The central issue in two appeals brought in the UK Court of Appeal in May was whether it is unlawful discrimination on the basis of sex for men on shared parental leave to be paid less than women on statutory maternity leave are paid for the same period. While the court held that this lower rate of pay is not sex discrimination, employers should continue to follow developments.
The UK Court of Appeal has held that it is not sex discrimination for an employer to provide shared parental pay to male employees at a lower rate of pay than a woman on maternity leave for the same period would receive. In doing so, the Court of Appeal rejected the argument that maternity leave and shared parental leave serve the same purpose, namely the facilitation of childcare. Instead, citing various European Court of Justice (ECJ) decisions, the Court of Appeal held that the purpose of maternity leave is to provide protection for women in connection with the effects of pregnancy and motherhood (i.e., health and safety) and is not solely to provide childcare (unlike the purpose of shared parental leave).
In the second appeal claim, the Court of Appeal held that the first instance tribunal and Employment Appeal Tribunal (EAT) were incorrect to characterise the claim as indirect discrimination—it should have been characterised as one of equal pay. As the Equality Act 2010 precludes equal pay claims in respect of terms that afford special treatment to women in connection with pregnancy or childbirth, such an equal pay claim could not succeed.
In the first appeal, Mr. Ali had taken time off work to care for his daughter when his wife returned to work. Mr. Ali sought to be paid the same rate as a female employee on maternity leave would have been paid during this period. He was informed by his employer that he was only eligible for shared parental leave at the statutory rate of pay, which was far lower than his ordinary rate of pay. Accordingly, Mr. Ali brought a claim for unlawful direct sex discrimination. Mr. Ali accepted that there was no valid comparison between himself and a mother during the two weeks of compulsory maternity leave because that period is set aside for the mother to recover from giving birth. Therefore, his complaint was in respect of the subsequent 12 weeks of leave at full pay, which only women were entitled to under his employer’s maternity leave policy.
At the heart of Mr. Ali’s appeal lay the proposition that, after the first two weeks of compulsory maternity leave following birth, maternity leave for the following 12 weeks is for the purpose of looking after the child. He argued that this was identical to the purpose of shared parental leave. If that proposition were correct, a birth mother entitled to maternity pay would be a legitimate comparator for the purposes of assessing direct discrimination.
The EAT and Court of Appeal held that Mr. Ali’s appeal failed because the entire length of maternity leave, not just the first two weeks, is about more than just facilitating childcare. The EAT and Court of Appeal relied on the ECJ’s decision in Hofmann v. Barmer Ersatzkassem among other ECJ decisions. In Hofmann, the ECJ discussed the special protections afforded to women in connection with pregnancy and maternity; in particular, the legitimate need to protect a woman’s biological condition during pregnancy and her physiological and mental functions following childbirth, and the special relationship formed between a woman and child following birth. It was therefore held that the purpose or predominant purpose of statutory maternity leave is not the facilitation of childcare.
It follows that there is a material difference between a male employee, such as Mr. Ali, and a female employee who is entitled to statutory maternity leave. Such a female employee is not a legitimate comparator for the purposes of direct discrimination under Section 13 of the UK Equality Act 2010. The appropriate comparator would be a woman on shared parental leave, and since there would be no difference in treatment between a man and a woman on shared parental leave, Mr. Ali’s appeal was rejected.
In the second claim being appealed, Mr. Hextall took shared parental leave for a 14-week period for which he was paid the statutory rate for such leave. He brought a claim alleging that the policy of only remunerating shared parental leave at the statutory level caused a particular disadvantage to men and was unlawful discrimination. Mr. Hextall claimed both direct and indirect discrimination at first instance. Following the rejection of his direct discrimination claim by the tribunal, he appealed solely against the rejection of his indirect discrimination claim.
The Court of Appeal held that Mr. Hextall’s claim was in reality an equal pay claim under Section 66 of the Equality Act, and accordingly could not proceed as under Paragraph 2 of Schedule 7 of the Equality Act, Section 66 does not operate in relation to terms that afford special treatment to women in connection with pregnancy or childbirth.
Similarly, the Court of Appeal held that an indirect discrimination claim could not proceed because Section 70 of the Equality Act precluded sex discrimination claims relating to terms that would be modified by Section 66 if it were not for the operation of Paragraph 2 of Schedule 7.
Notwithstanding, the Court of Appeal stated that it would have confirmed the tribunal’s rejection of the indirect discrimination claim. The Court of Appeal noted that women on maternity leave are materially different from men or women taking shared parental leave for the reasons discussed above. They should therefore be excluded from the pool of individuals to whom the effect of the provision, criterion, or practice is considered, as the pool must be populated by persons whose circumstances are the same or not materially different from the claimant. Once women on maternity leave are excluded from the pool, it is evident that the provision, criterion, or practice of paying a lower rate of pay for shared parental leave than for maternity leave does not cause a particular disadvantage to a man such as Mr. Hextall. The Court of Appeal went further to state that even if it were wrong about the composition of the pool, the court would be prepared to hold that any disadvantage to Mr. Hextall was justified as being a proportionate means of achieving a legitimate aim, namely the special treatment of mothers in connection with pregnancy or childbirth.
Following the Court of Appeal’s decision, employers can take comfort for the time being that it does not constitute sex discrimination if enhanced shared parental leave pay is provided at a lower rate than enhanced maternity pay. However, we understand that both claimants are seeking permission to appeal to the UK Supreme Court. Employers should therefore remain alert to developments in this area in the coming months. If the Supreme Court were to find in favour of the claimants, employers would be in the unenviable position of deciding between (a) levelling up enhanced shared parental pay (by increasing the level of enhanced shared parental leave pay to the same level as enhanced maternity pay), which is likely to have a significant cost impact; or (b) levelling down enhanced maternity pay (by reducing the level of enhanced maternity pay to the same level as enhanced shared parental leave pay), which is likely to negatively impact recruitment and employee retention.
One further notable implication of these decisions is that the absence of a requirement to match enhanced shared parental leave pay with enhanced maternity leave pay may create an additional challenge for the UK government in attempting to reduce the gender pay gap. A number of studies have demonstrated that time off in connection with childcare is a material factor in exacerbating the gender pay gap, as childcare responsibilities still tend to fall more heavily on women in the United Kingdom. The Court of Appeal’s decision will do little to encourage greater sharing of childcare responsibilities between men and women given that for many employers, enhanced maternity pay tends to be more generous than enhanced shared parental pay. The Trades Union Congress found in a study that just 1% of eligible parents exercised their right to shared parental leave in 2018. Given this, male uptake of shared parental leave remains low. Consequently, women continue to take more time off in connection with parenthood, with an inevitable impact on their pay and career progression.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
London
Matthew Howse
Jessica Rogers