Sex discrimination: Should employers that enhance maternity pay also enhance shared parental pay?

Author: Stephen Simpson

The Court of Appeal has heard the appeals in Chief Constable of Leicestershire Police v Hextall and Capita Customer Management Ltd v Ali, which considered whether or not it is discriminatory against men for employers to enhance maternity pay but not shared parental pay. We summarise what stage the cases have reached, explain their implications, and highlight some employers that have recently enhanced family-friendly leave.

The appeals against the Employment Appeal Tribunal (EAT) decisions in Hextall v Chief Constable of Leicestershire Police [2018] IRLR 605 EAT and Capita Customer Management Ltd v Ali [2018] IRLR 586 EAT were heard at the Royal Courts of Justice in London on 1 and 2 May 2019.

Given the importance of the issues involved, the UK's work-life balance charity Working Families acted as an intervener in this case. Working Families gave its submissions to the Court of Appeal in writing and did not appear at the hearing.

The full hearing, which is one for the first employment cases in the Court of Appeal to be broadcast online, is available to watch on the Court's YouTube channel.

Background

When shared parental leave was introduced in 2015, no statutory requirement was put in place for employers that enhance contractual pay for employees on maternity leave to match contractual pay for employees on shared parental leave.

This left employers that enhance maternity pay with a dilemma when formulating their shared parental leave policies. Should they provide shared parental pay at the statutory minimum rate only and risk sex discrimination claims from male staff? Or should they absorb the extra cost of enhancing shared parental pay, which would remove the risk of sex discrimination claims?

While the Government acknowledged the issue in its technical guide for employers (see extract on the right), no detailed guidance was provided. Employers have had to speculate as to how case law might deal with enhanced shared parental pay, particularly the possible justifications for limiting contractual enhancements to maternity pay if faced with an indirect sex discrimination claim from a male employee.

Hextall and Ali represent the first opportunity for the Court of Appeal to consider the relationship between sex discrimination and employers' shared parental leave policies.

Mr Hextall's claim

What is the policy?

Although legislation excludes police officers from the right to shared parental leave, the Home Office issued a circular to police forces stating that police officers can take shared parental leave. The Home Office recommended that forces offer shared parental pay at the same rate as the statutory minimum.

Leicestershire Police was among the police forces that introduced shared parental leave at the statutory minimum rate. Mr Hextall, a police constable, took around three months' shared parental leave and he was paid the statutory minimum.

Leicestershire Police, like other police forces, pays officers who are on maternity leave their full salary for 18 weeks. Had Mr Hextall been a mother on maternity leave, he would have been paid his full salary.

Was the policy found to be discriminatory?

Employment tribunal decision

In Hextall v Chief Constable of Leicestershire Police ET/2601223/2015, the employment tribunal dismissed Mr Hextall's direct sex discrimination claim. The tribunal held that Mr Hextall's chosen comparator, a police constable who has given birth to a child and is on maternity leave, is in a materially different position.

The tribunal held that a more valid comparator, who would have been treated in the same way as Mr Hextall, is a woman taking shared parental leave who is the wife or civil partner of a woman who has just given birth.

The employment tribunal went on to reject Mr Hextall's indirect sex discrimination claim. The tribunal held that the suggested provision, criterion or practice (PCP) of "paying only the statutory rate of pay for those taking a period of shared parental leave" does not cause a particular disadvantage to men. The policy pays both men and women the same amount while they are on shared parental leave.

EAT decision

While accepting the employment tribunal's decision on direct discrimination, Mr Hextall appealed to the EAT against the tribunal's indirect discrimination ruling.

The EAT in Hextall v Chief Constable of Leicestershire Police [2018] IRLR 605 EAT upheld Mr Hextall's appeal and remitted the case to be reheard by a differently constituted employment tribunal.

The EAT held that the relevant pool for testing whether or not the PCP leads to a disadvantage for men would be "police officers with present or future interest in taking leave to care for their newborn child". The EAT accepted that the tribunal had fallen into the trap of applying the comparator in the direct discrimination claim (ie women on maternity leave) to the indirect discrimination claim.

The EAT said that the employment tribunal would need to hear submissions as to the size or composition of the appropriate pool, ie the numbers of men and women taking shared parental leave.

Leicestershire Police's arguments in the Court of Appeal

During the appeal against the EAT decision on indirect discrimination, the police force's arguments included the following:

• Mr Hextall's case is miscategorised as an indirect sex discrimination case under s.19 of the Equality Act 2010. It should be argued as an equal pay claim (ie a breach of the sex equality clause under s.70 of the Equality Act 2010).
• In any event, the pleaded PCP of "paying shared parental leave at the statutory rate to both men and women" is not appropriate for an indirect discrimination claim. The PCP is so inextricably linked to sex that the proper claim is one of direct discrimination.
• The PCP must put men at a particular disadvantage (ie there must be a causal link between the PCP and any disadvantage to men). The disadvantage here flows not from the PCP, but from the fact that men are not entitled to take maternity leave and pay.
• The EAT was wrong to interfere with the employment tribunal's decision that Mr Hextall did not suffer a particular disadvantage, which is determined by comparing women taking shared parental leave with men taking shared parental leave. The employment tribunal rightly made a finding of fact, which cannot be challenged on appeal, that both women and men taking shared parental leave are paid the same and both are equally discouraged from taking shared parental leave because it is paid at the statutory minimum only.

Mr Ali's claim

What was the policy?

Mr Ali was a Telefonica employee who transferred to Capita. When Telefonica employees transferred, its policies transferred with them. Under the maternity policy, female employees are entitled to 14 weeks' enhanced maternity pay. New fathers are entitled to two weeks' full pay during their paternity leave.

Mr Ali took two weeks' paternity leave immediately after the birth of his child, followed by one week's annual leave. On his return to work, Mr Ali informed Capita that he needed more time off to care for his baby. He said his wife had been diagnosed with post-natal depression and the medical advice was that returning to work would assist her recovery.

Capita told Mr Ali that he was eligible to take shared parental leave, but that he would receive statutory shared parental pay only.

Mr Ali believed that, in his particular circumstances, he should be entitled to the paid leave that his female colleagues receive while they are on maternity leave.

Was the policy found to be discriminatory?

Employment tribunal decision

In Ali v Capita Customer Management Ltd ET/1800990/2016, the tribunal concluded that, after the two-week compulsory maternity leave period, Mr Ali could compare himself with a hypothetical female comparator on maternity leave who has given birth as both would be taking leave to look after their baby.

In the tribunal's view, the caring role that Mr Ali wanted to perform is not a role exclusive to a mother and he should have been treated equally in relation to pay "to access the same benefits for performing the same role".

The tribunal upheld Mr Ali's direct sex discrimination claim because, unlike his female comparator on maternity leave, he would not receive enhanced pay.

EAT decision

In Capita Customer Management Ltd v Ali [2018] IRLR 586 EAT, the EAT overturned the first-instance decision, disagreeing with the choice of hypothetical comparator.

The EAT held that the female comparator for Mr Ali is an employee caring for her child, and the relevant leave to be considered would be shared parental leave, not maternity leave.

The EAT said that, once the correct comparator has been identified, the inevitable conclusion is that Mr Ali was not discriminated against because of sex by being entitled to shared parental leave at the pay rate appropriate for such leave.

Mr Ali's arguments in the Court of Appeal

During the appeal against the EAT decision on direct discrimination, Mr Ali's arguments included the following:

• Some of the case law cited is over 30 years old and is based on outmoded attitudes. Previous cases set out the six main purposes of maternity leave as: coping with the latter stages of pregnancy; recuperating from pregnancy; recuperating from giving birth; developing the special relationship between mother and child; allowing for breastfeeding; and undertaking caring responsibilities for the child. The first five purposes relate to health and safety and only the sixth purpose is about the care for the child. Nowadays, the sixth purpose should be given much more weight and caring responsibilities can be undertaken equally by women or men.
• The introduction of a specific mechanism into UK law to allow women to curtail their maternity leave at any point after compulsory maternity leave (the first two weeks after childbirth) acknowledges the changing nature of maternity leave. The EAT was therefore wrong to find that Capita's enhanced maternity policy implements the requirements in the Pregnant Workers Directive because its purpose is the health and safety of the mother, not the care of the child.
• If it is accepted that the primary purpose of maternity leave after the compulsory two-week period is the care of the child, it is valid to compare a mother on maternity leave to a father on shared parental leave.
• The effect of failing to enhance pay for men is diametrically opposed to the purpose of shared parental leave legislation, which is to increase opportunities for caring responsibilities to be shared between women and men.

What happens next?

The Court of Appeal judges reserved judgment at the end of the two-day hearing on 1 and 2 May 2019.

The judges gave no timeframe for delivery of the judgment. However, rulings on issues of this complexity normally take two to three months to be delivered.

Implications for employers

Test cases

There are unusual aspects to both Hextall and Ali that mean that they are not ideal test cases for exploring the relationship between sex discrimination and employers' shared parental leave policies.

In Hextall, shared parental leave legislation does not apply to police officers, although police forces' policies mirror the legislation. This means that the opportunity for discussion about the purposes behind the legislation, such as encouraging childcare to be shared between both parents, is limited.

In Ali, Mr Ali's wife had postnatal depression and medical advice was that returning to work would assist with her recovery, so in that case there was a real need for him to take the leave, rather than it just being a preference between the couple. In addition, Ali concerns direct, rather than indirect, discrimination.

The real legal risk

Importantly, neither Hextall nor Ali got as far as considering the potential justifications for offering less generous pay for staff on shared parental leave than staff on maternity leave. Indirect sex discrimination still appears to be the most likely potential employment tribunal claim because men are more likely to be disadvantaged.

Employers should be prepared to justify a policy of enhancing maternity pay but not shared parental pay. The test for justification is whether or not in all the circumstances the practice is justified as a "proportionate means of achieving a legitimate aim".

Potential justifications, which are untested in the courts in the context of shared parental leave, include:

• Recruiting and retaining female staff The employer may have a gender diversity issue or be in a male-dominated sector. It could argue that more generous maternity leave and pay are needed to attract and retain more female staff, or to encourage employees to return to work after maternity leave. However, the employer would need to show a tribunal evidence of female under-representation and demonstrate that its more generous maternity offerings are part of its overall strategy to tackle the problem. Generalised assumptions that the organisation itself or its wider sector lack female representation would not be sufficient.
• Generous paternity leave and pay The employer may already offer generous family-friendly benefits to men, for example via occupational paternity leave and pay. The employer could argue that its generous provisions for male staff elsewhere within its policies justify it not enhancing shared parental leave and pay.

Example from the case law

In Shuter v Ford Motor Company Ltd ET/3203504/2013, car manufacturer Ford successfully justified its policy of paying additional paternity leave at the statutory minimum, while at the same time offering generous enhanced maternity pay to women on maternity leave.

Although the case relates to additional paternity leave (the predecessor to shared parental leave), it provides employers that enhance maternity pay but decide not to enhance shared parental pay with a good example of the detailed justification they should be prepared to provide.

• Administrative complexity It is not hard to put forward the case that the shared parental leave legislation is overly complicated. The employer could argue that a massive upswing in applications could be disruptive to the business. Before relying on this potential justification, the employer would be well advised to carry out an assessment of the potential for disruption to its business, rather than relying on generalised assumptions about how complicated shared parental leave is.
• What other employers are doing The employer may have looked at the shared parental leave policies of employers of a similar size or its rivals within the same sector. If none or very few of these employers are enhancing shared parental leave, this may be a factor in its decision not to do so.
• What other parts of the business are doing The employer may argue that its options are limited by what other parts of the business are offering. Companies within a group could have an overarching approach that limits the employer's room for manoeuvre. Similarly, it may be a challenge for multi-national companies with staff based in other countries with different family-friendly laws to make a major change to its benefits.
• Cost The employer may simply not be in a financial position to put more money into enhancing its family-friendly benefits. Cost could be a particular issue for employers with a male-dominated workforce, since it could cost more to meet demand for enhanced shared parental pay. Cost could also be an issue for small or medium-sized organisations. Financial considerations may be one of a number of justifications for employers, but it is well established that cost alone cannot justify indirect discrimination.

Employers seeking to justify enhancing maternity pay but not shared parental pay must bear in mind that the justifications set out above are examples only.

Employment tribunals will assess the employer's justification defence based on the individual circumstances before it. Tribunals will be unimpressed with generic propositions if there is a lack of evidence to back them up.

An approach for employers to avoid

Although not cited before the Court of Appeal in Hextall and Ali, the non-binding first-instance tribunal case Snell v Network Rail ETS/4100178/2016 provides an example of one particular approach that employers should avoid.

In this case, an employment tribunal in Scotland awarded £28,321 to an employee over his employer's shared parental leave policy. The employer's approach was to give a period of full pay to mothers and primary adopters on shared parental leave, but pay only statutory shared parental pay to partners and secondary adopters.

The employment tribunal made a declaration that the employer's policy indirectly discriminated against the employee, since it put him at a particular disadvantage during shared parental leave as a man, when compared with a woman.

Which employers have recently improved their offerings?

Aviva

In November 2017, the insurance company Aviva introduced a group-wide shared parental leave policy giving all staff up to 26 weeks' leave at full basic pay.

There are no eligibility criteria relating to service length or earnings threshold and the policy applies "regardless of gender, sexual orientation or how they became a parent (birth, adoption or surrogacy)".

On the first anniversary of the policy's introduction, Aviva reported encouraging take-up. The company says that more than 700 employees made use of the scheme internationally in its first year, including around 300 men.

NHS

From 1 April 2019, shared parental leave and pay is enhanced for employees under the NHS terms and conditions of service pay deal for 2018.

Shared parental leave and pay in England and Wales are now at the same level as occupational maternity and adoption leave and pay.

O2

From 1 April 2019, mobile network provider O2 increased paid paternity leave for all permanent staff to 14 weeks on full pay. Previously, O2 restricted paid paternity leave to two weeks' on full pay.

The updated policy is applicable for both heterosexual and same-sex couples, as well as adoptive and surrogate partners.

When making the announcement, O2 stressed that its new policy applies to all its permanent retail workers and is not restricted to head-office employees.

Diageo

On 3 April 2019, alcoholic beverage multi-national Diageo announced a new policy to equalise its occupational parental leave for women and men.

The company's policy means that parents employed by it in the UK are eligible for 52 weeks' leave, with 26 weeks' leave at full pay. The entitlement applies "regardless of gender, sexual orientation or whether they become parents biologically, through adoption or via surrogacy".

The leave is available to all of Diageo's 4,500 employees in the UK, including around 3,100 staff in Scotland who are primarily in manufacturing roles.