Is discontinuing childcare vouchers during maternity leave discriminatory?

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24 Aug 2018

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By virtue of the Maternity & Parental Leave Regulations 1999, apart from the payment of wages or salary, an employee who takes maternity leave is entitled to the benefit of all her terms and conditions of employment. In the recent case of Peninsula Business Services Ltd (“PBS”) v Donaldson, the EAT examined whether the condition of entry into the company’s childcare voucher scheme was that an employee agreed these vouchers would be suspended during periods of maternity leave, was in breach of these Regulations and the Equality Act in relation to sex discrimination and unfavourable treatment because of asserting a right to maternity leave. The facts of the case were that PBS ran a scheme which allowed employees to obtain vouchers which could be used to pay for childcare, which they would receive via a salary sacrifice arrangement. Therefore, effectively this would allow for the employees of the scheme to not pay tax and NI on the value of these vouchers. As part of the conditions of entry into this scheme, the employee was required to agree that PBS would suspend the provision of these vouchers whilst the employee was on maternity leave, as PBS only paid their employees statutory maternity pay. Ms Donaldson was pregnant and wanted to enter into the childcare voucher scheme, however she refused to be bound by the condition in relation to the suspension of the vouchers during maternity leave and therefore could not enter the scheme. Therefore Ms Donaldson considered this discriminatory under the Equality Act 2010 and in breach of the Maternity & Parental Leave Regulations 1999 and issued a claim against PBS in the Employment Tribunal. Ms Donaldson was successful with her claim at the Employment Tribunal, as they considered that the Maternity & Parental Leave Regulations 1999 provided that woman are entitled to receive non-pay benefits during maternity leave and requiring a woman to sacrifice this benefit whilst on maternity leave was discriminatory. The Employment Tribunal supported their Judgment with the guidance from HMRC, which stated that non-cash benefits provided under a salary sacrifice scheme must continue during periods of ordinary maternity leave. PBS appealed the Employment Tribunal decision to the Employment Appeal Tribunal (“EAT”). The EAT examined the relevant legislation and could not find anywhere within that any basis for the HMRC guidance that non-cash benefits provided under a salary sacrifice scheme must continue during periods of ordinary maternity leave. The EAT considered that the fundamental issue was whether these childcare vouchers constituted ‘remuneration’, as if they did, then they would be excluded from the Maternity & Parental Leave Regulations 1999 in relation to having to be continued during maternity leave. The EAT considered the correct interpretation of the childcare vouchers were that they represented part of the employee’s salary which had been diverted prior to the employee receiving their pay. Therefore these vouchers should be considered as ‘remuneration’ and therefore are not required to be continued during maternity leave as provided by the Maternity & Parental Leave Regulations 1999. They also considered that it could not constitute unfavourable treatment and therefore was also not in breach of the Equality Act 2010. Accordingly, the EAT allowed the appeal and substituted a decision that the claim should be dismissed. This decision also seems correct from a common sense point of view, as PBS only paid statutory maternity pay (“SMP”) and therefore this pay is not allowed to be salary sacrificed in any event. Accordingly it would have be suspended during the period when SMP was paid, unless a company wanted to provide an extra cash benefit to employees during maternity leave by the company effectively continuing to pay for the employee’s childcare vouchers from their own purse. By Amanda Beattie, Regional Litigation Consultant, Croner

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