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No good deeds go unpunished: benefit schemes and discrimination claims

Posted: 22/11/2022

An emerging line of case law offers some comfort to employers who introduce generous benefit schemes, only to be faced with discrimination claims concerning the terms and conditions (T&Cs) of the scheme. These cases will be of particular interest to employers who introduced generous schemes to assist employees during the Covid-19 pandemic, and who are now struggling with the legacy of these. 

Discrimination arising from disability 

Section 15 of the Equality Act 2010 outlaws discrimination arising from disability; namely where both: 

  • A treats B unfavourably because of something arising in consequence of B's disability; and
  • A cannot show that the treatment is a proportionate means of achieving a legitimate aim.

The recent case law, which is considered below, makes clear that for the purposes of a section 15 claim, ‘unfavourable’ treatment should be understood to mean adverse, rather than simply unbeneficial, treatment. The fact that someone could have been treated even more favourably will not be sufficient to establish a claim for discrimination arising from disability. The Employment Tribunal (ET) is unlikely to find fault with a generous benefit scheme, and will often look beyond the term that is the subject of the complaint and consider the scheme as whole. 

Case law 

In the Supreme Court case of Williams v Trustees of Swansea University Pension and Assurance Scheme [2018], the disabled claimant took issue with the fact that his enhanced pension was calculated by reference to his final salary, and so was based upon the part-time salary directly attributed to his disability, rather than the full-time salary he had enjoyed for the majority of his career. 

The claimant argued that the relevant treatment was the method of calculating his pension entitlement. However, the Supreme Court disagreed: there was an intrinsic link between the method of calculation and the award itself, as forgoing current salary was a necessary consequence of the claimant receiving an enhanced pension. Thus, it would be ‘artificial’ to separate the terms from the award itself, and the treatment was the award of an enhanced pension, and not the method of calculation. 

Having determined the treatment, the Supreme Court found that there was nothing ‘unfavourable’ about being awarded an enhanced pension that the claimant would never have received had he not been disabled and unable to work full-time. The fact that he could have received a higher sum did not make the pension unfavourable.

Furthermore, the employer had agreed to his request for reduced hours as a reasonable adjustment, and there was no obligation on the employer to keep paying him a full-time salary. The claimant’s claim for discrimination arising from disability therefore failed. 

A similar situation arose in the EAT case of Chief Constable of Gwent Police v Parsons [2018]. Here the disabled claimant received a payment under a voluntary exit scheme which was capped as a result of him receiving a deferred pension. He argued that the payment should not have been calculated by reference to the pension, as the pension was directly related to his disability. Unlike in Williams, however, the claimant’s claim for discrimination arising from disability was successful. 

The EAT found that there was no intrinsic link between the method of calculation and the award itself, so in this case the relevant treatment was the method of calculation. The fact that the claimant was entitled to a deferred pension was a wholly irrelevant factor, and was not a necessary precondition or consequence of his opting for the voluntary exit scheme. It should not therefore have been taken into account when assessing the amount of the exit payment.

The respondent had argued that the pension and voluntary exit schemes were linked as both payments emanated from the police pensions authority; however, this argument was dismissed by the EAT as the schemes had separate purposes. For this reason, the EAT found that the employer’s method of calculation was wholly ‘unfavourable’ and upheld the claimant’s claim. 

In the most recent EAT case of Scottish Fire Service v Cowie [2022], the employer introduced a new type of special paid leave to help employees who could only work reduced hours or who couldn’t work at all, due to childcare responsibilities or shielding requirements during the Covid-19 pandemic. However, employees could only use the scheme if they had already exhausted their annual leave entitlement and any accrued time off in lieu. A group of disabled employees felt that this deprived them of the choice and flexibility of when to use their leave entitlement, and that they should have been placed on sick leave instead.  

The claimant argued that the relevant treatment was the preconditions for the special paid leave scheme; however, the EAT disagreed and dismissed his claim. The EAT held that there was an intrinsic link between the precondition that employees exhaust other available leave and the award of special paid leave, and between the conditions of accessing a benefit and the benefit itself. The claimant also had a choice about whether to use the scheme. Thus, as it would be ‘wholly artificial’ to separate the T&Cs from the benefit scheme, the relevant treatment was the award of special paid leave. 

The EAT went on to find that the granting of special paid leave was ‘clearly favourable’, and the scheme’s preconditions were not enough to detract from this. While the scheme could have been made even more favourable by removing or amending the preconditions, a failure to do so did not make it unfavourable overall. The claimant’s claim for discrimination arising from disability failed. 

What to take away 

Employers will welcome the tribunals’ reluctance to find fault with a generous benefit scheme, and the confirmation that a term or condition will not be unfavourable simply because it could have been more generous. Employers who offer enhanced benefits packages should, however, evaluate the T&Cs of their benefit schemes, and remove any conditions or factors of questionable relevance to the benefit provided, in order to minimise the risk of a discrimination claim. 

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