Non–payment of bonus discriminated against disabled employees

Posted by Rebecca Ireland on
Managing disability issues in the workplace can be tricky for many employers. This is illustrated by the recent decision of the EAT in the case of Land Registry v Houghton and others.

The EAT upheld an Employment Tribunal’s decision that a failure to pay bonuses to disabled employees because of their high levels of sickness absence constituted discrimination arising from disability under section 15(1) of the Equality Act 2010.

Discrimination arising from disability occurs where:

  • A treats B unfavourably because of something arising in consequence of B’s disability.
  • A cannot show that the treatment was a proportionate means of achieving a legitimate aim.

Background

The Land Registry operated a discretionary bonus scheme the purpose of which was to encourage and reward good performance and attendance. All eligible employees received a bonus of £900 which was pro-rated for part time employees. Under the terms of the scheme however, an employee who received a formal warning in respect of sickness absence during the relevant financial year was automatically ineligible to receive the bonus.

Significantly, in relation to warnings given for conduct, as opposed to sickness absence, managers had a discretion about whether or not a warning should affect an employee’s entitlement to a bonus. There was no such discretion for sickness absence warnings.

Five disabled employees of the Land Registry had a number of sickness absences during the 2012 financial year because of their disability. Although the Land Registry had made certain adjustments, such as adjusting the usual trigger points when a warning would be issued, the employees were given warnings because of their absences. This meant that they were automatically excluded from the bonus scheme. They brought Employment Tribunal proceedings arguing that non-payment of the bonus constituted discrimination arising from disability because, as a consequence of their disability, they were not paid the bonus.

Employment Tribunal

The Land Registry argued that the link between the non-payment of the bonus and the employees’ disability was too remote. The Employment Tribunal disagreed. Paragraph 5.9 of the Equality and Human Rights Commission’s Code of Practice on Employment states that, “the consequences of a disability include anything which is the result, effect or outcome of a disabled person’s disability.”

The Employment Tribunal held that there was a clear link between the warning for absence and the exclusion from the bonus scheme which resulted in non-payment of the bonus. This non-payment was the consequence of the employees’ disability.

The Land Registry also argued that the purpose of the bonus scheme was to encourage and reward good performance and attendance. Non-payment of a bonus could be justified in achieving that aim. Interestingly, three of the five employees had improved their attendance after receiving the warning but this could not be taken into account when considering their eligibility for the bonus scheme. In addition, the Land Registry could not explain the anomaly whereby managers had a discretion to ignore conduct warnings (which would not affect an employee’s eligibility for a bonus) but had no such discretion for sickness absence warnings. The Employment Tribunal was of the view that the means adopted by the Land Registry to pursue its aim of encouraging and rewarding good performance and attendance were not proportionate. Balancing the discriminatory effect of exclusion from the bonus scheme on the employees concerned, non-payment of the bonus was disproportionate.

Employment Appeal Tribunal

On appeal, the Land Registry continued to argue that the link between the non-payment of the bonus and the employees’ disability was too remote. Anyone who had received a sickness absence warning, regardless of whether or not they were disabled would have been excluded from the bonus scheme. Further, the actual administrative act of disallowing the bonus was done by a member of the HR team without knowledge of the employees’ disability, and so was not consciously motivated to discriminate.

The EAT upheld the Employment Tribunal’s decision. The absences leading to the warnings were disability-related and this meant that the employees were automatically disqualified from the bonus scheme. This clearly amounted to unfavourable treatment in consequence of the disability. The motive of the HR member of staff who carried out the administrative task of linking the warnings to the non-payment was irrelevant. As for the justification argument, this failed too. There was no discretion to disregard absence warnings (unlike conduct warnings) and no possibility of taking into account any improvement in attendance following a warning.

Comment

It is not unusual for bonus schemes to be based on attendance. Many employers will be familiar with the idea of disregarding disability-related attendance when appropriate. However, it is important to ensure that bonus/attendance schemes have some degree of flexibility and discretion as this may assist in any subsequent justification argument.

About the Author

Rebecca is a highly experienced employment lawyer, having specialised in the area over 21 years ago, and is also a qualified mediator.

Rebecca Ireland
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