Case law: Reducing holiday and other pay-related compensation because of employee’s parental or other leave may be indirect discrimination

Employers calculating redundancy, holiday or other pay-related compensation should take advice before reducing it if the employee has recently been on parental leave (or other leave during which they receive no or reduced pay), according to an EU ruling.

A full-time employee in France had been on part-time parental leave, on reduced pay. He was dismissed and redeployed, and the employer reduced the compensation payable to reflect the fact he had been on reduced pay while on parental leave. The employee went to court claiming that the employer should have ignored that period – the compensation should have been calculated as if he was on full pay throughout it.

The Court of Justice of the European Union (CJEU) agreed that the compensation payable to the employee should be based on his full-time pay. Ignoring the reduced salary payable to them while they were on part-time parental leave since (given that the overwhelming majority of employees taking part-time parental leave are women) would potentially be indirect sex discrimination.

Employees in the UK are not entitled to take part-time parental leave. However, the ruling may apply here to prevent employers from paying reduced compensation to employees who have been on parental leave – or, perhaps, temporarily drawing a reduced salary while taking time off to care for their child – when calculating, for example, their redundancy or holiday pay payable. The ruling suggests these should be calculated by reference to the employee’s normal pay.

Operative date

• Now

Recommendation

• Employers calculating redundancy, holiday or other remuneration-related compensation should consider whether or not to take into account an employee’s time on parental leave, or period when they received reduced pay and, if in doubt, take specialist advice.

Case ref: RE v Praxair MRC SAS Case C-486/18