Baby boom

Baby boom
The legislative framework relating to maternity rights is a complex inter-relationship between a number of acts and regulations, specifically the Employment Rights Act 1996, the Sex Discrimination Act 1975, the Social Security Act 1989, the Maternity and Parental Leave Regulations 1999 (MPL) and the various Statutory Maternity Pay (SMP) regulations. Unfortunately, the provisions of these separate pieces of legislation do not always dovetail neatly, creating an element of confusion and uncertainty.

Into this mix, we now have the latest contribution to the body of legislation on maternity rights – the amendments to the Sex Discrimination Act, which were introduced in April this year and will apply to babies with an expected delivery date on or after 5 October 2008. These changes will necessitate a change to the MPL Regulations and the Government has indicated that these amendments will be made in good time.

The new regulations are a response to the successful legal challenge by the Equal Opportunities Commission (EOC) that the existing law did not comply with European law relating to maternity rights. The EOC relied on the ruling of the European Court of Justice (ECJ) in Land Brandenburg v Sass (2004), in which the ECJ held that there was no justification for treating an employee on Additional Maternity Leave (AML) differently from an employee on Ordinary Maternity Leave (OML). Although the case related to the accrual of seniority rights, the EOC argued that the principle should be extended to other rights. (2004)

New law: the effects on AML

One effect of the new provisions is to remove the distinction between OML and AML for the purposes of determining the benefits an employee is entitled to while absent on maternity leave. OML covers the first 26 weeks of maternity leave and AML the next 26 weeks after the end of OML (or until the employee returns to work, if earlier). Under the current law, women are entitled to a continuation of all their contractual benefits other than remuneration during OML. This covers benefits such as a company car, gym membership and holiday entitlement. However, there is no similar obligation on an employer to continue these benefits during AML.

The new law means that, from October 2008, women will continue to accrue holiday entitlement and enjoy other contractual benefits, such as mobile phone use, medical cover and life insurance throughout the entire period of their maternity leave.

Pension during AML

These regulations do not change the original position that remuneration is not payable during maternity leave.

One issue that arises is whether the new law changes the position regarding pension contributions. The current position is governed by the Social Security Act 1989, which provides that the employer is obliged to continue making pension contributions based on the employee’s normal salary (not the reduced amount she receives by way of SMP) for any period during which she is on paid maternity leave. This covers any period during which she receives either SMP or company maternity pay. However, as the SMP period has always been equal to or longer than the OML period, there was no need to consider whether pension contributions were remuneration, as the period for which contractual benefits other than remuneration continued was always less than the period of paid maternity leave.

However, as a result of the changes women could claim entitlement to pension contributions as a contractual benefit for the period of AML after their SMP has run out (ie the period from week 39 to week 52).

Although the government guidance is clear that pensions are not intended to be caught by this, there is clearly an argument that pension contributions are not remuneration and therefore should be continued until the end of AML. There is no definitive answer to this and we must therefore await judicial interpretation to have clarity.

Bonus during CML

The new regulations also make it clear that when assessing an employee’s entitlement to a discretionary bonus, any period of Compulsory Maternity Leave (CML) should be treated as though the employee was at work as normal. The period of CML is two weeks from the date of birth, or four weeks if the woman works in a factory.

This change means that when pro-rating a woman’s entitlement to an annual bonus to take account of her absence from work on maternity leave, it is unlawful to reduce the entitlement in relation to the period of compulsory maternity leave and that period should be aggregated to the period of the year when she was at work for the purpose of this calculation.

Alexandra Davidson is an employment partner at Berwin Leighton Paisner