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Employers with bonus schemes linked to attendance need to ensure that there is enough flexibility within schemes to avoid withholding payments in circumstances where this is likely to be discriminatory.

In the case of Land Registry v Houghton, the Employment Appeal Tribunal (EAT) has held that an employer discriminated against disabled employees by operating a bonus scheme, which did not pay out to employees who had received a warning for high levels of sickness absence.

The terms of the Land Registry’s bonus scheme stated that employees who had received a formal warning during the financial year were not eligible to receive a bonus. Managers had discretion to ignore formal warnings received for conduct but not for warnings relating to sickness absence.

The claimants were all disabled employees of the Land Registry. Each of the five employees had received a warning relating to their sickness absence in the relevant financial year. This was despite the Land Registry putting in place a number of “reasonable adjustments” to assist the employees in overcoming their disabilities. The warnings rendered all of the employees ineligible for a bonus.

The claimants brought a claim for discrimination arising from a disability under the Equality Act 2010.

Under s15 (1) of Equality Act “discrimination arising from a disability” occurs where both

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

To establish this type of discrimination there needs to be a connection between whatever led to the unfavourable treatment and the disability.

The EAT upheld an earlier decision of the Employment Tribunal and found in favour of the disabled employees. It was held that the automatic disentitlement to the bonus following disability related absences was sufficient to amount to unfavourable treatment as without the disability each claimant would not have had the same level of sickness absence, which is why the bonus was not paid.

The EAT recognised that the Land Registry had a legitimate aim of encouraging and rewarding good performance and attendance of staff. It did however decide that the bonus scheme in place was not a proportionate means of achieving that legitimate aim. This was largely because the scheme could not take into account improved absence levels after a warning and the scheme allowed conduct warnings to be ignored but not those for sickness absence.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.