Labour & European Law Review Weekly Issue 414 08 April 2015
The Equality Act allows employers to justify discrimination if they can show that it is a proportionate means of achieving a legitimate aim. In Land Registry v Houghton and ors, the Employment Appeal Tribunal (EAT) held that a rule in a bonus scheme which excluded people who had been given a formal warning for sickness absence was discriminatory.
The claimants’ union, PCS, instructed Thompsons to act on their behalf.
The Land Registry operated a bonus scheme whereby employees received an annual bonus of £900 unless they had been given a formal warning in respect of sickness absence during the relevant financial year. Managers had a discretion to decide the warning would not affect entitlement to the bonus if it related to conduct but not to sickness.
The Land Registry recognised the five claimants as being disabled and had made reasonable adjustments to help them overcome their disabilities. They had also adjusted the usual trigger points at which the warning procedure became engaged. Nevertheless, it still gave them a warning in relation to periods of sickness due to their disability. They brought claims under section 15 of the Equality Act for failure to pay them the annual bonus.
Section 15(1)(a) states that an employer discriminates against a disabled person if they treat them “unfavourably because of something arising in consequence” of their disability and (b) they cannot show that the treatment was a proportionate means of achieving a legitimate aim.
Having found that the claimants’ absences were disability-related, the tribunal rejected the Land Registry’s argument that the link between the disability and the non-payment of bonus was too remote. It concluded that as the claimants had all received a formal warning for disability-related absence and that warning automatically excluded them from the bonus scheme, non-payment was clearly a consequence of their disability.
It also rejected the Land Registry’s justification defence. Although the aim was ostensibly to reward good performance and attendance, the scheme did not take into account that three of the claimants had improved their absence record after receiving the warning. In addition, managers had no discretion to declare that a sickness absence warning would not affect eligibility for the bonus, although they could if the warning related to conduct.
The EAT agreed with the tribunal that, on the facts, the claimants satisfied the test in section 15 (1)(a) of the Act as the link between the disability and the unfavourable treatment was clear. The key issue was to decide what had caused the treatment in question, not the alleged discriminator’s motive in acting as they did, which the tribunal had done.
It also agreed that the tribunal had carried out the correct balancing test with regard to justification. The reason the Land Registry failed to establish a defence was firstly because, having decided to issue a warning for sickness absence managers had no discretion to decide that the employee would not be excluded from receiving the bonus, unlike warnings for conduct. There was no explanation for that anomaly. Secondly, managers could not take account of any improvement in performance post-warning, despite the fact that the legitimate aim of the bonus scheme was to reward good performance and attendance.
The decision shows that where employers operate bonus schemes which are linked to attendance they cannot apply a one size fits all approach. There needs to be flexibility within the scheme to ensure that a bonus is not withheld in circumstances which could be deemed discriminatory.