Non-payment of bonus due to ill-health absence was disability discrimination
Author: Kenny Scott
Applies to: England, Wales and Scotland
A recent decision demonstrates that linking bonuses to attendance may fall foul of disability discrimination law.
Many employers use 'trigger points' in their absence management policies whereby a certain level of absence results in a warning or some other sanction. A recent decision from the Employment Appeal Tribunal (EAT) demonstrates that employers need to be mindful of one of the less common forms of disability discrimination claim - 'discrimination arising from disability' under section 15(1) of the Equality Act 2010 - when relying on trigger points to impose sanctions on absent employees.
Section 15(1) of the Equality Act 2010 provides that 'discrimination arising from disability' occurs when:
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 'justification defence').
So the first step for any claimant is to establish unfavourable treatment received as a consequence of their disability. Paragraph 5.9 of the Equality and Human Rights Commission Code of Practice explains that, 'the consequences of a disability include anything which is the result, effect or outcome of a disabled person's disability'.
In Land Registry v Houghton and others the company operated a discretionary bonus scheme. Employees who received a formal sickness absence warning during the relevant financial year were automatically ineligible to receive the bonus.
It was accepted that the five claimants were disabled, their absences were disability-related and that they had not received a bonus because they had received a formal sickness absence warning that financial year.
Prior to the non-payment of the bonus, the company had considered reasonable adjustments in respect of each employee and adjusted the trigger points at which the sickness absence warnings were engaged.
Whereas managers had discretion to disregard conduct warnings for the purposes of the bonus scheme, there was no such discretion for sickness absence warnings.
A tribunal found that the unfavourable treatment test was clearly satisfied as, but for the disability related absences, the claimants would have received a bonus.
It is also a defence to section 15 claims if the alleged discriminator has no knowledge (and could not reasonably have been expected to be aware of) the existence of the relevant disability. The company argued that the HR officer who paid the bonuses was unaware of each claimant's disability.
The EAT found that the motive of the HR officer was not relevant. What was relevant was what caused the discriminatory treatment, being the non-payment of bonuses.
As for the justification defence, the company argued that the bonus scheme was to encourage and reward good performance and attendance. That was accepted as being a legitimate aim but to establish the justification defence that aim must also be pursued in a proportionate manner. This is where the EAT found against the company because:
- Three of the five claimants had improved levels of absence after the warnings but this made no difference under the bonus scheme because there was no discretion allowing for this to be taken into account
- The unexplained anomaly whereby conduct warnings could be disregarded for bonus purposes but sickness absence warnings could not
The claimants were therefore awarded compensation in the sum of the full unpaid bonus (pro-rated for part-timers) in addition to an award for injury to feelings.
What does this mean for employers?
Employers operating absence trigger points in their policies should:
- review these policies and any link to bonus payments
- document and keep under review the aims of bonus schemes to assist with any later justification defence
- consider whether there is an element of discretion at not only the point at which a warning is triggered but also regarding the consequences of that warning or trigger
- ensure that any relevant occupational health referrals and reports are carefully considered to establish if an employee has a disability
- where an employee is disabled consider what reasonable adjustments can be made
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.