It is common for bonus schemes to be conditional upon a number of factors including financial and personal performance, the employee not being under notice when the bonus is due and sometimes having a clean disciplinary record and a good attendance record. Is an employer free to choose whatever conditions it thinks fit for its bonus scheme? Not necessarily where the imposition of the condition could amount to disability discrimination.
In Land Registry v Houghton the employment tribunal found that a bonus scheme that excluded those who had received a formal warning in respect of sickness absence during the relevant financial year amounted to discrimination arising from disability. The Employment Appeal Tribunal upheld the employment tribunal’s decision on appeal.
The employer in this case operated a bonus scheme that paid out £900 to eligible employees in 2012. One of the rules of the scheme was that any employee who received a formal warning in respect of sickness absence during the relevant financial year would not receive the bonus. The employees in the case effectively argued that if they were not disabled then they would not have had the absence in question and therefore would not have received the formal warning. As such the rule gave rise to unfavourable treatment in relation to disability, given that the exclusion was automatic even for disability-related absences.
The employment tribunal noted that the employer had already made reasonable adjustments to assist the claimants in overcoming their disabilities and in adjusting the usual trigger points at which the sickness warning procedure became engaged. However, the tribunal thought it inconsistent that whereas a warning for misconduct could, at managers’ discretion, be ignored for the purpose of entitlement to the bonus, no such discretion existed in relation to a warning for sickness absence.
This particular strand of disability discrimination is capable of objective justification by the employer. The problem for the employer was that there was no discretion to waive or modify the effect of the warnings, despite evidence that three of the claimants had improved their absence record after receiving the warning. This meant that they could not make out a defence to the claim on the facts of the case.
Employers looking to apply conditions to a bonus scheme which relate to the personal circumstances of the employee should consider carefully whether those conditions could be directly or indirectly discriminatory whether on the grounds of disability or other protected characteristics. Including discretion in bonus schemes can be a double-edged sword because the exercise of discretion by different managers or departments can lead to uncertainty and inconsistency. However, it was the absence of discretion here in relation to a potentially discriminatory effect of the bonus scheme which resulted in this employer losing the case.
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