claim
The Court of Appeal agreed with Leicestershire Police that Mr Hextall's claim was properly characterised as an equal terms/pay claim under section 66 EqA, rather than an indirect discrimination claim under section 19 (such claims being mutually exclusive).
The employment tribunal and EAT were wrong to hold that his and his comparator's terms of work were not 'less favourable' for the purposes of equal terms/pay merely because the standard set of terms and conditions provided to him included terms governing maternity leave and maternity pay. Mr Hextall, as a man, could not benefit from the maternity terms and so, on face value, his terms were less favourable in equal pay terms. However, any equal pay claim failed because the EqA expressly provides that the sex equality clause does not have effect in relation to terms of work to which the maternity exception applies (Schedule 7, para 2 EqA). In other words, Mr Hextall had a prima facie equal pay claim, but it automatically failed due to the maternity exception.
Furthermore, while Mr Hextall's equal terms claim failed due to the maternity exception, the fact that he had a prima facie equal terms claim prevented him from bringing an indirect discrimination claim because of the section 70 EqA 'mutual exclusivity provision'. As a result of section 70, a claim for indirect discrimination cannot be brought where the claim is an equal terms claim. The Court of Appeal confirmed that this applies even if the equal term claim immediately fails because of the maternity exception.
Despite the indirect discrimination claim failing due to the 'mutual exclusivity provision', the Court of Appeal nevertheless went on to state that it would have also rejected Mr Hextall's indirect discrimination claim because there is a material difference between Mr Hextall and a new mother. Additionally, in any event, not equalising enhanced maternity and ShPL pay was justified as a proportionate means of achieving a legitimate aim, namely the special treatment of mothers in connection with pregnancy or childbirth.
The Court of Appeal conclude by stating that employers having to equalise payment for maternity leave and ShPL would eliminate the special treatment afforded to a woman in connection with pregnancy or childbirth which would be contrary to the policy set out in European Union case law and, the policy of the UK's EqA.
What does this mean for employers?
Whether an employer who fails to match maternity pay enhancements will face a successful discrimination claim from a man on ShPL has been the elephant in the room for some time. The Court of Appeal has been unequivocal that employers that enhance maternity pay but not ShPL pay are not in breach of the Equality Act, whether considered under the direct discrimination, indirect discrimination or equality of terms provisions.
At the centre of the judgement is that birth mothers on maternity leave are in materially different circumstances to men (or women) on ShPL, and that this distinction does not simply expire at the end of the two week compulsory maternity leave period.
This decision will come as a relief to the many employers who, on the introduction of ShPL regime, chose to maintain their enhanced maternity pay policies but only offer ShPL at statutory pay.
Grey area removed?
It is important to note that Mr Ali's case concerned an employer's policy that only provided enhanced contractual maternity pay for the first 14 weeks and so fell squarely within the minimum leave and pay period set out in the Pregnant Workers Directive for the health and wellbeing of the birth mother. Similarly, in relation to Mr Hextall, while the policy provided for 18 weeks enhanced maternity pay, the period of ShPL taken was 14 weeks.
But what about employer policies offering enhanced maternity pay in excess of 14 weeks? Is it still arguable in such a case that there comes a point in time when maternity leave and pay is no longer designed to protect a woman's biological condition following pregnancy and childbirth and instead, its purpose becomes only childcare?
On the one hand, under the UK legislation, surrogate mothers and other birth mothers who give their child up for adoption are entitled to take the full period of statutory maternity leave and pay, regardless of whether or not they continue to have contact with the child following the birth (also entitled are those who sadly suffer a stillbirth). This indicates a primary purpose of maternity leave being for the woman's health and wellbeing following pregnancy/childbirth.
On the other hand, the EAT in Mr Ali's case noted that it may be, as suggested by Working Families who intervened in the appeal, that after 26 weeks (the Ordinary Maternity Leave period) the purpose of maternity leave and pay may change from the biological recovery from childbirth and special bonding period between mother and child, and it may at that point be possible to draw a valid comparison between a father on ShPL and a mother on maternity leave.
The EAT left open the possibility of a challenge to policies offering enhanced maternity pay in excess of 26. The Court of Appeal does not specifically address the period of maternity leave in excess of 14 weeks (as it did not arise on the facts before it), however it clearly confirms the purpose of maternity leave is to protect the woman's health and wellbeing following pregnancy/childbirth and not childcare. It does specifically refer to issues such as breastfeeding for periods in excess of 14 weeks and birth mothers entitled to maternity leave and pay even if there is no child to look after in an adoption/surrogacy scenario. Arguably this greatly restricts the suggestion (as mooted by the EAT in Ali) that at some point during the 52 weeks of maternity leave, the leave somehow loses its health and safety rationale and becomes purely leave related to childcare.
Voluntary enhancement of ShPL pay?
Had the decision gone the other way there was concern by organisations, such as Working Families, that employers would change their policies to the detriment of women on maternity leave, by equalising down the pay for both types of leave to statutory pay for budgetary reasons.
In an era of changing traditional gender roles with more families wanting to share child-rearing from an early age, is this judgment simply preservation of an important safeguarding provision for women in the workforce or a retrograde step in terms of achieving gender equality at work? This is a very tricky issue. Working Families Chief Executive Jane van Zyl responding to the judgment said:
"Working Families'intervention in these cases reflects our concern that a ruling of sex discrimination would have undermined the essential protection afforded to women on maternity leave, and could have resulted in employers reducing maternity pay. The distinct disadvantage that women face in the workplace having experienced pregnancy and childbirth must continue to be recognised in law. Because maternity leave is designed to protect women's health and wellbeing, it cannot simply be equated with 'childcare'.
"Well-paid leave is vital if we are to improve equality at work and at home, and see more fathers take up their rights. Working Families has long called for employers that can afford to do so to go beyond the minimum pay for Shared Parental Leave…. In addition, we continue to advocate for a properly-paid, standalone period of extended paternity leave for fathers…[to] complement, not threaten, the rights of working mothers."
While this decision allows employers to offer maternity and ShPL pay at different rates, it is, of course, open to employers to enhance both maternity and ShPL pay. Employers should ask themselves if offering enhanced ShPL pay will assist in attracting and retaining talent in their organisation.
If considering matching enhanced maternity pay for those on ShPL, specialist advice should be taken to make sure the wording of the policy achieves what is intended.
We wait to hear if permission to appeal will be sought from the Supreme Court. Given the importance of the issues raised and the wide range of different conclusions reached by the employment tribunals, the EAT and now the Court of Appeal, a further appeal seems highly likely, particularly on the equal terms claim or indirect discrimination claim debate.