Sick Pay and Disability Discrimination - Applying the "reasonable adjustment" principle

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On 30 March 2007, in the case O'Hanlon v HM Revenue and Customs, the Court of Appeal rejected the employee's continued claims that the employer had discriminated against her on the grounds of disability by counting the time she was absent sick due to her disability against her sick pay entitlement, thus preventing her from receiving sick pay when absent for reasons unrelated to her disability. The original Employment Tribunal and Employment Appeal Tribunal (EAT) had both rejected Mrs O'Hanlon's arguments.

Mrs. O'Hanlon suffered from clinical depression and was absent from work for extended periods of time between 2001 and 2004. The HMRC sick pay scheme allowed full pay for up to 6 months, followed by up to 6 months at half pay, followed by the pension rate of pay. Mrs. O'Hanlon's absences meant that, from 2003, she was receiving her pension rate of pay during her continuing absences.

In 2005, Mrs. O'Hanlon made a claim to the Employment Tribunal that she should have received full pay for all disability-related sickness absences, that she was substantially disadvantaged by the sick pay rules and that, because the employers had failed to make a reasonable adjustment to counter the disadvantage, she had suffered discrimination on the grounds of disability.

The Disability Discrimination Act 1995 requires employers to make adjustments to provisions, criteria, practices or physical features that put disabled persons at a substantial disadvantage in comparison with persons who are not disabled. An employer discriminates against a disabled person if he cannot demonstrate that less favourable treatment is justified or refuses to make reasonable adjustments.

The Act gives specific examples of what factors should be considered in deciding whether or not it would be reasonable for an employer to make adjustment. These include the financial and other costs that would be incurred. The Act also gives examples of reasonable adjustments, such as giving some of the employee's duties to someone else, transferring the employee to another job, and altering the employee's hours of work.

Although the Tribunal decided that HMRC's sick pay scheme did put Mrs. O'Hanlon at a substantial disadvantage, it ruled that HMRC had taken such steps as were reasonable in all the circumstances, and that, in view of a likely additional annual cost of £6 million to change the scheme rules, it was not reasonable for HMRC to pay her salary in full.

In considering Mrs. O'Hanlon's initial appeal, the EAT had agreed with the Tribunal's view that the purpose of the legislation is to assist disabled persons to obtain employment and integrate them into the workforce. All of the examples of reasonable adjustments that employers might make are of this nature. It is true that they are only examples and are not an exhaustive list, but none of them suggests that it will ever be necessary simply to put more money into the wage packet of the disabled. The Act is designed to recognise the dignity of the disabled and to require modifications which will enable them to play a full part in the world of work. It is not intended to treat them as objects of charity which, as the Tribunal had pointed out, may tend to act as a positive disincentive to return to work.

The EAT agreed that, where it would cost a very significant sum to pay full pay to all disabled employees, it would be reasonable for an employer to argue that such an adjustment would be unreasonable. However, the EAT also observed that "the justification could simply be the fact that the employer considered it appropriate to pay those who attend work and contribute to the operation more than those whose absence prevents that."

The Court of Appeal, in considering Mrs. O'Hanlon's latest appeal, agreed fully with the decision of the EAT. In the view of Lord Justice Sedley, "justification has been established by (HMRC) on an objective as well as a subjective basis. While collectively agreed pay structures for a very large establishment are not in principle beyond the reach of the 1995 Act, they are not ready candidates for individual variation. The whole point of a comprehensive pay scale and scheme is that it applies to everyone, so that individual departures are likely to create justified resentment and require the exercise of discretion in both the legal and non-legal sense of the word.

He further stated: "It is relevant that the aspect of the scheme with which we are concerned is not a term of a kind which every contract of employment has to contain. An employee who is absent for 6 months or more because of chronic illness, whether or not it amounts in law to a disability, might well find that at common law the contract has been frustrated by illness and that a consequent dismissal is held to be fair. A scheme which preserves the contractual relationship in such circumstances and assures first full pay and then half pay for extended periods of time therefore goes well beyond anything required by law. This is not of course to say that it is permissible, much less justified, to construct or administer such a scheme so that it operates arbitrarily to the disadvantage of the disabled. But any unplanned discriminatory impact may well be justified on the ground that such exceptions as can fairly be made in favour of disabled employees are already programmed into the scheme."

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Source:
O'Hanlon v HM Revenue and Customs
O'Hanlon v HM Revenue and Customs

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