Court of Appeal upholds landmark EAT decision on the meaning of “unfavourable treatment”
“Blake Morgan are delighted to have represented Swansea University and the Trustees of its Pension Scheme in this landmark case. We agree with the Court of Appeal's analysis of "unfavourable treatment" in the context of disability discrimination and we welcome the clear guidance which the Court has now given to employers and employees alike in this area.”
The Court of Appeal has today upheld the Employment Appeal Tribunal decision that an employee had not been unfavourably treated because of something arising in consequence of disability in the award of an ill-health early retirement pension. It also held that "unfavourable treatment” did not mean the same as “detriment” or “less favourable treatment”.
In a significant decision in the case of Williams v The Trustees of Swansea University Pension & Assurance Scheme and Swansea University, the Court of Appeal dismissed Mr Williams' appeal that he had suffered unfavourable treatment under section 15 of the Equality Act 2010 when, after taking ill-health retirement, his pension benefit was calculated on his part-time salary rather than his earlier full-time salary.
Matthew Smith, Employment partner at Blake Morgan acted for the Trustees and University, instructing Keith Bryant QC and Saul Margo of Outer Temple Chambers.
Mr Williams suffered from a number of conditions including Tourette’s Syndrome, obsessive compulsive disorder and depression. He had worked full-time (35 hours a week) for 10 years but in 2010, because of his disability, he asked if his hours could be reduced and this was agreed. By the end of July 2011, Mr Williams’ hours had been reduced by half. He successfully applied for ill-health retirement effective from 30 June 2013 at the age of 38 when otherwise his Normal Pension Date (NPD) would have been 6 October 2041.
Under the rules of the pension scheme applicable to Mr Williams he was entitled to:
- Immediate payment of accrued pension (without actuarial reduction for accelerated receipt) in respect of the work that he had already done; and
- Enhanced pension (again with no actuarial reduction) as if he had continued working until normal retirement age (which for Mr Williams was 67) and based on the salary received at the time of retiring.
Mr Williams complained that he had been unfavourably treated contrary to section 15 of the Equality Act 2010 because of something arising in consequence of his disability and this treatment could not be justified.
Mr Williams’ case was that it was discriminatory for him not to receive an ill-health pension based on his full-time salary rather than his part-time salary. His position was that the reason he was working part-time was to accommodate his disability, and, had he been working full-time at the time of his retirement, his enhanced pension would have been twice the amount of the pension he actually received. His position was that he was at a substantial financial disadvantage because he had reduced his working hours because of an increasing disability. However, someone who had to retire suddenly, for example, because of a stroke or heart attack, would have their pension calculated on their full-time salary (assuming they had been working full-time at the point at which they became disabled).
The Employment Tribunal upheld the claim that Mr Williams had been treated unfavourably by the rules of the pension scheme because his pension reflected the fact that he was working part-time at the time of his ill-health retirement and this was something which arose in consequence of his disability. It held that, the meaning of “unfavourable” equated to that of “detriment” used elsewhere in the Equality Act 2010.
Whilst the Employment Tribunal was of the view that the Trustees and University had a legitimate aim in providing a viable, defined benefit occupational pension scheme that provided benefits at an appropriate and affordable level, the means of achieving that aim were not proportionate.
The Trustees and University appealed to the EAT against the findings on unfavourable treatment and proportionate means and Mr Williams cross-appealed against the finding on legitimate aim.
Employment Appeal Tribunal
The Trustees and University's appeals were successful and the EAT held that the Employment Tribunal’s finding in respect of unfavourable treatment was “manifestly perverse”.
A key point in the successful appeal was that the only employees entitled to retire early and to receive an immediate enhanced pension were those who retired through ill-health and who were by definition disabled within the meaning of the Equality Act 2010. The pension scheme rules taken overall therefore favoured those who were disabled and (in the EAT’s judgment) it was perverse of the Employment Tribunal to conclude that the scheme was discriminatory.
Further, the University had complied with its obligations to make reasonable adjustments by agreeing to the reduction in working hours requested by Mr Williams. It would have been incongruous for the University to be found liable for operating a discriminatory pension scheme because of its compliance with the legal obligation to make reasonable adjustments. If that were the case, the University would have been required to reduce Mr Williams’ hours but also be obliged to pay him his enhanced pension without any reduction, that is, based on his full salary.
The EAT held that the words “unfavourable treatment” and “detriment” were deliberately chosen when being included in the Equality Act 2010 and had distinct meanings. Unfavourable treatment involves an assessment in which a broad view is to be taken and which is to be judged by broad experience of life. It has the meaning of placing a hurdle in front of or creating a particular difficulty for, or disadvantaging a person because of something which arises in consequence of their disability.
The appeal was allowed with the matter remitted to a fresh Employment Tribunal for a complete re-hearing. Mr Williams' cross-appeal was dismissed.
Mr Williams appealed to the Court of Appeal against the EAT's judgment. The Trustees and University cross-appealed against the decision to remit the case for a re-hearing on the basis that the claim should have been dismissed.
Court of Appeal
Mr Williams argued that "unfavourable" equates to and is potentially broader than "detriment". Whether or not the treatment is advantageous should be irrelevant. The question is whether, objectively, the treatment is unfavourable. Mr Williams was working reduced hours because of his disability and as a result his pension benefit was reduced. This was unfavourable treatment because of something arising in consequence of his disability (i.e. his part-time working) regardless of the fact that Mr Williams was benefiting from the pension offered by the pension scheme to those retiring early on the grounds of ill-health.
The Trustees and University reiterated their arguments put forward at the EAT and adopted the EAT's Judgment in defending Mr Williams' appeal. This turned on the central argument that the receipt of an ill-health early retirement pension was favourable, not unfavorable, treatment of a disabled person, given that non-disabled employees would not be eligible to receive a pension until their Normal Pension Date. The fact that another, differently disabled employee (such as one suffering a stroke whilst working full-time) might have been more favourably treated still by receiving an ill-health pension related to full-time salary did not render the treatment of Mr Williams unfavorable. The University and Trustees also made the point that, if Mr Williams had not asked for reduced working hours in 2010 but had simply stopped working for the University, he would not have been eligible for ill-health retirement at all, because at that stage he was not permanently incapable of carrying out his occupation.
The Court of Appeal considered the key issue - does treatment which confers advantages on a disabled person but which would have conferred greater advantages had the disability arisen more suddenly amount to unfavourable treatment under section 15? It agreed with the EAT that it did not and Mr Williams' appeal was dismissed. More specifically, the Court noted that no case law authority was cited to it to support the view that a disabled person who is treated advantageously in consequence of his disability, but not as advantageously as a person with a different disability or different medical history would have been treated, has a valid claim for discrimination under section 15 subject only to the defence that the treatment was a proportionate means of achieving a legitimate aim. The Court noted that, if such a claim were valid, it would call into question the terms of pension schemes or insurance contracts which confer increased benefits in respect of disability caused by injuries sustained at work, or which make special provision for disability caused by one type of disease (for example cancer).
In reaching its conclusions, the Court of Appeal considered the argument on Mr Williams' behalf that at the time of the his retirement “he was working reduced hours because of his disability…; as a result his benefit was reduced; and that this was simply unfavourable treatment – a disadvantage – because of something arising in consequence of his disability”. The Court robustly rejected this:
"[T]his cannot possibly be sufficient to establish disability discrimination. If it were, it would be difficult to see why it would not apply to a disabled claimant who applies for and secures a part-time job because that is as much as he can manage, but would otherwise have worked full-time. He will be paid a part-time salary because of something arising in consequence of his disability. It can hardly be said to have been Parliament’s intention that he should be able to claim that he has been the victim of unfavourable treatment under s 15 and throw the onus onto the employers to establish that the part-time salary is a proportionate means of achieving a legitimate aim. Similarly it would be remarkable if he could maintain an entitlement to the same retirement pension as he would have received had he worked full-time throughout his employment."
Given its view on the question of "unfavourable treatment", the Court did not consider it necessary to address the question of justification, observing simply that it saw "considerable force" in the EAT's analysis.
Significantly, the Court of Appeal allowed the Trustees and University's cross-appeal. As there was no unfavourable treatment within the meaning of section 15 there was no purpose to be served by remitting the claim to the Employment Tribunal and Mr Williams' claims were therefore dismissed.
The Court of Appeal's decision is a welcome (and robust) statement of the position in relation to "unfavourable treatment" and the clarification which its judgment provides will be welcomed by employers and benefit providers. The judgment recognises that, in difficult circumstances such as those of Mr Williams, the fact that a differently disabled person might have been more favourably treated does not constitute unfavourable treatment of the particular claimant.
More broadly, under section 20 of the Equality Act 2010, the duty to make reasonable adjustments can arise where a provision, criterion or practice (PCP) puts a disabled person at a substantial disadvantage in comparison with those who are not disabled. It is important to note that an employer is only under a duty to make a reasonable adjustment where they know or could reasonably be expected to know that the individual has a disability and is likely to be placed at a substantial disadvantage.
A reduction in working hours, with a consequent reduction in salary, is a very common reasonable adjustment to make. The Court of Appeal decision in this case provides helpful clarity in such circumstances because it recognises (and avoids) the significant practical and legal difficulty which would otherwise have arisen where an employer complies with its duty to make reasonable adjustments under section 20 (e.g. by allowing part-time working) but then finds itself the subject of an unfavourable treatment claim under section 15 (on the basis that paying part-time salary because of those part-time hours is unfavourable treatment arising in consequence of a disability which must therefore be justified). This would have been all but unworkable in practice.
The decision is also welcome news in cases where pension (or insurance) schemes provide for increased benefits where a disability is caused by a workplace injury or where the terms of the scheme make special provision for a particular condition, for example cancer. Such schemes would be called into question if the Court of Appeal had decided in favour of Mr Williams or would at least have been required to demonstrate justification for the structure of their benefits.