Maternity leave and pay – a summary of the current law

This article, written by yours truly, first appeared in the December / January issue of Independent Lawyer.

On 5th October legislation changed some aspects of maternity law, and in particular harmonised employee benefits and entitlements during Additional Maternity Leave (AML) with those currently enjoyed during Ordinary Maternity Leave (OML).

The new legislation is the Sex Discrimination Act 1975 (Amendment) Regulations 2008, which are designed to rectify the non-compliance with Directive 2002/73 found by Burton J in Equal Opportunities Commission v DTI [2007] IRLR 327 – a challenge to maternity legislation by the EOC.

The pre-existing regime drew a sharp distinction between the two leave periods, but to see how the relationship has changed, it is helpful to review our maternity laws. The governing legislation was (and still is) the Maternity and Parental Leave Regulations 1999/3312 (MAPLE 1999). Leave and benefits on adoption is covered by different legislation, which in most respects has identical provision and is not considered in this article.

OML is available to all pregnant employees, without any qualifying period of service with the employer being necessary. The right is for the pregnant employee to take up to 26 weeks’ leave from her employer. It commences whenever the employee wishes, although she must notify her employer before the end of 15th week before her expected week of childbirth (EWC) that she is pregnant, the date of her EWC, and her proposed start date for OML. It cannot start earlier than the eleventh week before the EWC, and will commence automatically if she gives birth, or is absent wholly or partly because of her pregnancy at any time from the beginning of the fourth week before the EWC. There is a prohibition on the employee performing any work for a period of two weeks after giving birth – four weeks if she works in a factory – this period is known as Compulsory Maternity Leave (CML). There is absolutely nothing to say that a woman cannot, if she wishes, keep on working right up until her contractions make it impossible!

During OML a number of rights and benefits come into play. The most important one of these, for many employees, is the right not to suffer a detriment related to pregnancy, childbirth, or taking maternity leave (s47C, Employment Rights Act 1996), or to be dismissed for one of these reasons (s99, ERA 1996).
During OML the employee’s contract, and the benefits she derives from it, continue exactly as before, save for any that require her to work or to attend her place of work, or that concern remuneration by the employer. The latter is defined as wages or salary, which includes payments related to the employee’s own performance, such as profit-related pay, commission, or targeted bonuses, but not those which are unrelated. An annual bonus unrelated to work done and made to all staff would fall outside the definition of remuneration and be payable to an employee on maternity leave, a bonus calculated on each employee’s monthly sales would not. Thus, in GUS Home Shopping Ltd v Green and McLaughlin [2001] IRLR 75, the EAT found unlawful the withholding of a bonus payable on a successful transfer from a woman absent on maternity leave for the entire period. The difficulties in distinguishing payments are considered further below.

Other typical non-remunerative contractual terms and conditions which would be preserved during OML are company cars permitted to be used for personal travel, gym membership, staff discount schemes, accrual of contractual length of service (e.g., for a company redundancy scheme) and accrual of holiday entitlement.
AML previously required 26 week’s qualifying service by the fifteenth week before the EWC. The right thus gained was to an additional 26 weeks’ leave after the end of OML. The qualifying period for AML was abolished for women with an EWC on or after the 1st April 2007, with the result that all women now have the right to both forms of leave. The traditional contractual treatment of AML has been that the contract’s terms and conditions do not remain in force save, under MAPLE 1999: the benefit of the employer’s implied obligation of trust and confidence; and any terms and conditions relating to notice of termination, compensation in the event of redundancy, or disciplinary or grievance procedures; and on the employee’s side, any terms relating to notice of termination, disclosure of confidential information, acceptance of gifts or other benefits, competition, and the implied obligation of good faith. The gym membership, accrual of contractual holiday entitlement, company car and so on could thus be withheld during AML.

This suspension of contractual terms and conditions has been controversial ever since the ECJ case of Land Brandenburg v Sass [2005] IRLR 147, which suggested that any benefits, excluding pay, ought to continue through the entire period of leave. It was this judgment, applied in the domestic arena by the EOC v DTI case referenced above, which has prompted the October 2008 changes.

For employees with an EWC beginning on or after 5th October 2008 AML is included with OML in reg. 9, MAPLE 1999, so that the two are of identical effect in relation to preservation of the contract of employment. This means that the two periods of leave are on an equal footing, and the non-remuneration benefits enjoyed by the employee during OML continue into AML.

The difficulty in distinguishing when a bonus falls to be considered as remuneration persists, and is now drawn into sharper focus by the effective extension by six months of the period when the problem exists. In the leading case of Hoyland v Asda Stores Ltd [2006] IRLR 438 the difficulty of this distinction was made clear. Asda operated an annual bonus scheme based on profits, which was pro-rated to reflect absences of eight consecutive weeks or more during the year. Maternity leave was treated as absence for the purpose of calculating bonus payments. On the facts the EAT held that as the bonus was payable in respect of the workforce’s performance as a whole, it was remuneration which was capable of lawfully not being paid during maternity leave.

Practitioners should be careful to note that the distinction does not exist during the two week CML, which is treated for these purposes as though the employee was still at work.

It would therefore appear that the only two distinctions between OML and AML, following the changes in contractual provision and the removal of qualifying service, are maternity pay and the right to return to work.
It is helpful to set out a reminder as to qualification and calculation of Statutory Maternity Pay. SMP is still subject to qualifying conditions. Chiefly, the employee must have 26 weeks’ service with the employer by the time she reaches the fourteenth week before her EWC. She must also still be pregnant, or have given birth to a live baby, by the eleventh week before her EWC. A stillbirth after this week confers identical leave and pay entitlements as a live birth, a stillbirth, miscarriage or termination before, none. For eight weeks up to and including the fifteenth week before her EWC she must have had weekly earnings at least the level of the Lower Earnings Limit for National Insurance purposes – £90 in the current tax year, going up to £95 in 2008/2009. She must also have complied with the notification requirements detailed above. All in all, a calendar is an essential tool of the trade when dealing with maternity rights.

The first six weeks of SMP is payable at 90% of the average earnings over the eight weeks up to and including the fifteenth week before the EWC. This average includes any other payments made during that period (such as commission payments), as well as an enhancement to reflect any salary increases applied during the first six weeks of maternity leave. The remaining weeks of SMP entitlement are paid at the statutory rate, presently £117.18, or the 90% rate if it is less.

SMP used to be payable for six months, a period that linked in with OML. Indeed, a lay person would have most likely differentiated OML and AML by the feature that the first appeared to be paid, the latter not. In fact, SMP is an entirely separate right to leave, and this was made apparent by the extension of SMP to 39 week’s entitlement for women with an EWC on or after 1st April 2007. Another innovation brought in at the same time were Keeping in Touch days – where by agreement an employee may perform up to ten days work without jeopardising her SMP entitlement – which are hugely beneficial for both employer and employee.
An employee returning from OML is entitled to return to the same job in which she was employed, an employee returning from AML has this entitlement unless it is no longer reasonably practicable in which case she must be given another suitable and appropriate job.

Presumably when SMP is extended in due course to 52 weeks the distinction between OML and AML will be consigned to the history books – it will certainly be a complicated regime to accomplish very little.

Key points:

• The new regulations apply to employees with an EWC after 5th October 2008.
• Their effect is that all contractual terms & conditions not relating to pay and wages will apply during AML.
• Typical examples will be contractual holiday and length of service accrual, and non-monetary staff benefits. 
• The regulations also clarify that bonuses not payable during OML & AML are nonetheless payable during compulsory maternity leave.