EAT reverses ET decision on childcare vouchers

Childcare cost

The Employment Appeal Tribunal (EAT) has overturned an Employment Tribunal (ET) decision that it was discriminatory to require employees to agree to the suspension of childcare vouchers during maternity leave when signing up to the scheme.

In the case of Peninsula Business Services vs Donaldson, a pregnant employee refused to enter the salary sacrifice childcare voucher scheme offered by her employer, Peninsular, because the terms stated that entitlement to the vouchers would be suspended during certain periods of leave, including maternity leave.

The ET held that the terms of the scheme were discriminatory.

Peninsular argued that the ET had misinterpreted the essential nature of the scheme and that it was not the government’s intention to require employers to continue to provide vouchers during periods when participants in the scheme were not in receipt of a salary that could be sacrificed.

The EAT has allowed the appeal against this ruling, reversing the ET’s decision.

The EAT disagreed with the ET’s decision that offering entry into the scheme on the proposed terms constituted unfavourable treatment, and found that the ET incorrectly assumed that the childcare voucher scheme was a benefit that the law required to be continued via the provision of vouchers while the respondent was on maternity leave.

Peter Done, managing director at Peninsula Business Services, said: “Our line of business means we interpret employment law on a daily basis and we were confident that we were not acting unlawfully with our childcare voucher scheme.

“We are glad that the Employment Appeal Tribunal has agreed with us. As an employer, we deal with the same issues as the clients we represent on a day to day basis and, on this occasion, we have been able to create new ground for them.”

Paula Hargaden, senior associate at law firm Burges Salmon, added: “What is most interesting about this judgment is that the Employment Appeal Tribunal accepted Peninsula’s characterisation of salary sacrifice as a ‘diversion’ of salary. This led the EAT to the conclusion that during maternity leave employers must provide childcare vouchers that are ordinarily a ‘perk’ in addition to salary, but that employers are not obliged to provide childcare vouchers funded through salary sacrifice.

“This would appear to have implications for all benefits funded via salary sacrifice arrangements. However, employers should proceed cautiously in revising their policies and procedures, and certainly not until it is clear that Ms Donaldson is not to appeal the decision.”