Disability discrimination and extending company sick pay

The Court of Appeal in O’Hanlon v HM Revenue Customs has confirmed that an employer is not obliged to continue paying sick pay to a disabled employee once the employee’s sick pay entitlement has run out.

Mrs O’Hanlon, who was employed by HM Revenue & Customs (HMRC), suffered from clinical depression which amounted to a disability under the Disability Discrimination Act 1995 (DDA). Over four years she had a total of 365 days’ sick leave, of which 320 were related to her disability.

Substantially disadvantaged

O’Hanlon brought a claim under the DDA, contending that she was substantially disadvantaged by HMRC’s sick pay rules compared to a non-disabled person, and that it had failed to make reasonable adjustments to its policy so as to enable her to continue to receive full pay while absent. She also claimed that she had been subject to disability-related discrimination since her absence was related to her disability and the failure to continue paying her was not justified.

The tribunal held that O’Hanlon was substantially disadvantaged, but that HMRC had taken all reasonable steps to alleviate the disadvantage, including doing all it could to help O’Hanlon back to work. She appealed to the EAT. The EAT agreed that HMRC had made all reasonable adjustments and that there was no unlawful discrimination.

The EAT said that only in a very rare case would giving higher sick pay than would be payable to a non-disabled person – who in general did not suffer the same disability-related absences – be considered necessary as a reasonable adjustment.

O’Hanlon then appealed to the Court of Appeal.

The Court of Appeal said that HMRC had not failed to make reasonable adjustments by following its sick pay policy and refusing to pay O’Hanlon for her entire period of absence. Although this treatment did amount to disability related discrimination, the discrimination was justified.

Key points

The Court of Appeal said that while a failure to continue sick pay might cause financial difficulties, an employer could not be expected to decide whether to increase sick pay by an assessment of financial hardship.

It agreed with the tribunal’s assessment that payment for disability-related absences would be a disincentive to return to work.

It also found that it would be difficult for an employer to distinguish between disability and non-disability related reasons for a period of sickness absence, and that requiring employers to treat disability-related absences differently could create a sense of unfairness.

It did not consider whether it could ever be a reasonable adjustment to make extra payments to a disabled employee, but it did see “much force” in the EAT’s statement that it would be a rare case where extra pay to a disabled employee amounted to a reasonable adjustment.

What you should do

It will now be very difficult for a disabled employee to argue that they are entitled to receive full pay for an entire period of absence once their contractual entitlement has been exhausted.

Be aware that this is subject to the decision in Nottingham County Council v Meikle, which held that where the employer has contributed to the absence by failing to make reasonable adjustments, an employee may recover compensation for loss of sick pay.

This does not extend to discretionary sick pay schemes, where claims could be brought if discretion is exercised unlawfully.

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