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Protecting disabled employee's pay can be a reasonable adjustment (EAT)
Practical Law UK Legal Update w-003-2944 (Approx. 6 pages)
Protecting disabled employee's pay can be a reasonable adjustment (EAT)
by Practical Law Employment
| Published on 01 Sep 2016 • England, Scotland, Wales |
The EAT has considered whether an employer was required, as a reasonable adjustment, to continue employing a disabled employee in a more junior role, at his existing rate of pay.
Speedread
The EAT has held that an employment tribunal was entitled to find that an employer was required, as a reasonable adjustment, to continue employing a disabled employee in a more junior role involving less physical activity, preserving his existing rate of pay on an indefinite basis. While it will not be an "everyday event", the EAT held that there was no reason in principle why pay protection, in conjunction with other measures, could not be a reasonable adjustment as part of a package of measures to get an employee back to work. Whether it was reasonable for the employer to have to take that step was a separate question, to be determined in the particular circumstances.
The EAT held that the tribunal's conclusion that there had been no agreed variation to the employee's contract when he started the more junior role had been based on an error of law, that an employer seeking to fulfil the statutory duty to make reasonable adjustments can impose a particular adjustment without the employee's consent, differentiating it from a variation of contract, which requires consent. In the EAT's view, if an employer proposes an adjustment which is incompatible with the terms of the contract, the employee is entitled to decline it: the adjustment will not be effective without agreement. In this case, it was clear that there had been a variation of the contract when the employee returned from sickness absence to a changed role. (G4S Cash Solutions (UK) Ltd v Powell UKEAT/0243/15.)
Background
An employer has a duty to make reasonable adjustments where it knows (or ought reasonably to know) that a person has a disability and there is a provision, criterion or practice (PCP) which places the disabled person at a substantial disadvantage compared to those who are not disabled. Failure to make a reasonable adjustment amounts to discrimination. The duty is set out in section 20(3) of the Equality Act 2010 (EqA 2010), which provides:
"Where A's provision, criterion or practice (PCP) puts a disabled person at a substantial disadvantage in comparison with those who are not disabled, A must take such steps as it is reasonable to have to take to avoid the disadvantage."
An employer who is under a duty to make reasonable adjustments is not entitled to require a disabled person to pay any of the costs of complying with the duty (section 20(7), EqA 2010).
One of the possible adjustments highlighted by the 2011 EHRC Employment Statutory Code of Practice (the EHRC Code) is "transferring the disabled person to fill an existing vacancy". This reflects Archibald v Fife Council [2004] ICR 954, in which the House of Lords held that an employer's duty to make reasonable adjustments might require it to appoint a disabled employee to an alternative post, even if that employee is not the best candidate. The EHRC Code also states that even if an adjustment has a significant cost associated with it, it may still be cost-effective in overall terms, for example, compared with the costs of recruiting and training a new member of staff, and so may still be a reasonable adjustment.
In O'Hanlon v Commissioners of HM Revenue & Customs UKEAT/0109/06, the EAT held that an employer would only very rarely be obliged, as a reasonable adjustment, to give more sick pay to a disabled person than it would otherwise give to a non-disabled person on sick leave (see Legal update, Disability discrimination: employer not required to extend company sick pay). In coming to this decision, the EAT commented that the purpose of the disability discrimination legislation was to enable disabled persons to play a full part in the world of work, not to "treat them as objects of charity". (The O'Hanlon decision was later unsuccessfully appealed to the Court of Appeal, on a narrower basis than was argued before the EAT; see Legal update, Court of Appeal: employers do not have to extend company sick pay for disabled employees)
For further information, see Practice note, Disability discrimination: reasonable adjustments.
In the case reported below, the EAT considered the extent to which an employer may be required to maintain a disabled employee's existing salary level when transferring them to a new role, as a reasonable adjustment.
Facts
Mr Powell worked for G4S Cash Solutions (UK) Ltd (G4S) as a single-line maintenance (SLM) engineer, maintaining the company's ATM machines. He had been employed since 1997 in a variety of roles. He suffered with back pain and by mid-2012 he was no longer fit for jobs involving heavy lifting or work in confined spaces. From this period onwards it was accepted that he was disabled under the EqA 2010.
In the summer of 2012, G4S created a new role of "key runner" supporting ATM engineers working in Central London. The role involved driving from their depot to various locations to deliver materials to engineers. This enabled the engineers to travel by public transport.
After a period of sickness absence Mr Powell began to work as a key runner while retaining his existing salary as a SLM engineer. He understood the change of role to be long-term. By May 2013, G4S was considering discontinuing the key runner role for organisational reasons. They told Mr Powell that the role had not been permanent and invited him to look through a list of alternative vacancies. If nothing was suitable, he would be dismissed on medical grounds.
Mr Powell presented a grievance, claiming that G4S was attempting to change his terms and conditions. G4S then decided to make the key runner role permanent, but at a lower rate of pay to reflect the fact that it did not require engineering skills. Mr Powell was unwilling to accept the 10% pay reduction this would entail and was dismissed on 8 October 2013.
Employment tribunal decision
An employment tribunal rejected Mr Powell's claim that there had been an agreed variation to his contract of employment when he started the key runner role, such that he was entitled to continue in that role at his original salary on a permanent basis. However, the tribunal went on to hold that G4S was required, as a reasonable adjustment under section 20 of the EqA 2010, to employ Mr Powell as a key runner at his original rate of pay. It went on to find that his dismissal amounted to discrimination arising from disability, and was unfair. G4S appealed against the reasonable adjustment finding and Mr Powell cross-appealed on the contractual variation point.
In the course of reaching its conclusion that the contract had not been varied, the tribunal found that an adjustment under section 20 can be effective without the consent of the employee, and therefore differs from a variation of contract, which requires the employee's consent. The tribunal drew a distinction with the other occasions on which Mr Powell's role had changed over the years, when each time G4S had provided him with a document setting out the details of the new role. By contrast, there was never a time when the parties agreed, expressly or impliedly, that Mr Powell's contract had been varied so that, as a permanent change, he would continue in the key runner role at his previous rate of pay as an SLM engineer.
Decision
The EAT (HHJ David Richardson, sitting alone) dismissed the appeal, upholding the tribunal's decision that G4S should have continued to pay Mr Powell at the higher rate of pay, as a reasonable adjustment.
Was there a contractual variation?
The EAT held that the tribunal's conclusion that there had been no agreed variation to Mr Powell's contract had been based partly on an error of law, that an employer seeking to fulfil the statutory duty to make reasonable adjustments can impose a particular adjustment without the employee's consent, differentiating it from a variation of contract, which requires consent. In the EAT's view, if an employer proposes an adjustment which is incompatible with the terms of the contract, the employee is entitled to decline it: the adjustment will not be effective without agreement, that is without a variation of the contract. In this case, it was clear that there was a variation of contract in the summer of 2012.
The real question was not whether there had been a contractual variation but what the terms of the variation were. While temporary variations to an employee's work or location are common, in a case where the employee is disabled, there may be no intention that the employee will return to the previous work, or that the adjustment will last for a particular period. In this case, the employment tribunal had not made clear findings as to the parties' intentions in this regard. The tribunal's finding that Mr Powell thought that his role was long-term, and was allowed to believe this, might suggest that the variation was permanent, in the sense that neither party had a unilateral right to insist on a return to the role of SLM engineer or to some other role. On the other hand, the fact that G4S did not confirm the variation in writing could mean that it did not intend the variation to be permanent. What was important, however, was whether G4S's words and conduct, viewed objectively, led to this conclusion.
The EAT concluded that the tribunal did not make clear findings on this point, and accordingly the finding that there had been no agreed permanent variation could not stand. However, given the EAT's finding on the reasonable adjustment issue, there would be no practical point in remitting it.
Was it a reasonable adjustment to protect Mr Powell's pay?
As it was beyond doubt that Mr Powell was at a substantial disadvantage compared to non-disabled employees (since he was unable to carry out his duties as an SLM engineer), the real issue was whether the reasonable adjustments duty extended to protecting Mr Powell's higher rate of pay indefinitely.
The reasonable adjustments duty may require an employer to treat an employee more favourably than others (Archibald v Fife Council [2004] ICR 954). It is also well established that the duty may include transferring an employee to a different role. Pay protection is no more than another form of cost for an employer, analogous to the cost of providing extra training or support, and there is no reason in principle why one should be a "step" within section 20(3) of the EqA 2010, but the other should not. The question will always be whether it is reasonable for the employer to have to take that step.
The EAT rejected G4S's submission that the decision in O'Hanlon v Commissioners of HM Revenue & Customs UKEAT/0109/06 (see Background) meant that pay protection could never be a reasonable adjustment. If enhanced sick pay could fall within the ambit of section 20(3), there was no reason why ordinary pay should be excluded. Elias P's remarks in O'Hanlon that the objective of the disability discrimination legislation was not to treat disabled people as "objects of charity" must be read in the context of the case, where the proposed adjustment was simply to augment sick pay. The EAT noted that the legislation envisages an element of cost to the employer if an adjustment is one which is reasonable for the employer to have to make; this is not a matter for charity, but a legal requirement reflecting the expectations of Parliament and society. The objective is to keep employees in work, and there was no reason why a package of measures for this purpose, which includes some pay protection, should not be a reasonable adjustment.
The EAT went on to consider Newcastle upon Tyne Hospitals NHS Foundation Trust v Bagley UKEAT/0417/11 (see Legal update, Disability and reasonable adjustments: EAT takes restrictive approach to duty). In that case, Mrs Bagley was on long-term sick leave following a work-related injury, and was receiving "Temporary Injury Allowance" (TIA), equivalent to 85% of her salary, under NHS rules. This was only available to employees who were absent, not to employees on a phased return to work.
Mrs Bagley argued that the NHS Trust should have paid her TIA or an equivalent when she returned to work part-time, working 60% of her normal hours. An employment tribunal accepted this argument, but it was overturned on appeal, the EAT applying O'Hanlon. The EAT held that her argument would have involved not only re-writing the terms of the TIA, but also extending a very generous benefit to all persons who had a disability, or at least means testing them all.
However, the EAT thought that the reasoning in the Bagley decision depended on the particular formulation of the PCP which was the Trust's policy of paying people for the work that they do. Mrs Bagley worked full time, as required by her contract. However, her disability prevented her from working full time rendering her liable to dismissal. The requirement to work full time plainly placed her at a disadvantage compared to non-disabled employees. The PCP may have obscured the real question, which was what steps it was reasonable for the employer to take to alleviate the disadvantage.
Consequently, Bagley should not be read as saying that the law can never countenance adjustments which include a payment to an employee for time not worked.
The EAT concluded that while it will not be an "everyday event" for an employer to provide long-term pay protection in this situation, cases can be envisaged where this may be a reasonable adjustment as part of a package to get an employee back to work or to keep an employee in work. The financial considerations will always have to be weighed in the balance by the tribunal. The EAT also noted that, in changed circumstances, an adjustment may eventually cease to be reasonable, for example if the need for a job were to disappear or the economic circumstances of the business changed.
Comment
It is important to emphasise that the effect of this decision is simply that protecting a disabled employee's pay when they are redeployed should not be discounted. As in every case, the reasonableness of potential adjustments must be assessed on a case-by-case basis, taking account of the factors set out in the EHRC Code, including the costs of making the adjustment and the financial and other resources available to the employer.
In this case, G4S had paid Mr Powell at the higher rate of pay for around a year, and had led him to believe that the arrangement would be long-term. The tribunal concluded that G4S was a company with substantial resources for whom the additional annual cost of employing Mr Powell would have been easily affordable. Notably, G4S's evidence was that the main reason for not continuing to pay the SLM rate was the likelihood of discontent from other employees. The EAT described this as an "unattractive reason". This is a reminder that the impact (or anticipated impact) on other employees of an adjustment is not generally a factor that should be taken into account when determining reasonableness. However, wider implications on the organisation or the workforce as a whole may be considered (see Practice note, Disability discrimination: reasonable adjustments: Proper assessment: Effect on workforce).
Finally, the clarification regarding employee consent is useful. Previous cases have held that it is for the employer to explore the possibility of reasonable adjustments, not for the employee to suggest them. Although in some circumstances employers will be expected to take the initiative in making adjustments in order to discharge the duty (for example, see Legal update, Employer failed to make reasonable adjustments when requiring disabled employee to attend competitive interview), this case clarifies that an adjustment which also amounts to a contractual change will not be effective without securing the employee's agreement.