Disability discrimination: Bonus schemes and sickness - DAC Beachcroft

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Disability discrimination: Bonus schemes and sickness

Published On: 17 March 2015

Disability discrimination: Non-payment of bonus because of sickness absence warning was discriminatory

The Land Registry operated a discretionary bonus scheme. Under the terms of the scheme employees who had received a formal warning during the relevant financial year were not eligible to receive a bonus. Formal warnings that had been received for a conduct-related matter could be ignored, at a manager's discretion, when determining bonus entitlement, but there was no such discretion to ignore a warning in relation to sickness absence.

The five claimants were all disabled, and each had been absent due to sickness during the 2012 financial year, in all cases as a result of their disabilities. The Land Registry had various reasonable adjustments in place that assisted the claimants in overcoming their disabilities, and adjusted the normal trigger points that would usually lead to a warning. However, despite these adjustments, each of the claimants eventually received a warning. These warnings rendered them ineligible for a bonus, and no bonus was paid to them.

The claimants brought a claim for discrimination arising from disability, which was successful at the employment tribunal. The tribunal found that the non-payment of the bonus was the consequence, result, effect or outcome of each claimant's disability. The employment tribunal rejected the Land Registry's justification defence. While it accepted that the Land Registry had a legitimate aim of acknowledging employees' contributions (and specifically encouraging and rewarding good performance and attendance) the tribunal held that the bonus scheme in place was not a proportionate means of achieving that aim.  The scheme could not take into account the fact that three of the claimants had improved their absence record after the warning, and there was an anomaly in the scheme where conduct-related warnings could be ignored, but not warnings for sickness absence. The Land Registry appealed to the EAT who upheld the tribunal's decision and reasoning. It was particularly significant that, as the legitimate aim of the bonus scheme was to reward good performance and attendance, no account could be taken of any improvement in performance post warning and the manager had no discretion to award the bonus, unlike where the warning had been issued for misconduct.

What this means for employers: 

Employers with bonus schemes that are linked to attendance should ensure that there is sufficient flexibility within schemes to avoid withholding payment in circumstances where it is likely to be discriminatory. In this case, it was not sufficient just to have reasonable adjustments in place to delay the issuing of a warning; it was also necessary to provide flexibility as to the effect of that warning.

Land Registry v Houghton and others UKEAT/0149/14