Discriminatory Bonus Schemes

20 Feb 2015

An old chestnut which drops onto my desk from time to time is whether an employer can pay a bonus to Stakanovites who never take sick leave? My answer has always been to steer clear of attendance related bonuses because they're probably discriminatory and can encourage bad practice – when you're under the weather with man flu we'd rather you don't come in and let the air handling system spread your germs to all parts of the building!

The Land Registry operated a discretionary bonus scheme under which anyone who was warned about their sickness record became ineligible to receive that year's bonus. Five disabled employees had absences attributable to their disabilities which triggered warnings. They were disqualified from receiving bonus so complained to the Employment Tribunal. The tribunal said this was discrimination in consequence of a disability (S. 15(1) (a) the Equality Act 2010) but was it justified as a proportionate means of achieving a legitimate aim (S. 15(1) (b))?

No it wasn't. The Land Registry didn't take note of the improved attendance after the warnings and it didn't allow managers' discretion to award the bonus in sickness cases, in contrast to misconduct cases where discretion was permitted.

The Land Registry appealed. Amongst its arguments were that the non-payment of bonus was the result of warnings for absences and the disciplining manager had discretion over the sanction imposed on that occasion. He didn't have to give a warning and this discretion applied in every case whatever the employee's health. In addition the disqualification was done as an administrative action by a member of the HR team who had no knowledge of the disabilities; i.e. a modified Nuremberg defence – he was following orders without allowing his mind to be tainted by knowledge of an individual employee's circumstances.

The EAT dismissed these points in short order. It observed that without their disabilities none of the claimants would have run up absences leading to warnings and that was clearly why the bonus wasn't paid. Also that the discriminator's ignorance wasn't relevant as the correct question was, what caused him to exclude the claimants from the bonus? The EAT acknowledged justification is a balancing exercise but couldn't fault the Tribunal's analysis so the claimants won their bonus and we have judicial authority for a practice which always appeared dodgy.