Case law: Settlement agreement with pregnant employee must specify statutory maternity pay otherwise not covered

Employers settling claims by pregnant employees who want the settlement agreement to cover statutory maternity pay (SMP) must expressly mention it in the agreement, otherwise it will not be covered and the employee will be able to claim it separately.

After six months of employment, an employee notified her employer that she was pregnant and planned to take maternity leave. Shortly after, an issue arose with her performance and she went to Acas to start early conciliation proceedings. An agreement was reached that she would be paid £10,000 in “full and final settlement of all [her] claims”.

Her employer believed this included any claim for statutory maternity pay (SMP) which, in her case, would amount to around £8,000. However, the employee later claimed SMP in addition to the negotiated sum.

The First Tier Tax Tribunal (Tax Chamber) ruled that she had a statutory right to SMP which could not be excluded under any settlement agreement. That meant any settlement agreement would only cover SMP if SMP was expressly referred to in it, and the correct amount of SMP was actually paid under it.

The agreement in this case made express reference to some statutory entitlements, including statutory sick pay, but there was no mention of SMP. Therefore it could not be said to cover SMP. Use of the phrase in “full and final settlement of all claims” was not enough.

The employee was entitled to SMP in addition to the £10,000 provided for under the settlement agreement.

Operative date

• Now

Recommendation

• Employers wishing to settle claims for SMP by pregnant employees should ensure the settlement agreement expressly mentions the SMP (including how it was calculated) so that the employee cannot then claim it separately.

Case ref: NVCS Limited v (1) HMRC Commissioners and (2) Dare [2019] UKFTT 0635