The Equality Act states that it is unlawful to discriminate against a woman because she is pregnant or on maternity leave. In Peninsula Business Services v Donaldson, the Employment Appeal Tribunal (EAT) held that it not discriminatory to suspend membership of a childcare voucher scheme during maternity leave.
Basic facts
In return for receiving a lower salary, Peninsula offered childcare vouchers for its employees to the value of the salary sacrifice. The benefit to the employee was a saving in tax and National Insurance contribution on the amount of the vouchers. However, a clause in the contract stated that during maternity leave the voucher scheme would be suspended, although the employee remained in the scheme.
By the time Ms Donaldson wanted to join the scheme, she was pregnant. She brought a tribunal claim that the suspension clause in her contract constituted pregnancy and maternity discrimination under sections 18 (direct discrimination) and 19 (indirect discrimination) of the Equality Act.
Tribunal decision
As women on maternity leave are entitled to receive non-pay benefits during ordinary and additional maternity leave in accordance with the Maternity and Parental Leave Regulations 1999, the tribunal concluded that Ms Donaldson had been discriminated against contrary to section 18. As the terms of the voucher scheme put women at a particular disadvantage compared to men (which could not be justified), Peninsula had also indirectly discriminated against her contrary to section 19.
In coming to its conclusion, the tribunal relied on guidance from HM Revenue and Customs (HMRC) stating that although an employee can agree to withdraw from a Childcare Voucher Scheme during statutory maternity leave, she cannot be required to do so by her employer.
Peninsula appealed on the basis that the provision of childcare vouchers under a salary sacrifice scheme fell within the meaning of "remuneration" in the 1999 Regulations and could therefore be suspended during maternity leave; and that the tribunal had wrongly interpreted section 19.
EAT decision
The EAT held that the scheme did not involve a “sacrifice” but a diversion of salary which the employee had earned but which was “redirected” to buy vouchers rather than placed in their pay packet. It therefore constituted remuneration for the purpose of the regulations and not a benefit beyond wages and salary. The fact that it was deemed to be a “non-cash benefit” by HMRC for tax purposes was irrelevant.
In any event, as Ms Donaldson had never entered the scheme and was paid all that she was legally and contractually entitled to receive while on maternity leave, the offer of entry into the scheme on the terms proposed did not constitute unfavourable treatment under section 18.
Finally, the EAT decided that although the HMRC guidance suggested otherwise, it had no legislative force and after looking carefully at the regulations, decided that it was wrong.