Failure to Pay Bonus Due to Sickness Record Disability Discrimination

A bonus scheme that excluded employees who had received a written warning for sickness absence was discriminatory on grounds of disability. 

In Land Registry v Houghton, the employer’s bonus scheme provided that employees who had received a written warning for sickness absence during the relevant financial year were ineligible to receive a bonus. There was a similar exclusion for warnings for misconduct, but managers had discretion to ignore a conduct warning when determining bonus entitlement. 

The employer had made various adjustments to assist employees to overcome their disabilities and had already adjusted the trigger points that would normally lead to a warning for sickness absence. 

A number of disabled employees brought disability discrimination claims. They had all been absent due to sickness resulting from their disabilities and argued that their exclusion amounted to discrimination arising from disability. 

The employment tribunal upheld their claims. The claimants had all received a warning for disability-related absence and this automatically excluded them from the bonus scheme. Non-payment of the bonus was therefore due to their disability. The employment tribunal found that their exclusion was not justified. The employer’s aims of acknowledging employees’ contributions and encouraging and rewarding good performance and attendance were legitimate. However, the bonus scheme in place was not a proportionate means of achieving those aims. It could not take into account the fact that three of the claimants had improved their absence record after the warning. In addition, there was an anomaly in the scheme as conduct warnings could be ignored at the manager’s discretion but warnings for sickness absence could not. 

The EAT rejected the employer’s appeal. 

Although the employer in this case was unable to justify its bonus scheme, this was due at least in part to its inflexibility. This meant that even where a person’s attendance was improving after receiving a warning, there was no scope for them to receive a bonus. This was despite the fact that the scheme rules were designed to reward good attendance. Had managers retained a discretion to award a bonus notwithstanding a warning for sickness absence, there would have been a better chance of the scheme being justified. The fact that managers retained a discretion to award a bonus to someone who had received a warnings for misconduct was also unhelpful. 

Employers should therefore consider retaining an element of discretion when drawing up bonus scheme rules. This will assist them in ensuring that the rules do not operate in a discriminatory fashion in particular cases and may help in establishing a justification defence.