Failure to enhance shared parental pay is not discrimination: but is this right for your workplace?

In two conjoined appeals the Court of Appeal has decided that it is not unlawful discrimination on the basis of sex – whether direct, indirect, or because of the operation of the sex equality clause implied into all terms of work by the Equality Act 2010 (“EqA”) – for men to be paid less on shared parental leave (“SPL”) than birth mothers are paid on statutory maternity leave.

This confirmed the decision of the Employment Appeal Tribunal in Capita v Ali (see our previous blog), which had overturned the first instance decision (which we also wrote about).

Legal findings

In summary, the Court of Appeal reached its decision for the following reasons:

1. Direct discrimination: The Court rejected the proposition that the purpose of maternity leave is the same as SPL, namely the facilitation of childcare. Rather, its purpose is to protect the mother in connection with the effects of pregnancy and motherhood. There is therefore no direct discrimination as a man on SPL is not in comparable circumstances to a birth mother on maternity leave.
   
   
2. Equal pay: A contractual difference in SPL pay for men and enhanced maternity pay for women is properly characterised as an equal pay/equality of terms claim. Such a claim fails because the sex equality clause does not apply to contractual terms affording special treatment to women in connection with pregnancy or childbirth.
   
   
3. Indirect discrimination:

(a) As the claim was really an equal pay claim, an indirect discrimination claim was precluded by the mutual exclusivity provision in the EqA.

(b) For good measure, the Court explained why they would have dismissed an indirect discrimination claim in any event. Women on maternity leave should be excluded from the comparison pool because they are in a materially different position from men or women taking SPL. A policy of paying statutory pay to men on SPL can then be seen to cause no disadvantage to men (as women on SPL would be paid the same). In any event, any disadvantage could be justified as a proportionate means of achieving the legitimate aim of ensuring special treatment of mothers in connection with pregnancy or childbirth.

Talking points

So, employers can lawfully enhance maternity pay whilst only offering statutory pay for men taking SPL.

Some commentators argue that the practical outcome of this decision is a positive one. If the Court had held that SPL pay should be enhanced, it could have brought about the unintended consequence of employers making a commercial decision to withdraw enhanced maternity pay because they could not afford to equalise pay rates for those taking SPL. This may be a justifiable concern in some cases. However, the affordability of equalising SPL and maternity pay rates will not be prohibitive for all employers and so the Court of Appeal’s decision should not necessarily be taken as a blessing to avoid enhanced SPL pay.

In February my colleague, Alice Yandle, wrote an excellent blog which explored the need to shift societal norms better to protect women from the risks of losing their jobs as a result of pregnancy or maternity leave. She referred to the “motherhood penalty” – “a gradual but continual rise in the [seniority and] wage gap… by the time the first child is 12, women’s hourly wages are a third below men’s” (The Institute of Fiscal Studies, 2016). To eliminate this penalty, many argue that caregiving must be divided equally between parents. In response to a Women and Equalities Committee report on “Fathers and the workplace”, the Government acknowledged that “Enabling families to share caring roles more easily and equitably will… help to close the Gender Pay Gap”. This is not simply a question of social justice: let’s not forget the compelling evidence that higher female participation is linked to company financial outperformance.

Work and care arrangements established in the first year of parenthood can set a pattern of caregiving that persists in later years. The evidence suggests that fathers who take leave in the first year of their child’s life are more likely to be involved with their child’s care in subsequent years (see for example here). Moreover, studies suggest the involvement of fathers has important consequences for child well-being, for example, with regard to issues such as diet, exercise and play (see here). It should also not be overlooked that in today’s world many fathers simply want to play a more active role in their children’s lives.

However, despite this, pay remains one of the key factors in the take up of SPL. As things stand, many couples are faced with a decision between the mother taking maternity leave at an enhanced rate and the father taking SPL at the statutory rate; in these circumstances, it may simply not make financial sense for the father to take SPL.

This is where employers can perhaps come in: if SPL is made a more affordable option, might more couples feel able to share the burden of childcare in the first year of parenthood and therefore share the “motherhood burden” which is currently placed disproportionately on women to their detriment? In other words, while the Court of Appeal has ruled that legally there is no requirement for employers to enhance SPL, there are still clear moral (and, I would say, commercial) reasons for employers who currently enhance maternity pay but not SPL pay to ask themselves whether that is the right decision for their workplace and employees.

If you require further information about anything covered in this blog, please contact Alice Kendle, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, June 2019