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13 March 2015

Employer’s bonus policy was discriminatory towards disabled employees

A recent Employment Appeal Tribunal (EAT) decision provides a useful reminder that employers must consider discounting absence caused by disability when making decisions based on attendance at work.

Background

Under the Equality Act 2010, employers must not treat disabled employees unfavourably because of something arising out of their disability.  Employers must examine their policies to evaluate whether these could have a negative impact on disabled employees and if so, whether the policy is capable of being justified as a proportionate, or reasonable, means of achieving a legitimate aim.

Quite often, however, justification will depend on whether any reasonable adjustments could have been made to the policy to minimise, or avoid, the adverse effect on disabled employees.  If such reasonable adjustments have not been implemented, it might be difficult to argue that policies are justifiable.

Facts

The Land Registry operated a discretionary bonus scheme, under which employees who had received a written warning within that financial year could not receive a bonus.  Although managers had the discretion to ignore warnings for conduct, warnings for sickness absence could not be ignored.  A single written warning for poor attendance would, therefore, result in employees not receiving a bonus.

Whilst the Land Registry had adjusted its policy, so that disabled employees could take a longer period of absence before receiving a written warning, five disabled employees still received written warnings due to sickness caused by their disabilities.  They therefore did not receive a bonus.

The five employees successfully brought claims in the employment tribunal for discrimination arising from disability.  The Land Registry appealed to the EAT.

Decision

The EAT dismissed the appeal.  The EAT noted that, without their disabilities, each claimant would not have had the same level of sickness absence and it was for this reason that the bonus was not paid.  As a result, the non-payment of the bonus was discrimination arising from the employees’ disability.

The EAT also agreed with and upheld the employment tribunal’s decision that a desire to reward and encourage good attendance was a legitimate business aim.  However, both the tribunal and EAT held that the Land Registry’s bonus scheme was not a proportionate means of achieving that aim, as there was no discretion for managers to take account of the reasons why the warning had been issued, or to reward improvements in attendance after a written warning had been issued.

Comment

Although non-payment of the bonus in this case clearly constitutes unfavourable treatment, a similar bonus scheme might have been justified had there been room for more discretion.  The tribunal and the EAT both focused on the fact that there was no discretion to ignore warnings for sickness absence.  This was, in fact, counter-productive to the purpose of improving attendance levels.

Employers with bonus schemes that are linked to attendance should ensure that the scheme is flexible.  Managers should have discretion to take account of compelling and unavoidable absences; particularly when caused by disability or for some other protected characteristic, such as absences caused by childcare responsibilities and should also be able to reward improvements in attendance.