Must an employer re-start salary payments to a disabled employee who's no longer eligible for PHI?

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Could an employer who fails to pay an employee salary when they cease to be eligible for PHI be guilty of discrimination arising from a disability?

In West v Royal Bank of Scotland EAT 0296/16, the EAT decided that an employment tribunal was wrong to find that an employer’s decision not to pay an employee who ceased to be eligible for payment under its long-term disability PHI scheme due to a change in occupational health advice as to her fitness for work could not constitute discrimination arising from a disability. However, the EAT did not have sufficient evidence before it to determine the employee’s claim, so sent it back to another employment tribunal.

Legal background

Discrimination arising from a disability occurs when an employer treats a disabled person unfavourably because of something arising in consequence of their disability. Case law has established that a tribunal considering a claim for discrimination arising from disability must: identify the unfavourable treatment; establish the reason for that treatment (taking into account the employer’s subjective motivation); and determine whether, as an objective question of fact, that reason was "something arising in consequence of" the employee’s disability.

However, this form of discrimination can be objectively justified by the employer, i.e. it won’t be unlawful if the employer can show that the treatment is "a proportionate means of achieving a legitimate aim".

Facts

Mrs West had worked for the Royal Bank of Scotland in various roles since 1985. In 2009, she was working full-time as a Business Control Manager, a role which involved significant travel between branches – initially in the North of England and then, following a reorganisation, across the whole of England and Wales.

She had been diagnosed with cervical spondylosis – a condition which caused her neck and back pain – in 2003. Following a fall in November 2009, her symptoms worsened and she had a period of sickness absence from 30 November 2009 to 1 March 2010. She then returned to work on a phased return, initially working two hours per day. However, an Occupational Health ("OH") report in April 2010 advised that travelling and carrying equipment were likely to aggravate Mrs West’s symptoms. It recommended that she was better suited to a role at a fixed base with an appropriate chair and workstation and concluded that it was unlikely that she could successfully continue in her present role. Her manager said that the team would be unable to support her working from a fixed base in the long term and, at RBS’s instance, she began a further period of sick leave in June 2010.

Mrs West had a contractual entitlement to sick pay for up to 12 months’ absence. She was also eligible for RBS’s long-term disability scheme – a PHI scheme which offered 55% of salary for up to four and a half years, so long as she met the eligibility criteria. It was a condition of joining the scheme that she give up her existing role. By November 2010, Mrs West was still off sick and OH recommended her for the long-term disability scheme, which she joined on 3 February 2011. From that date, therefore, she remained employed by RBS, but no longer held the Business Control Manager role.

In March 2012, a new OH report stated that Mrs West should now be able to work 20 to 25 hours per week, provided she was based entirely in an office environment. Based on this report, the administrator of the long-term disability scheme considered that Mrs West no longer met the scheme’s definition of incapacity for work. RBS ceased to make payments to her under the scheme in August 2012, but she remained an employee.

Following a lengthy period of correspondence and discussions, in October 2013 RBS placed Mrs West on a 16-week period of redeployment. She was offered 29 alternative available vacancies and told that if she was interested in any of them she would be considered on a non-competitive basis provided she met the minimum requirements of the role.

Mrs West demanded a full ergonomic workstation assessment before any period of redeployment would begin, but RBS considered that it couldn’t carry out such an assessment without knowing the details of the role she would be doing. Mrs West therefore refused to engage in the redeployment process and did not apply for any of the available vacancies. When the redeployment period expired, she was called to a meeting and told that dismissal may be the outcome. She was ultimately dismissed on 16 April 2014 with a payment in lieu of her contractual notice entitlement.

Employment tribunal claims

Mrs West claimed that her dismissal was unfair. She also brought a number of claims of disability discrimination, one of which was that RBS’s failure to pay her once she ceased to be eligible for payment under the long-term disability scheme amounted to discrimination arising from a disability.

The employment tribunal rejected Mrs West’s discrimination claims. It acknowledged that not paying her after she came out of the long-term disability scheme amounted to unfavourable treatment. However, it considered that the reason Mrs West was not paid was because she had given up her role in order to join the long-term disability scheme, and the new OH report in March 2012 was to the effect that she no longer qualified for the scheme notwithstanding her ongoing disability. In the tribunal’s view, the unfavourable treatment did not "arise from the claimant’s disability which continued but from the occupational health advice which [had] altered".

As for the unfair dismissal claim, the tribunal noted that Mrs West had spent a long period on long-term disability, followed by a period of redeployment during which she failed to engage with the opportunities offered to her to find a new role. It therefore accepted that there was nothing else RBS could have done in the face of Mrs West’s intransigence and concluded that her dismissal was fair for "some other substantial reason".

Mrs West appealed to the EAT.

EAT decision

The EAT agreed with the tribunal’s view that failing to pay Mrs West when she came out of the long-term disability scheme amounted to unfavourable treatment. It referred back to the legislation on discrimination arising from a disability; for a claim to succeed, the unfavourable treatment must be because of "something" that arises in consequence of a disability. Noting the tribunal’s finding that Mrs West was removed from the scheme because the OH advice was that she no longer qualified for it, the EAT clarified that the "something" the tribunal had identified in this case was the OH advice.

The next question was whether this "something" arose from Mrs West’s disability. On the face of it, the OH reports were things arising from Mrs West’s disability; they were commissioned precisely to establish the extent and consequences for work of her disability. The EAT therefore decided that the tribunal’s conclusion to the contrary was not sufficiently reasoned and indicated a real risk that the tribunal had fallen into the error of construing the words "something arising from" the disability too narrowly.

The EAT sent the claim back to another employment tribunal for rehearing. It commented that Mrs West’s case on the "something arising" point appeared to be strong, but that the tribunal would have to address the question of justification. The EAT noted that the aim of adhering to the limits of the long-term disability scheme would be a legitimate one, but whether or not Mrs West’s treatment was proportionate would depend on various factors including the terms of the scheme, contents of the medical reports and steps that RBS took to resolve matters.

Mrs West also appealed against the tribunal’s finding that her dismissal was fair, but her appeal on this point was unsuccessful.

Comment

Assuming the causal link is made out, the question is: can an employer justify a failure to pay a disabled employee who is no longer eligible for PHI payments because they are fit to work in some capacity but cannot return to their previous role?

The answer will, of course, turn on the issue of legitimate aim and proportionality, and employers will naturally be interested in the outcome of this case when it returns to the employment tribunal. In the meantime, employers who are concerned about how to effectively manage employee ill-health in general, including in relation to redeployment and entitlements under PHI schemes, should attend our seminar, "Employee ill-health: active management for effective outcomes". For more information and to book a place, click here.

Author

Senior Legal Adviser

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