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Case law: Employee settlement agreement must specify statutory maternity pay or SMP doesn't form of the agreement

Employers wishing to settle claims for statutory maternity pay (SMP) by pregnant employees should ensure any settlement agreement expressly mentions the SMP (including how it was calculated), or the employee may be able to claim SMP separately.

Legal Alert

This update was published in Legal Alert - February 2017

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A pregnant employee was made redundant. She claimed unfair dismissal and pregnancy dismissal. After conciliation she reached an Acas settlement with her employer – a legally binding agreement to settle her tribunal complaint. This was recorded on Acas form COT3.

As her redundancy was within 11 weeks of her due date, statutory maternity payment (SMP) was due to her. Part of her claim in the settlement negotiations was for around £41k for 'maternity pay entitlement', calculated by reference to the salary she would have earned during her maternity leave. She eventually received £60k in settlement of "all and any claims".

Although her employer had intended the £60k to be in full and final settlement of all her claims, including SMP, the agreement did not specifically mention SMP. After the settlement agreement had been concluded she complained to HM Revenue and Customs (HMRC) that she had not received SMP, arguing that the settlement agreement did not cover it because it was not specifically mentioned in the agreement

The First Tax Tribunal (FTT) agreed, and found:

'…an employer will only have met the obligation [to pay SMP], in connection with a settlement agreement, if the agreement specifically includes SMP in the amount paid. In addition, National Insurance Contributions must be paid in respect of the SMP. Neither requirement was satisfied in this case and nor did it fall within the definition of maternity pay entitlement.'

The FTT also said it was 'unfortunate' that Acas had given the employer incorrect information.

Operative date

  • Now

Recommendation

  • Employers wishing to settle claims for statutory maternity pay (SMP) by pregnant employees should ensure any settlement agreement expressly mentions the SMP (including how it was calculated), so that the employee cannot subsequently claim it separately

Case ref: Campus Living Villages UK Ltd v Revenue and Customs [2016] UKFTT 738

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.