Employment lawyer caught out by SMP rules
Kate Upcraft looks at a statutory maternity pay (SMP) dispute, which provides key lessons about the service requirement, and how notice of a pregnancy must be provided to an employer.
The case of Paul Brook Solicitors v HMRC and Ms Rebecca Scothern (TC06396), between a firm of solicitors which specialised in employment law, and their apprentice (Ms Scothern) who was backed by HMRC.
Paul Brook contesting a ruling from HMRC that he was liable to pay £2,633.78 in SMP to Scothern. Brook accepted that there would be no cost to his firm in the payment of SMP as it would be reclaimed in full, but as an employment lawyer he thought it was important to pursue whether there was a legal entitlement to the payment.
The case centred around two specific regulations within the statutory maternity pay: (General) Regulations 1986 (SI 1986/1960), which relate to the definition of employee, and the evidence of confinement. Regulation 17 says a woman who is treated as an employed earner by virtue of the Social Security (Categorisation of Earners) Regulations 1978, is entitled to SMP, and this includes contracts of apprenticeship. Regulation 22 concerns the requirement that the woman shall provide “evidence to the person with the liability to pay statutory maternity pay”.
Scothern was the niece of the practice manager, and she had been offered work experience via a government-funded organisation called The Apprentice Team. An unpaid trial led to a twelve-month placement during which time a £35 per week allowance was paid via The Apprentice Team. It appears that the placement was successful, as Scothern was taken on as an employee by Paul Brook Solicitors, from 14 August 2015 until 31 December 2015. Scothern discovered she was pregnant at about 8 weeks of term, and her baby was due on 29 March 2016.
The practice manager said that she had not discussed with Scothern the fact that she was pregnant, as her employment was due to end well before her baby’s due date, and no MAT B1 (maternity certificate) was produced. An SMP1 exclusion form was provided to her in January 2016 after her employment had ended.
Scothern argued she had never received a contract of employment from the practice and was unaware that her employment was of a fixed term nature. She said she had also discussed her pregnancy with both Brook, and the practice manager, and had provided a MAT B1.
Who was right?
- The practice said that Scothern was on unpaid work experience until August 2015 so did not have the qualifying 26 weeks’ service and earnings to receive SMP.
- Scothern and HMRC said that she had the relevant service, earnings, and had met the evidence conditions.
Decision and reasons
The tribunal found in favour of the employee and HMRC, for the following reasons, which are all key points in relation to the SMP processes and recordkeeping:
There is no requirement in the law that the evidence for SMP must be given in the form of a MAT B1, or that the evidence even needs to be provided in writing. On balance the tribunal felt that it was highly probable that Scothern had discussed her pregnancy with her aunt.
What period was she employed for?
The baby’s due date was 29 March 2016, so the qualifying week (14 weeks before the due date) was week commencing 13 December 2015. Therefore, for SMP to be due Scothern needed to be employed on 27 June 2015 (26 weeks before qualifying week). So, what was her employment status on 27 June 2015: employed or on work experience?
HMRC said that Paul Brook Solicitors had reported Scothern on the company’s FPS from April 2015. The firm said their accountant had mistakenly put her on the payroll, despite the fact that on the SP 50B (Application to resolve a dispute about SMP entitlement), they said that Scothern had been employed between 14 August 2014 and 31 December 2015 (the start date was another error the practice contended). The SP 50B was submitted in February 2016.
The law firm had decided to pay Scothern an additional top-up of £15 per week throughout the 12-month placement. This amount was being paid on 27 June 2015.
The tribunal took the view that Scothern had been employed from 14 August 2014 to 31 December 2015 because she:
- Received more than out-of-pocket expenses (£35 pw paid by The Apprentice Team),
- Carried out actual tasks rather than ‘work shadowing’, and
- Had regular hours for the whole of her placement under the direction of the practice
Therefore, the payment of the SMP was due.
With the hoped-for increase in apprenticeships as a result of the apprenticeship levy, understanding the relationships between different contractual arrangements will be important for employers and payroll agents, who may not come across this type of situation on a regular basis.
Accurate and consistent record keeping by employers is vital, and this is particularly problematic for payroll agents who are reliant on the information passed to them by the client. Letters of engagement must make it clear that matters of employment status fall to the employer to determine unless the payroll agent is engaged specifically to assist with such determinations.
Given that the employer in this case was an employment lawyer, the payroll agent would have had every expectation that he had specific expertise in this area, and would have been well aware of the need to provide an employment contract and to understand the implications of paying more than out-of-pocket expenses.