Employment Law – Hoyland, maternity leave and bonus payments

Employers and lawyers looking for clarity in the law have at least some cause to thank the EAT for its June 2005 decision in Hoyland v Asda Stores Ltd [2005] IRLR 438.

Each party to this claim for £94 was represented by a QC. This proves – if proof were needed – the ability of the legal profession to provide the highest level of representation for the tiniest of claims.

All Asda staff with 6 months continuous service share in a bonus scheme which rewards those who contribute to company profits. It is not individually determined and does not relate to personal merit but rewards the group contribution to the success of the company. Both the ET and the EAT were clear that the scheme was non-discretionary. The payment is reduced pro rata for any absence of over 8 consecutive weeks including maternity leave.

According to the EAT, such a reduction cannot be prohibited by the 1975 Sex Discrimination Act, which does not apply to the payment of money under a woman’s contract of employment: SDA s.6(2). Since the bonus was non-discretionary it was a contractual right which could have been sued for in contract.

The EAT decided that European law does not prohibit Asda’s practice either. ECJ cases make it clear that workers who exercise statutory rights to parental leave are in a special situation and cannot be compared with men or women at work. They have a right to protection but not to be paid as much as their colleagues at work. Where a bonus is paid as a Christmas gift it usually need not be paid to women on maternity leave. Where the bonus is retroactive pay for work carried out during the year the woman on maternity leave must receive the payment pro rata to the time she actually worked and for the period when women are compelled to take leave (in the UK this is the 2 weeks immediately after birth). She need not be paid the bonus for the period she is not working.

Section 47C of the Employment Rights Act prohibits an employer from exposing an employee to any detriment for taking ordinary maternity leave but again excludes remuneration.

At first blush the decision in Hoyland is surprising because of the wide ranging protection which the cases indicate applies to pregnant women. A woman who is pregnant must be treated in the same way as other male and female staff before and after maternity leave. If a pay rise is put in place while the woman is on leave or if she would automatically rise in seniority were she to stay at work then she must receive the pay rise or increase in status. However, she is not entitled under domestic or European discrimination law to claim to be paid either ordinary wages or a bonus as if she were at work. She is entitled to be paid according to the statutory and contractual rules applicable to pregnant woman and gets no further protection from discrimination law (save that she must be paid any bonus for the work she did before leave and will do after it).

This leaves one important question: what about discretionary bonuses? By their nature these are not “regulated by the woman’s contract of employment” (SDA s.6(6)) and so are not excluded from the SDA nor excluded from being a detriment under the ERA. It is surely therefore open to the employee to bring a claim under domestic law.

Of course the employee would still need to prove that the non-payment was discrimination under the SDA or a detriment under the ERA. The prospects of succeeding at this are unclear. In GUS Home Shopping v Green [2001] IRLR 75 the EAT decided that it was discrimination not to pay a loyalty bonus to women who were on maternity leave but remained in employment for the relevant period. However the EAT in Hoyland stated that GUS was decided on its specific facts and has little precedent value.

Much would depend on the terms of the particular bonus scheme under consideration. There are obvious risks posed to employers who operate discretionary or opaque schemes. Further, since the employer will have drafted the scheme, it will not be easy for the employer to argue that the drafting should be set aside and the scheme regarded as contractual or the rules as specific when the drafting expressly asserts the opposite.

One final warning: this area really is complex and technical. To take one example: if a woman is absent with a pregnancy-related illness and is unpaid, this failure could, arguably, in some circumstances, be regarded as a breach of the Equal Treatment Directive and possibly domestic legislation. However, if the employer uses the illness to bring forward the maternity leave non-payment then this would probably not be unlawful.

Note: A version of this article appears on the Lawtel website and it is reproduced here with permission.