Settlement Agreements During Pregnancy or Maternity Leave

Pregnancy and Dismissal: The Law

First, the fundamentals: if you're pregnant or on maternity leave, your employer cannot dismiss you simply for being pregnant. This is automatically unfair and also constitutes unlawful sex discrimination. This protection is absolute—there are very limited exceptions.

If your employer has dismissed you during pregnancy or maternity leave, this is almost certainly a strong legal claim. The tribunal would likely award damages for unfair dismissal, sex discrimination, and possibly additional compensation. This means you have significant leverage in settlement discussions.

Understanding this legal position is crucial when negotiating your settlement. You're not starting from a weak position; you're likely in a strong one.

Maternity Rights That Cannot Be Waived

Some maternity rights are so fundamental that they cannot be released in a settlement agreement. These include:

Statutory Maternity Pay: If you're entitled to statutory maternity pay (SMP), this cannot be waived. If your employer hasn't paid it, they cannot settle that dispute by agreeing not to pay it. The agreement must acknowledge your right to SMP.

Right to Return: If you're on maternity leave, you have a right to return to work. This is non-waivable. However, a settlement agreement might address how your return happens—for example, with flexible working or phased return arrangements. These can be negotiated terms that benefit you.

Protection Against Detriment: You cannot be treated detrimentally because you've taken maternity leave. Settlement agreements must not include terms that penalise you for maternity, such as loss of benefits or negative references due to absence.

Settlement on Maternity Leave: Key Issues

If you're settling whilst on maternity leave, several specific issues need careful consideration:

Calculation of Compensation: Settlement amounts should reflect the fact you're on leave. Loss of earnings should account for maternity pay, not full salary. But your settlement should also reflect any loss of benefits, pension contributions, or bonuses you would have received. These calculations can be complex—don't accept a simple figure without understanding what it comprises.

Notice Period: Your notice period might operate during maternity leave, or your employer might "stop the clock" on maternity leave during notice. The settlement agreement must specify how notice will be handled. Some employees prefer to have notice run whilst on leave (so they start new work post-notice); others prefer the opposite. Negotiate for your preference.

Holiday Entitlement: You continue to accrue holiday whilst on maternity leave. Your settlement must address:

• Payment of accrued holiday to the maternity leave date
• Payment of holiday accrued during maternity leave up to settlement
• Holiday you would have accrued during any notice period

Pension Contributions: If your employer makes pension contributions (such as matching contributions), these should continue during maternity leave. Your settlement must confirm this and clarify the position after settlement. Some employers offer to make additional contributions to compensate for maternity-related losses.

Negotiating Maternity-Specific Benefits

Settlement agreements on maternity can include valuable benefits beyond compensation for the dispute:

Flexible Working: If you're returning to work, negotiate flexible working arrangements as part of the settlement. This might include:

• Reduced hours initially with return to full-time later
• Remote working days to reduce childcare logistics
• Revised role structure to accommodate caring responsibilities

Career Protection: Negotiate assurance that your maternity absence won't negatively affect future promotion or development. Some agreements include commitment to review progression once you've returned to full duties.

Extended Support: Negotiate for:

• Extended health insurance to cover childcare-related health issues
• Access to employee assistance programmes for new parent support
• Nursery support or childcare benefits
• Carers' leave provisions for future use

The Seven-Day Reflection Period During Maternity Leave

If you're offered a settlement agreement whilst on maternity leave, you have seven days to reflect—but these might coincide with challenging times (newborn, recovering from birth). Don't let time pressure force you into a decision.

You can extend discussions beyond the initial seven days if needed. Communicate with your employer (through your solicitor) if you need more time. Most employers will accommodate this during maternity periods.

Crucially, use this period to obtain legal advice. A maternity-related settlement is complex, and mistakes here can affect your long-term position as a parent and employee.

What Not to Accept

There are certain terms you absolutely should not accept in a maternity-related settlement:

Negative References Based on Maternity: You cannot be given a negative reference due to maternity absence. If the draft agreement includes or permits this, it's unlawful. Push back firmly.

Loss of Benefits Due to Maternity: You shouldn't lose benefits, pension rights, or bonuses simply because you've been on maternity leave. If the agreement would result in this, it might be unlawful.

Restrictive Covenants That Effectively Prevent Return to Work: A non-compete clause that would prevent you from working your profession after returning from maternity leave is likely unreasonable and should be resisted. Push for narrower terms.

Inadequate Compensation for Maternity-Related Loss: Don't accept a settlement figure that doesn't account for the financial impact of maternity (lost bonuses, reduced contributions, etc.) combined with the employment dispute.

Tax Treatment of Maternity Settlements

Compensation for pregnancy discrimination or sex discrimination related to maternity is tax-free. However, statutory maternity pay that's being made up is taxable, and wages during the notice period are taxable. Your solicitor should structure the settlement to maximise tax-free elements.

This is another reason to get proper legal advice. The difference between a well-structured and poorly-structured settlement can amount to thousands in tax.

After the Settlement

Once you've settled, be aware:

• You've waived your rights to claim pregnancy/maternity discrimination from that employer
• But you retain statutory maternity rights and benefits
• You retain data protection rights and can still access your medical records
• If the employer breaches the settlement (e.g., fails to pay, provides negative reference), you have grounds to challenge

Keep records of all settlement documents and correspondence. If disputes arise later about what was agreed, these will be important evidence.

Getting Maternity-Specific Legal Advice

Not all solicitors have specialisation in maternity law. If you're settling during pregnancy or maternity leave, ensure your solicitor has specific experience with:

• Pregnancy and maternity discrimination claims
• Statutory maternity pay and leave entitlements
• How maternity interacts with settlement agreements
• Valuation of maternity-related loss

This is a specialised area, and having proper expertise is important. Ask potential solicitors about their experience with maternity settlements specifically.