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In Chief Constable of Gwent Police v Parsons and Another UKEAT/0143/18/DA the Employment Appeal Tribunal (‘EAT’) ruled that the capping of the Claimants’ compensation under a voluntary exit scheme was discriminatory and highlighted the importance of providing full evidence when attempting to justify alleged discriminatory behaviour.

The Facts

The Claimant’s were police officers and were disabled under the Equality Act 2010 (disability being accepted by the respondent). Due to their disabilities, the claimants were certified under regulation H1 of the Police Pensions Regulations 1987 as being disabled from performing the ordinary duties of a police officer (they could only perform back office duties) and therefore both held a “H1 Certificate”.

A benefit of holding such a certificate was that they would be entitled to receive an immediate pension payment upon leaving the force rather than having such a payment deferred until a defined retirement date. The claimant’s left the force under a voluntary exit scheme (‘VES’) brought about by budget cuts (effectively voluntary redundancy). Under the terms of this scheme they were entitled to a lump sum compensation calculated using a months pay multiplied by years of service subject to a maximum 21 months’ pay. This payment was subject to a six months’ pay cap with a tapering provision if the individual was approaching ‘Pension Age’ but this related to an ‘ordinary pension’ and made no reference to those qualifying for a pension with H1 certification. The claimants had 23 and 18 years’ service respectively at the time they left the force.

The respondent argued that the claimants would receive a windfall if they received their H1 pension and the full VES compensation payment as they would be better off than if they left via ill-health retirement rather than VES and/or remaining as a serving officer with 30 years’ service. The Claimants claimed that this amounted to disability discrimination under s.15 Equality Act 2010 (‘EqA’) and the Employment Tribunal (“ET”) upheld this claim.

The Law: S.15 EqA and Justification

S.15(1)(a) EqA states that a disabled person is discriminated against if they are treated unfavourably because of something arising in consequence of their disability (which is a question of fact). If a claimant can evidence that such treatment took place, it will then be for the respondent to justify that treatment under s.15(1)(b) EqA by showing that it was a “proportionate means of achieving a legitimate aim.”

The EAT referred to Loxley v BAE Land System Munitions and Ordinance Limited UKEAT/0156/08 and Kraft Foods UK Ltd v Hastie UKEAT/0024/10 to set out the principles of law regarding justification.

In summary, the onus is on the employer to establish justification; the unfavourable treatment must be reasonably necessary and proportionate means of achieving the legitimate aim. Saving money is not itself a legitimate aim but preventing a windfall could be; and a cap on an immediate pension benefit may (but not inevitably) justify exclusion from a payment under a redundancy scheme. However, a cap imposed to prevent an employee recovering more under a redundancy scheme than he would receive in earnings had he remained employed until retirement will be justified in achieving the legitimate aim of preventing a windfall.

The EAT’s Decision

The EAT agreed with the ET that the claimants’ H1 status arose in consequence of their disabilities and that the decision to cap the VES payment was unfavourable treatment because of the same. It also noted that interpretations on the terms of the VES was irrelevant as the claims were based on an allegation of discrimination and not contractual entitlements – the issue here was whether the unfavourable treatment could be justified.

The only evidence the respondent provided to show that they were preventing a windfall was an email in which the head of payroll had calculated payments to someone who retired at 56 with 30 years’ service, who took ill-health retirement, and the payment Mr Parsons would receive in his circumstances.

The EAT pointed out that there was no material relating to someone in the other claimant’s position and/or any attempt to show the overall financial effect on the claimants of giving up their careers early. In line with Loxley and Hastie, the EAT noted that such material would involve ‘at least a consideration of what [the claimants] would have earned if [they] had stayed with the police to normal retirement age’ and a comparison with the same.

On this basis the EAT agreed that the respondnt had failed to show that the unfavourable treatment was justified and the claim was upheld.

Practical Points

The judgment clearly emphasises the depth of analysis expected of employers when considering whether to cap payments owed to employees in the circumstances of this case. Employers should ensure that they consider what the position would have been in had the employees in question retired under normal circumstances and what they may be losing out by ending their employment early when considering whether their actions are justified – especially if relying upon a potential windfall. This analysis should be in writing and records should be retained to mitigate risks should an employee bring a claim in the tribunal.

Legal advice should be sought immediately if an employer is considering applying a cap to payments made to disabled employees in a redundancy situation.