Non-payment of bonus to disabled employees was discrimination arising from disability

Land Registry v Houghton and others [EAT] | February 2015

The employer was the Land Registry whose discretionary bonus scheme paid to each eligible employee £900 (pro-rated for part-time employees). This payment was automatically not paid to an employee who had received a formal warning in respect of sickness absence during the relevant financial year. For employees, however, who had received a warning for a misconduct related issue HR had discretion whether to ignore it and award the bonus.

In this case the five claimants had all received a formal warning for their sickness absences even after the Land Registry had made reasonable adjustments both to assist the claimants in overcoming their disabilities and to modify the trigger points at which the warning procedure applied.

At the employment tribunal the claimants successfully argued that the Land Registry had discriminated against them for a reason arising from their disability. Each claimant was awarded a sum for injury to feelings and the value of the unpaid bonus.

The Land Registry appealed to the EAT who looked at the relevant parts of section 15 of the Equality Act which provides:

(1)           A person (A) discriminates against a disabled person (B) if –

(a)           A treats B unfavourably because of something arising in consequence of B’s disability, and

(b)          A cannot show that the treatment is a proportionate means of achieving a legitimate aim.

The first part of section 15 considers the question of causation for the unfavourable treatment (the non-payment of the bonus); this need not be because of the employee’s disability for there to be discrimination arising from disability. The EAT stressed, relying on the guidance from the 2011 Statutory Code of Practice issued by the Equality and Human Rights Commission, that “the consequences of a disability include anything which is the result, effect or outcome of a disabled person’s disability . . .” In other words it is sufficient that there is a connection between the reason for the non-payment of the bonus and the disability.

The EAT had no difficulty in agreeing with the employment tribunal’s judgment that the automatic loss of the bonus payment following the disability-related absences was plainly sufficient to amount to unfavourable treatment for a reason arising from the employee’s disability. Without the disability each employee would not have had the same level of sickness absence that triggered the warning and the non-payment of the bonus.

The second part of section 15 gave the Land Registry a potential defence based on justification. However the EAT also dismissed this part of the appeal on the basis that whilst the Land Registry had a legitimate aim (to reward good performance and attendance) it was not a ‘proportionate means of achieving” this legitimate aim. The EAT held this was because the bonus scheme in relation to sickness warning did not give the manager any discretion to decide if the bonus should be paid unlike the position with a warning for conduct. No explanation for that anomaly was given. This lack of discretion prevented the manager from taking account of any improvement in performance post-warning which the EAT highlighted was unjustified given the aim of the bonus scheme was to reward good performance and attendance.

This is another example of how discrimination arising from disability is proving to be a growing area of disability discrimination. Section 15 has the benefit that the claimant does not need to identify a comparator (unlike the pre 2010 disability discrimination law) and it is sufficient for the unfavourable treatment to be because of something that arises in consequence of the disability.

If you operate a bonus scheme that is linked to attendance you must ensure the scheme rules give managers a wide discretion to avoid withholding payment in circumstances where it is likely to be discriminatory. It will not be sufficient to make reasonable adjustments to delay the issuing of a warning for poor attendance. It is also necessary to provide flexibility to avoid the consequences of that warning. It will also be sensible to ensure that the same discretion applies to both conduct and sickness absence warnings.