Bonus linked to sickness record amounts to disability discrimination

The Employment Appeals Tribunal (EAT) has recently considered whether the non-payment of a bonus due to the employees sickness absence amounted to disability discrimination in the case of Land Registry v Houghton.

The Land Registry operated a bonus scheme which was subject to certain rules. One of the scheme’s rules was that any employee who received a formal written warning in respect of sickness absence during the relevant financial year was automatically ineligible to receive a bonus. Five employees who had lost out on their bonus due to sickness absence under this rule were considered to be ‘disabled’ under the Equality Act. Each of their absences was directly attributable to their disabilities. They argued that their exclusion meant that they were treated unfavourably under the Equality Act and brought claims for disability discrimination against the Land Registry.

The Tribunal noted that the Land Registry had made reasonable adjustments, both to assist the Claimants in overcoming their disabilities, and in adjusting the usual trigger points at which the warning procedure for sickness absence became engaged.

Notwithstanding this, the Tribunal decided that the scheme amounted to discrimination which could not be objectively justified. In particular it noted that there was an anomaly in the bonus scheme – managers had a discretion in determining if a warning issued in relation to a conduct related matter effected the entitlement to the bonus. However, no such discretion existed in relation to a sickness absence warning. The Tribunal also noted that three of the Claimants had improved their absence record after receiving the warning, something which could not be taken into account under the scheme.

The EAT rejected the Land Registry’s appeal. It agreed with the Tribunal’s view that the issue at hand was not whether the warnings themselves were discriminatory, but instead, the non-payment of the bonus under the scheme itself. It was clear that the reason the Claimants were ineligible for the scheme was because of their sickness absence due to their disabilities.

The EAT considered that the Tribunal had correctly taken into account the scheme’s discretionary element when considering whether it was justified. The EAT also noted that the Land Registry had not provided any reason as to why there was a discretion to award a bonus to someone who had received a warning for a conduct issue, but no such discretion existed in the case of a warning related to sickness absence. It also noted that no account could be taken of any improvement in performance post-warning, in particular in circumstances where the legitimate aim of the award was to reward good performance and attendance.

Comment

Employers should carefully consider whether their approach to sickness absence properly takes into account employees who are considered disabled, especially where a level of sickness absence means that the employee will not receive a bonus.

For further information please contact a member of the Employment Team.

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