Changes to maternity rights: case study 2

Pia Sanchez of Lewis Silkin continues a series of articles on changes to maternity rights with a case study that focuses on the imminent changes to rights during additional maternity leave.

Susie and Maria are employed by ABC Ltd and are both pregnant. They work in the sales department and are subject to the same contractual terms and conditions. Their non-pay benefits include private use of a company car and mobile telephone, gym membership subsidy, 5% employer pension contributions and 26 days' holiday per annum plus bank holidays. They are both also entitled to a discretionary annual performance-related bonus.

Susie's expected date of childbirth is 1 September 2008 and Maria expects to have her baby on 5 October 2008. Both employees intend to take the full maternity leave entitlement of 52 weeks and will receive statutory maternity pay (SMP) during their maternity leave. The sales manager has heard that there are some imminent changes to the law relating to maternity rights, but is not sure whether Susie and Maria will be affected.

Will the imminent changes affect Susie and Maria?

Pregnant employees are entitled to take 26 weeks' ordinary maternity leave (OML) followed by 26 weeks' additional maternity leave (AML), regardless of length of service. The distinction between OML and AML is important because currently women are entitled to different terms and conditions of employment depending on whether they are on OML or AML. During OML a woman is entitled to receive the same terms and conditions that she would have received if she was not on maternity leave, with the exception of her wages or salary, whereas during AML her contractual rights are limited. However, under changes brought about by the Sex Discrimination Act 1975 (Amendment) Regulations 2008, the distinction between OML and AML, in terms of the receipt of non-remuneration benefits, will be removed for all women with an expected week of childbirth (EWC) that begins on or after 5 October 2008. Amendments to s.6A of the Sex Discrimination Act 1975, made by the 2008 Regulations, mean that women with an EWC that begins on or after 5 October 2008 will be able to bring sex discrimination claims in relation to non-remuneration benefits during AML in the same way as during OML. The Maternity and Parental Leave etc Regulations 1999 are also due to be amended to reflect and confirm this new position. (See Changes to maternity rights: overview in this series for more detail.)

Women whose EWC begins on or after 5 October 2008 will, therefore, be entitled to the same non-pay benefits (ie all benefits excluding wages or salary) throughout the entire 52-week maternity leave period as that currently enjoyed by women for the first 26 weeks of maternity leave only. This represents a significant increase in maternity rights, and will require many employers to make changes to how non-pay rights during maternity leave are operated.

Whether the imminent changes affect Susie and Maria will depend on when their babies are due.

What will Susie's entitlements be?

As Susie's baby is due on 1 September 2008, she will be unaffected by the changes to the law. While Susie is on OML she will be entitled to receive all of her contractual benefits (excluding remuneration) on no less favourable terms than if she was not on maternity leave. Failure by ABC Ltd to continue to allow her access to these non-remuneration benefits will be discriminatory. Susie can therefore continue to use the company car and the mobile telephone, receive the gym membership subsidy, accrue contractual holiday and receive the 5% employer pension contributions (assuming she continues to receive SMP).

Once Susie has exhausted her 26 weeks' OML, she will commence her entitlement to 26 weeks' AML. During her AML, ABC Ltd will be able lawfully to suspend her use of the company car, mobile telephone and gym membership subsidy. She will no longer accrue holiday at her contractual rate, but instead will accrue it only at the rate of 24 days per annum (the statutory minimum). She will continue to be entitled to employer pension contributions but only while she is still receiving SMP, which is currently payable for a maximum of 39 weeks. If she has any contractual entitlements that are based on length of service, the accrual of service for those purposes will cease.

If her bonus is based purely on performance, Susie will have a sex discrimination claim unless she is paid a pro-rata amount reflecting the period during which she was working before her maternity leave (and after, if applicable) plus the compulsory maternity leave period of two weeks after the birth. This is an outcome of the European Court of Justice decision in Lewen v Denda [2000] IRLR 67 ECJ, which precipitated the changes to the Sex Discrimination Act 1975 that require the compulsory maternity leave period to be included within any bonus calculations. Although the changes to the Act will not have come into effect in Susie's case, employment tribunals are required to interpret the 1975 Act in accordance with the Lewen v Denda decision.

What will Maria's entitlements be?

Maria's baby is due on 5 October 2008. As her EWC begins on 5 October 2008, the changes brought about by the 2008 Regulations will apply to her. For the entire period that Maria is on maternity leave she will be entitled to use of the company car and mobile telephone, to receive her gym membership subsidy, and to accrue holiday. Her holiday will accrue during the entire period in relation to the entitlement set out in her employment contract (ie 26 days per annum plus bank holidays) rather than just to the statutory minimum rate (24 days per annum), as in Susie's case during AML. Maria will also be entitled to benefit from employer pension contributions while she is in receipt of SMP, although the position with regard to pension contributions once SMP has finished is unclear. For any contractual benefits that are based on length of service, her service will continue to accrue throughout the entire period of maternity leave, as if she had remained at work.

In terms of the performance-related bonus payments, the only difference between Susie and Maria's entitlements is that Maria's right to payment of a performance-related bonus in respect of the two-week period of compulsory maternity leave will be determined not just by virtue of European case law, ie the ECJ decision in Lewen v Denda, but also by the amended Sex Discrimination Act 1975, which implements that decision.

Next week's article will be FAQs on the changes to maternity rights and will be published on 30 June.

Pia Sanchez (pia.sanchez@lewissilkin.com) is an associate in the Employment and Incentives Department at Lewis Silkin.

Further information on Lewis Silkin can be accessed at www.lewissilkin.com.