A woman who receives a pay increase before the start of her maternity leave is entitled to have the increase taken into consideration in the calculation of the earnings-related element of her statutory maternity pay, even though the pay rise was not backdated to the relevant reference period for calculating her entitlement under the Statutory Maternity Pay (General) Regulations 1986.
Woolwich plc employed Mrs Alabaster from 1987. She became pregnant in May 1995. Her expected week of childbirth was the week commencing 11 February 1996. The Statutory Maternity Pay (General) Regulations 1986, regulation 21 (as amended), provides that an employee’s normal earnings during the 8 week period immediately preceding the 14th week before the expected week of childbirth determine her entitlement to Statutory Maternity Pay (SMP). In Mrs Alabaster’s case the “relevant period” was the 8 weeks prior to 29 October 1995.
On 1 December 1995 Mrs Alabaster received a pay increase. Her maternity leave began on 8 January 1996 so Mrs Alabaster continued to work during December at her increased rate of pay. However, the salary increase took effect after the relevant period, so when Mrs Alabaster started to receive SMP it did not take the salary increase into account. Mrs Alabaster claimed before the employment tribunal that this was contrary to the Equal Pay Act 1970 and Article 141 (formerly Article 119) of the EC Treaty.
The Decision: Employment Tribunal
The employment tribunal was referred to the case of Gillespie v Northern Health and Social Services Board  ICR 498, ECJ in which it was ruled that EC law required that pay increases awarded during maternity leave must be included in the calculation of SMP from the date they took effect.
In order to comply with this ruling, an amendment had been made through Statutory Maternity Pay (General) Regulations 1986 regulation 21(7) which provides that “In any case where a woman receives a backdated pay increase which includes a sum in respect of a relevant period, normal weekly earnings shall be calculated as if such a sum was paid in that relevant period even though received after that period”.
The employment tribunal found that this amendment did not fully implement the ruling in Gillespie v Northern Health and Social Services Board  because it did not cover pay increases that were not backdated.
The Decision: Employment Appeal Tribunal
The EAT upheld the findings of the employment tribunal. It held that Statutory Maternity Pay (General) Regulations 1986 regulation 21(7) did not comply with EC Treaty Article 141 because it did not fully implement the ruling in Gillespie v Northern Health and Social Services Board . The EAT reached this conclusion (at  IRLR 754) on the basis of two main arguments.
First, the European Court of Justice in Gillespie v Northern Health and Social Services Board  had ruled that maternity pay should be recalculated to take account of any pay increases awarded during maternity leave, whereas the amendment introduced into the regulations only provided that pay increases should be included if they were backdated.
Second, the ECJ did not require any increase in pay to be included by reference to the relevant period. Any increase was to be covered from the date, on which it took effect, to the end of the maternity leave.
The Decision: Court of Appeal
The employer appealed to the Court of Appeal, which decided (at  EWCA Civ 211, IRLR 420, CA) to stay proceedings and to refer the three questions to the European Court of Justice for a preliminary ruling.
The questions were intended to apply to a situation:
- where the earnings-related element of a woman’s SMP is calculated by reference to her normal weekly earnings for an 8-week period ending in the 15th week before the expected week of confinement (the relevant period) and
- where the employer grants a pay rise, which is not backdated to the relevant period, at any time after the end of the relevant period used for calculating that woman’s earnings-related element of SMP and before the end of her maternity leave.
The questions referred to the ECJ were as follows.
- Are EC Treaty Article 119 (now Article 141) and the judgment in Gillespie v Northern Health and Social Services Board  to be interpreted as meaning that the woman is entitled to have that pay rise taken into consideration in calculating or re-calculating the earnings-related element of her SMP?
- Is the answer to question (1) affected by whether the effective date of the pay rise commences:
- prior to the beginning of the woman’s maternity leave
- prior to the ending of the period of the earnings-related period of her SMP or
- on some other date and, if so, on what date.
- If the answer to question (1) is in the affirmative:
- how should the calculation or re-calculation of the normal weekly earnings in the relevant period take into account the pay rise?
- should the relevant period be changed?
- what allowance, if any, should be made for other factors occurring within the period to which the pay rise relates, such as the number of hours worked, and the reason for the pay increase?
- does it follow that, if there is a reduction in pay after the end of the relevant period, but before the end of the woman’s period of maternity leave, her SMP should be calculated or re-calculated to take account of the reduction of pay, and if so, how is this to be done?
The Decision: European Court of Justice
The reply to the first and second questions was that the EC Treaty must be interpreted as requiring that, insofar as the pay received by the worker during her maternity leave is determined, at least in part, on the basis of the pay she earned before her maternity leave began, any pay rise awarded between the beginning of the period covered by the reference pay and the end of the maternity leave must be included in the elements of pay taken into account in calculating the amount of such pay. This requirement is not limited to cases where the pay rise is backdated to the period covered by the reference pay.
By the third question the Court of Appeal was essentially asking, in the event that the ECJ finds that there is a right to have a pay rise taken into account, how the pay rise should be taken account of in calculating the pay due to the worker during her maternity leave, and whether account should also be taken of any decrease in the woman’s pay during the period following that covered by the reference pay and during her maternity leave.
As regards the first point, the ECJ suggested that it was a matter for domestic courts, and thus within the discretion of the competent authorities of the Member State concerned, provided that they comply with the requirements of EC law.
The ECJ declined to make any ruling on the question of whether a decrease in pay could be taken into account, on the basis that the question was hypothetical, in that it did not arise on the facts of the case under consideration.
Thus, the reply to the third question was that it was for the competent national authority to determine how, in compliance with all of the provisions of EC law, any pay rise awarded before or during maternity leave must be included in the elements of pay used to calculate the pay due to a worker during maternity leave.
The Decision: Court of Appeal
The case then returned to the Court of Appeal to determine remedy; in other words, whether she was entitled to additional maternity pay as a result of the ECJ ruling, and, if so, the amount.
The Court of Appeal rejected the argument of the Secretary of State for Social Security that any remedy was through a complaint of unlawful deduction from wages contrary to the Employment Rights Act 1996 (with such a claim having been made out of time) rather than under the Equal Pay Act 1970.
The Court of Appeal decided that the appropriate way to proceed was to disapply those parts of the EPA 1970 s.1 which imposed the requirement for a male comparator, in the same way that the House of Lords in Webb v EMO Air Cargo (UK) Ltd (No. 2)  IRLR 645 had disapplied equivalent requirements in the Sex Discrimination Act 1975 which might otherwise have made a male comparator necessary in relation to discrimination claims by pregnant employees.