MRS ELIDH HOYLAND v ASDA STORES LTD [2005] UKEAT 0058_04_2202

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2005] UKEAT 0058_04_2202Case No Appeal No. UKEAT/0058/04Venue 52 MELVILLE STREET, EDINBURGH EH3 7HF
Between
MRS ELIDH HOYLANDAPPELLANTASDA STORES LTDRESPONDENT
Before
Mr Justice Bean Mr J M Keenan Dr W M SpeirsDate 22 February 2005
[1]APPEARANCES For the Appellant Mr B Napier, Queen's Counsel Instructed by- Equal Opportunities Commission St Stephen's House 279 Bath Street GLASGOW G2 4JL For the Respondent Mr J Hand, Queen's Counsel Instructed by- ASDA Stores Ltd Legal Department ASDA House South Bank Great Wilson Street LEEDS LS11 5AD SUMMARY Pro rata reduction of annual bonus for period of absence on ordinary maternity leave neither sex discrimination nor pregnancy-related detriment. THE HONOURABLE MR JUSTICE BEAN: In this appeal from an Employment Tribunal sitting at Glasgow under the chairmanship of Ms Eccles the sum at stake is £94.99. Nevertheless the parties were represented before us, as they were before the Tribunal, by leading counsel: Mr. Brian Napier QC for the appellant employee Ms Hoyland, Mr. John Hand QC leading Mr. Paul Gilroy for the respondent employer Asda Stores Ltd. The arguments, written and oral, were of the highest quality.[2]The case raises the issue of whether, if an annual bonus is based on the sales achieved by the workforce as a whole, but absence for any reason for more than a specified period during the year in question leads to a pro rata reduction in the bonus payable to the relevant individual, it is lawful to make the pro rata reduction in respect of a period of absence on ordinary maternity leave. Mr. Hand characterised the case as another chapter in the history of attempts to obtain for pregnant workers the same remuneration, while absent on maternity leave, as they would receive if they were attending at work.[3]The essential facts are not in dispute. The Applicant has been employed by the Respondents since September 1998. She is currently employed at their Dumbarton store in Customer Services & Events Co-coordinator. She was absent from work from 21 st May 2002. As from 1 st June 2002 she was on maternity leave until 3 rd December 2002 when she returned to work. She did not attend work for 183 days in the calendar year 2002. These included 18 weeks of ordinary maternity leave and 8 weeks of additional maternity leave. During her maternity leave she received statutory maternity pay and certain further sums by way of company maternity pay.[4]During 2002 Asda operated a bonus scheme the purpose of which was to reward employees for their work and continued contribution to the financial performance of the business during the calendar year. Employees in stores where profits were above target were entitled to receive an additional bonus equivalent to 20% of the full bonus under the scheme. Employees in the Respondents' employment on 21 st February 2003 with at least 6 months continuous service on 31 st December 2002 were entitled to a bonus payment. The bonus payment was pro-rated to reflect part-time employment (this was not contentious in the present case) and absences of 8 consecutive weeks or more during the year. Payments were also reduced if the employee had been disciplined during the year or had less than 12 months continuous service. Maternity leave was treated as absence for the purposes of calculating bonus payments.[5]Bonus payments were made by Asda on 21 st February 2003. Full time employees at the Dumbarton store were entitled to a maximum bonus of £300 each. The pro-rata equivalent based on the Applicant's hours of work was £189.47p, which was what the Applicant expected to receive. However, that payment was reduced to reflect her 183 days of absence during 2002, resulting in a payment of £94.48p. The Applicant, who had been unaware that her payment would be reduced to reflect absence from work on maternity leave, was upset and raised her concerns with management. On 23 rd April 2003, not having received satisfaction, she presented an originating application to the Tribunal.[6]The Tribunal found that the bonus was designed to reward attendance at work which contributed to the overall performance of the business during the bonus year. While unrelated to individual productivity it was paid in recognition of work undertaken by employees as a whole. It was paid through payroll with basic wages subject to deductions of tax and National Insurance contributions. A percentage of the bonus was paid into the employee's pension plan with an equivalent amount contributed by the Respondents. The Tribunal concluded that the bonus was part of the Applicant's "wages or salary" within the meaning of regulation 9(3) of the Maternity and Parental Leave etc Regulations 1999.[7]In European law the pregnant worker's source of protection during maternity leave derives from the Pregnant Workers Directive (92/85/EC). Article 8.1 requires Member States to allocate at least 14 weeks continuous maternity leave within which must be included at least 2 weeks compulsory maternity leave. Article 11.2 provides that the pregnant worker must receive some payment or be made an adequate allowance, but the payment need not be that provided for by the employment contract and will be deemed adequate if it is at least equivalent to the allowance payable in the event of absence through illness.[8]The legislation implementing the Directive in the UK is sections 47C and 71 to 75 of the Employment Rights Act 1996, the Maternity and Parental Leave Regulations 1999 and further statutory provisions relating to social security. Parliament was a little more generous than the minimum required by the Directive in that there is a period of ordinary maternity leave of not less than 18 weeks, during which there must be 2 weeks compulsory maternity leave following the birth (section 72 of the 1996 Act and regulation 8 of the 1999 Regulations). Subsequent periods are described as "additional" maternity leave. Before and after the maternity leave period the primary sources of legal protection are Article 141 of the EU Treaty, the Equal Pay Act 1970 and the Equal Pay Directive (75/117/EC), the Sex Discrimination Act 1975 and the Equal Treatment Directive (76/207/EC). During these periods the pregnant worker must receive equal treatment with her male colleagues and have pay equal to theirs.[9]Mr. Napier puts his claim in three alternative ways. He argues, first, that the pro-rata reduction in the bonus constituted sex discrimination; Secondly, he argues that it was a pregnancy-related detriment within the meaning of section 47C of the 1996 Act; thirdly, that it is a breach of his client's rights under Article 141 of the EU Treaty. He has a fourth head of complaint, namely that there was an unlawful deduction from wages contrary to section 13 of the 1996 Act, but he accepts that this is only the case if one of his first three heads of complaint is upheld.[10]The Employment Tribunal found a detriment within section 47C in the employers' failure to pay Mrs Hoyland bonus in respect of the 2-week period of her compulsory maternity leave and awarded her the sum of £5.20p. Putting it another way, they found that the deduction of £5.20p from her bonus was an unlawful deduction under section 13 of the 1996 Act interpreted in the light of Article 141. There is no appeal from that decision. As to the demarcation between the various European rights, Mr. Napier accepted that a single act of discrimination may fall under Article 141 or The Equal Treatment Directive but not both. Sex Discrimination.[11]Section 6(6) of the Sex Discrimination Act 1975 excludes "benefits consisting of the payment of money when the provision of those benefits is regulated by the woman's contract of employment" from the protection of section 6(2) against discrimination by employers. Such complaints are covered by the Equal Pay Act 1970. Mr. Napier argued that the bonus in this case was discretionary and not a payment regulated by Mrs. Hoyland's contract of employment; alternatively that the case could be classified as a complaint about a working condition that prevented her from accruing entitlement to the full bonus while absent from work on maternity leave.[12]The Tribunal rejected both submissions. As to the suggestion that the bonus was a non-contractual payment, they said:- "In the present case the decision about whether the applicant should receive her bonus in full was regulated by the Bonus Scheme. If the applicant complied with the rules of the Bonus Scheme she was entitled to be paid the bonus. This was not a matter left to the discretion of the respondents. In addition, the amount of bonus to be paid was not discretionary within the terms of the Scheme. For the purposes of work undertaken during 2002, the Bonus Scheme formed part of her contract of employment. The applicant appeared to acknowledge the contractual status of the bonus by referring to it as a right connected with her employment contract and by comparing her right to a bonus with other contractual rights such as annual leave and accrual of occupational pension rights, as in the case of Boyle and Others v EOC [1998] IRLR 717 (ECJ)."[13]As to the working conditions argument the Tribunal held:- "The factual matrix before the Tribunal led to a finding that the bonus was a payment regulated by contract. This excludes the application of the Sex Discrimination Act 1975. The Tribunal did not accept that by treating the failure to pay the bonus in full as a result of a working condition the same issue could also give rise to a claim under the Sex Discrimination Act 1975 and Equal Treatment Directive 76/207. …The issue under consideration in the present case is the payment of a reduced bonus as part of the applicant's wages. This falls within the scope of Article 141."[14]The leading case on this topic is the decision of the European Court of Justice in Gillespie v Northern Health and Social Services Board [1996] ICR 498 . The Court held that "a woman on maternity leave is in a special position which requires special protection, but which is not comparable either with that of a man or with that of a woman actually at work" (paragraph 17 of the judgment). Mr. Napier sought to depict this decision as something of a deviation from the true path of equal opportunities law, but as recently as the decision in Alabaster v Woolwich Plc and Secretary of State for Social Security [2004] IRLR 486 the Court cited Gillespie with approval (paragraph 46). "…women taking maternity leave provided for by national legislation are in a special position which requires them to be afforded special protection, but which is not comparable, in particular, either with that of a man or with that of a woman actually at work ( Gillespie paragraph 17). Therefore they cannot usefully rely on the provisions of Article 119 of the Treaty to argue that they should continue to receive full pay while on maternity leave as though they were actually working, like other workers ( Gillespie paragraph 20)."[15]Mr. Napier argued that the present case can be distinguished from Gillespie because it was not concerned with payments made during the period of maternity leave. Like the Tribunal we are unable to accept the distinction between the period when entitlement accrued and the date when the bonus was paid. Mrs. Hoyland's entitlement to be paid bonus accrued during the period of maternity leave. It was a payment in recognition of work undertaken by the workforce during the period of that leave, and the Tribunal found that the bonus payment was part of the wages of Mrs. Hoyland and her colleagues. It would in our view lead to anomalous results if the case were to turn on whether the payment date for the annual bonus was shortly before or shortly after the end of the applicant's maternity leave. What is surely significant is the period during which the entitlement accrues.[16]In Lewen v Dender [2000] ICR 648 Ms Lewen was excluded entirely from a Christmas bonus because she was on parenting leave at the time of payment. The European Court of Justice, in some respects not following the Opinion of Advocate-General Colomer, held:-"36. According to settled case law discrimination involves the application of different rules to comparable situations or the application of the same rule to different situations ( Boyle [1998] IRLR 717 ).37. A worker who exercises a statutory right to take parenting leave, which carries with it a parenting allowance paid by the state, is in a special situation which cannot be assimilated to that of a man or woman at work since such leave involves suspension of the contract of employment and, therefore, of the respective obligations of the employer and the worker.38. The refusal to pay a woman on parenting leave a bonus as an exceptional allowance given voluntarily by an employer at Christmas does not therefore constitute discrimination within the meaning of Article 119 of the Treaty where the award of that allowance is subject only to the condition that the worker is in active employment when it is awarded.39. The position would be different if the national court were to classify the bonus at issue under national law as retroactive pay for work performed in the course of the year in which the bonus is awarded.40. In those circumstances, an employer's refusal to award a bonus, even one reduced proportionally , to workers on parenting leave who worked during the year in which the bonus was granted, on the sole ground that their contract of employment is in suspense when the bonus is granted, places them at a disadvantage as compared with those whose contract is not in suspense at the time of the award and who in fact receive the bonus by way of pay for work performed in the course of that year. Such a refusal therefore constitutes discrimination within the meaning of Article 119 of the Treaty since female workers are likely, as noted in paragraph 35 of this judgment, to be on parenting leave when the bonus is awarded far more often than male workers.41. As to whether periods for the protection of mothers (in which they are prohibited from working) must be taken into account, it must be held that they are to be assimilated to periods worked.42. Indeed to exclude periods for the protection of mothers from the periods worked for the purpose of awarding a bonus retroactively as pay for work performed would discriminate against a female worker simply as a worker since had she not been pregnant, those periods would have had to be counted as periods worked.43. The answer to the second question must therefore be that Article 119 of the Treaty precludes an employer from excluding female workers on parenting leave entirely from the benefit of a bonus paid voluntarily as an exceptional allowance at Christmas without taking account of the work done in the year in which the bonus is paid or of the periods for the protection of mothers (in which they were prohibited from working) where that bonus is awarded retroactively as pay for work performed in the course of that year.44. However neither Article 119 of the Treaty nor Article 11(2) of Directive 92/85 nor Clause 2(6) of the Annex to Directive 96/34 precludes a refusal to pay such a bonus to a woman on parenting leave where the award of that allowance is subject to the sole condition that the worker must be in active employment when it is awarded." [Emphasis added]"[17]We think it is quite plain from the italicized words in the above judgment, as well as from Gillespie and Alabaster , that the Luxembourg jurisprudence is adverse to Mr. Napier's main argument. A worker who takes maternity leave during a bonus year must be paid bonus in respect of the periods when she is at work and the fortnight of compulsory maternity leave. But a proportionate reduction to reflect absence on ordinary maternity leave is permitted.[18]On the working conditions argument Mr. Napier cited the Opinion of Advocate General Léger in North-Western Health Board v McKenna delivered on 2 nd December 2004 on a reference from the Labour Court of Ireland. The applicant was obliged to take sick leave on account of a pregnancy related illness that lasted for nearly the whole term of her pregnancy. During maternity leave, which lasted 14 weeks, she received full pay but otherwise only half pay. She complained that the halving of her pay when her absence was due to a pregnancy related illness constituted both discrimination in breach of the Equal Treatment Directive and unfavorable treatment contrary to Article 141(1)(2) and Directive 75/117. The Advocate General proposed that the Court should rule that the case fell within the ambit of the Equal Treatment Directive rather than that of Article 141 and the Equal Pay Directive, and that it breached the Equal Treatment Directive. The Gillespie decision is referred to only in a single sentence. Neither Lewen nor Alabaster is referred to at all. This is an interesting point of view, but it is not binding on us. We derive greater assistance from the decisions of the Court of Justice in Gillespie, Lewen and Alabaster , particularly since Lewen , as a case concerned with bonuses, is much closer to the present facts than McKenna , which is a case about sick pay.[19]In CNAVTS v Thibault [1998] IRLR 399 the employee was absent during the year 1983 for three periods totalling 52 days due to illness followed by 16 weeks' maternity leave, followed by six weeks' child care leave. This meant she was at work for 155 days during the year. The employer refused to carry out an assessment of her performance for the year for the purposes of a performance pay increase since the relevant national collective agreement provided only that any employee present at work for at least six months of the years must be the subject of a performance assessment. The European Court of Justice, on a reference from the Cour de Cassation, ruled that the Equal Treatment Directive precludes national rules which deprive a woman of the right to an assessment of her performance and, consequently, to the possibility of qualifying for promotion because she was absent from the undertaking on account of maternity leave. In paragraph 29 of its judgment the Court stated:- "The principal of non-discrimination requires that a woman who continues to be bound to her employer by her contract of employment during maternity leave should not be deprived of the benefit of working in conditions which apply to both men and women and are the result of that employment relationship. In circumstances such as those of this case, to deny a female employee the right to have her performance assessed annually would discriminate against her merely in her capacity as a worker because, if she had not been pregnant and had not taken the maternity leave to which she was entitled, she would have been assessed for the year in question and could therefore have qualified for promotion."[20]Although Mr. Napier relied strongly on Thibault it does not seem to us relevant to the present case. The European case law indicates that when a woman returns from maternity leave she must be treated for the purposes of future pay and working conditions as though she had never been away. Thus if the workforce has received a pay rise during her absence the pay rise is applicable to her. If she would have moved into a higher seniority band, she must be given that benefit on her return. If she would have been assessed for promotion, she must be assessed anyway. But none of these is the same as saying that she must be paid for the period of the maternity leave as if she had never been on leave.[21]Mr. Napier also relied on GUS Home Shopping Ltd v Green and McLaughlin [2001] IRLR 75 . In that case the applicants were employed in the marketing department at the employers' Worcester office. A decision was made to transfer this function to Manchester with effect from 1 st April 1998 and to make the employees in Worcester redundant from that date. In order to affect a smooth transfer the employers introduced a discretionary loyalty bonus. Payment was contingent upon an orderly and effective transfer of the marketing operation over the preceding six months; cooperation and goodwill of the individual employee; and the individual employee remaining in the post until 31 st March 1998 or an earlier agreed date. Mrs. McLaughlin did not receive any loyalty payment because she was absent from work on maternity leave throughout the whole of the relevant period. Mrs. Green was absent for part of the period due to pregnancy-related sickness and maternity leave. Mrs. McLaughlin received no loyalty payment and Mrs. Green's was reduced pre-rata. Their complaints of unlawful sex discrimination were successful. The Tribunal found that the employees were not considered for the loyalty bonus as a result of their absence due to pregnancy and that the failure of the employers to recognize the special status given to women in such circumstances amounted to an act of direct sex discrimination. An appeal by the employers to this Appeal Tribunal was dismissed.[22]The facts of this case were unusual and its value as a precedent seems to us to be slight. The submissions of Mr. Linden, counsel for the employees, as to the proper construction of the bonus scheme were as follows:- "It required the contract of employment to continue and it required the employees to do no more than comply with the term of the contract of employment, namely to cooperate and show goodwill. ……….[It] was a special scheme within a contract of indefinite duration offering a special loyalty payment for those who continued with the contract until a specific date. As such it was subject to all the regular incidences of an indefinite contract of employment such as absence by reason of illness or leave for whatever purpose." The EAT accepted this analysis; but it is a long way from the present case.[23]In our judgment Mrs. Hoyland's claim falls four square within section 6(6) of the Sex Discrimination Act. The bonus was described in the scheme as "discretionary" but does not appear to have been withheld from anyone who satisfied the qualifying requirements. The Employment Tribunal found in paragraph 27 of their decision that "if the applicant complied with the rules of the bonus scheme she was entitled to be paid the bonus. This was not a matter left to the discretion of the respondents. In addition the amount of bonus to be paid was not discretionary within the term of the Scheme." Neither we nor either Leading Counsel in the case could think of any circumstances, except perhaps if the company were on the brink of insolvency, in which an employee qualifying under the terms of the scheme would not be paid the bonus, and Mr. Hand was content for that fact to be recorded in our judgment. The claim for sex discrimination was therefore rightly rejected by the Tribunal. Pregnancy Related Detriment[24]The Pregnant Workers Directive (92/85/EC) requires by Articles 8 and 11(2) that workers on maternity leave are to be ensured the maintenance of "a payment" and or "entitlement to an adequate allowance", and otherwise are to retain their rights connected with the employment contract. Article 11(3) states that the "allowance" shall be deemed adequate if it guarantees income at least equivalent to that which the worker concerned would receive in the event of a break in her activities on grounds connected with her state of health (subject to any ceiling laid down under national legislation)".[25]Section 47C of the Employment Rights Act 1996 (inserted by the Employment Rights Act 1999) confers on an employee a right not to be subjected to any detriment by any act, or any deliberate failure to act, by her employer done for a reason which is prescribed by Regulations and which relates to pregnancy, childbirth or maternity, or maternity leave (whether ordinary, compulsory or additional). Section 71 of the 1996 Act defines ordinary maternity leave, and states in sub paragraph (4)(a) that an employee who exercises her right to take it "is entitled, for such purposes and to such extent as may be prescribed, to the benefit of the terms and conditions of employment which would have applied if she had not been absent". Subsections (5) and (6) provide as follows:
"(5) In sub section (4)(a) "terms and conditions of employment"- (a) includes matters connected with an employees employment whether or not they arise under her contract of employment, but (b) does not include terms and conditions about remuneration. (6) The Secretary of State may make regulations specifying matter which are or are not to be treated as remuneration for the purposes of this section."
[26]The relevant Regulations are the Maternity and Parental Leave etc Regulations 1999. Regulation 9 provides:- "(1) An employee who takes ordinary maternity leave- (a) is entitled, during the period of leave, to the benefit of all of the terms and conditions of employment which would have applied if she had not been absent…. (2) In paragraph (1)(a) "terms and conditions" has the meaning given by Section 71(5) of the 1996 Act and accordingly does not include terms and conditions about remuneration. (3) For the purposes of section 71 of the 1996 Act, only sums payable to an employee by way of wages or salary are to be treated as remuneration." The question, therefore, is whether the bonus was a sum payable to Mrs. Hoyland "by way of wages or salary" in which case it was not required by the Regulations to be paid in respect of the period of ordinary maternity leave (other than the compulsory fortnight)".[27]The phrase "wages or salary" is not defined in the 1999 Regulations. Mr. Hand, however, submits that it is significant that in section 27(1)(a) of the 1996 Act the definition of wages for the purposes of the unlawful deductions legislation includes any bonus.[28]The Tribunal, in paragraph 22 of their Decision held:- "The bonus was designed to reward attendance at work which contributed to the overall performance of the business during a bonus year. While unrelated to individual productivity, it was paid in recognition of work undertaken by employees. It was paid through the respondents' payroll with the employee's basic wage. It was subject to deductions of tax and national insurance contributions. A percentage of the bonus was paid into the employee's pension plan with an equivalent amount contributed by the Respondents. On consideration of the above factors, the Tribunal concluded that in this case the bonus paid to the applicant was part of her "wages or salary" within the meaning of Regulation 9(3) of the Maternity and Parental Leave etc Regulations 1999." We agree with the Tribunal's reasoning and conclusions.[29]Mr. Napier argued that nevertheless the pro-rata deduction from the bonus was a "detriment" within the meaning of section 47C of the 1996 Act and regulation 19 of the 1999 Regulations. Regulation 19, so far as material, provides:- "(1) An employee is entitled under section 47C of the 1996 Act not to be subjected to any detriment by any act, or any deliberate failure to act, by her employer done for any of the reasons specified in paragraph (2). (2) The reasons referred to in paragraph (1) are that the employee -….. (d) took, sought to take or availed herself of the benefits of ordinary maternity leave… (3) For the purposes of paragraph (2)(d), a woman avails herself of the benefits of ordinary maternity leave if, during her ordinary maternity leave period she avails herself of the benefit of any of the terms and conditions of her employment preserved by section 71 of the 1996 Act and regulation 9 during that period"[30]In our view an employer's failure to pay a woman on maternity leave wages, salary or a bonus which she would have earned had she been at work cannot be a "detriment" within the meaning of section 47C and regulation 19, otherwise the exclusion of terms and conditions about remuneration by way of wages or salary contained in section 71(5) and regulation 9(2) and (3) would be meaningless. We therefore agree with the Tribunal that (with the exception of the fortnight of compulsory maternity leave) the employers did not act contrary to section 47C by reducing Mrs. Hoyland's bonus. Article 141[31]Mr. Napier's final submission was that even if the claims under the Sex Discrimination Act and section 47C of the Employment Rights Act 1996 failed, Mrs. Hoyland nevertheless had a claim under Article 141 of the Treaty. He submitted that the decision of the European Court of Justice in Lewen v Denda had been wrongly interpreted by the Tribunal as meaning that credit only had to be given for the fortnight of compulsory maternity leave. He submitted that Mrs. Hoyland should have been given credit for the whole 18 weeks of ordinary maternity leave to which she was entitled under domestic legislation, alternatively for the minimum period of 14 weeks of maternity leave prescribed by the Pregnant Workers Directive.[32]There are several obvious difficulties with this submission. The first is that even a large employer such as Asda is not an emanation of the State. Secondly, the submission flies in the face of Gillespie and Alabaster . Thirdly, it ignores the words in the Court of Justice's judgment in Lewen v Denda which we emphasized earlier in this judgment. Leaving aside the fortnight of compulsory maternity leave, what the Court criticized was the employer's withholding of the bonus in its entirety. It was plain that a pro-rata payment of the bonus would have fulfilled the employer's obligations. Conclusion[33]For these reasons we dismiss Mrs. Hoyland's appeal. We should add that one member of the Tribunal, Dr Speirs, while agreeing that this must be the result as the law stands, is strongly of the view that legislation should be introduced to clarify the position of women who find themselves in the same situation as hers.[34]We do not consider that a reference to the European Court of Justice for a preliminary ruling is warranted. We do, however, give Mrs Hoyland permission to appeal to the Court of Session.