Peninsula Business Services Ltd v Donaldson

A childcare-voucher arrangement funded by salary sacrifice is, in substance, a diversion of earned salary to purchase vouchers. The vouchers therefore form part of remuneration, rather than a non-pay benefit which must continue during maternity leave under regulation 9 of the Maternity and Parental Leave Regulations 1999.

A tribunal has no jurisdiction under section 19 of the Equality Act 2010 to determine an indirect sex-discrimination complaint concerning contractual terms of work, because the statutory equality-clause regime is exclusive. Offering a pregnant employee entry to such a scheme on terms suspending vouchers while she receives only statutory maternity pay is not, on the analysis adopted, unfavourable treatment under section 18.

The claimant, who was pregnant and entitled only to statutory maternity pay during maternity leave, declined to join her employer's childcare-voucher scheme. Entry required acceptance of a term under which vouchers and adjusted salary would be suspended during maternity leave, although the employee would remain in the scheme.

The Employment Tribunal upheld complaints under sections 18 and 19 of the Equality Act 2010, section 47C of the Employment Rights Act 1996, and regulation 9 of the Maternity and Parental Leave Regulations 1999. It treated the vouchers as a non-pay benefit which had to continue during maternity leave.

The employer appealed. The central issues were whether vouchers acquired through salary sacrifice were remuneration for regulation 9, whether the Tribunal had jurisdiction over the section 19 complaint, and whether the proposed scheme terms amounted to unfavourable treatment under section 18.

1. Appeal allowed. The Employment Tribunal's decision was reversed and the claimant's claims were dismissed.

2. The Tribunal had no jurisdiction to uphold the indirect sex-discrimination claim under section 19 of the Equality Act 2010. The complaint concerned proposed contractual terms of work. Sections 66 and 70 provide the equality-clause regime for less favourable contractual terms and exclude a discrimination claim in that field. The relevant provisions also excluded direct or indirect discrimination claims concerning maternity-related terms and conditions.

3. Although the Tribunal proceeded on the basis that childcare vouchers were a non-pay benefit, that characterisation was wrong for a salary-sacrifice scheme. Such an arrangement diverts salary which the employee has earned before it reaches the pay packet, to buy vouchers of the same value. The vouchers are consequently part of remuneration. Their tax treatment as a non-cash benefit does not determine their character for regulation 9.

4. Regulation 9 of the Maternity and Parental Leave Regulations 1999 preserves non-remuneration terms and conditions during maternity leave, but excludes remuneration. It would require continued vouchers where an employer provides them in addition to salary. It did not require an employer to fund vouchers which, under this scheme, could only be obtained by diverting salary unavailable during a period of statutory maternity pay. The contrary view would give the employee a windfall and impose an additional cost liable to discourage voluntary schemes.

5. The claimant never entered the scheme. No identified statutory provision made it unlawful to offer the scheme on its stated terms, and regulation 9 was satisfied. Assuming without deciding that section 18 was not excluded on the same jurisdictional basis as section 19, making that offer was not unfavourable treatment. The Tribunal had erred in treating the scheme as a benefit that the law required to continue during maternity leave.

• Employment Appeal Tribunal: Allowed the employer's appeal and substituted a decision dismissing the claims: [2016] UKEAT 249_15_903.

• Employment Tribunal, Manchester: On 30 March 2015, upheld the claimant's complaints concerning access to the childcare-voucher scheme under sections 18 and 19 of the Equality Act 2010, section 47C of the Employment Rights Act 1996, and regulation 9 of the Maternity and Parental Leave Regulations 1999.