Is ring-fencing pay a ‘reasonable adjustment’?

Sarah Lamont | Employment, Bevan Brittan

A recent case has confirmed that long-term pay protection is capable of being a ‘reasonable adjustment’ for a disabled employee. Additionally, it was confirmed that an employer requires an employee’s consent to vary terms of employment, even if the changes are to fulfil the employer’s duty.

Background

Under the Equality Act 2010, an employer is required to provide reasonable adjustments for a disabled employee, to help reduce any disadvantage in the workplace caused to an employee by their disability. What is “reasonable” is heavily fact based, with guidance and a number of Employment Appeal Tribunal (EAT) decisions shaping the landscape.

One of the possible adjustments highlighted by the 2011 Equality and Human Rights Commission Employment Statutory Code of Practice (the EHRC Code) is “transferring the disabled person to fill an existing vacancy”. This reflects the well-known case of Archibald v Fife Council, in which the House of Lords held that an employer’s duty to make reasonable adjustments might require it to appoint a disabled employee to an alternative post, even if that employee is not the best candidate. The EHRC Code also states that even if an adjustment has a significant cost associated with it, it may still be cost-effective in overall terms, compared to – for example – the cost of recruiting and training a new member of staff.

In G4S Cash Solutions (UK) Ltd v Powell, the EAT considered the extent to which an employer may be required to maintain a disabled employee’s existing salary level when transferring them to a new role, as a reasonable adjustment.

The facts

Mr Powell, an engineer who maintained automatic teller machines for G4S Cash Solutions (UK) Ltd (GCSU), suffered back problems and was eventually unable to continue in his role. GCSU offered Mr Powell an alternative position as a “key runner” to drive keys and parts to engineers at various locations. The role was on a lower rate of pay but was offered, and accepted by Mr Powell, based on his existing higher rate of pay. After a year, GCSU informed P that the key runner role was not permanent and that he should find alternative vacancies. Mr Powell was informed that if he was unable to locate a suitable role he could be dismissed on medical grounds. Eventually the key runner role was made permanent but Mr Powell’s pay was decreased by 10% to reflect the lower skillset required by the role. Mr Powell was unwilling to accept the 10% pay reduction this would entail and was dismissed on 8 October 2013.

Mr Powell applied to an employment tribunal, which made two rulings.

1. There was no variation in the terms of the contract when MR Powell’s role as a key runner commenced and therefore he could not rely on the pay protection to continue.

2. It was a reasonable adjustment for GCSU to protect Mr Powell’s pay on a long-term basis.

GCSU appealed and Mr Powell cross-appealed on contractual variation point.

The decision

The EAT held that the tribunal had been mistaken in deciding that there was no contractual variation to Mr Powell’s terms of employment. Once Mr Powell accepted the key runner role at his existing rate of pay, the terms were varied. Additionally, the tribunal incorrectly decided that GCSU could oblige Mr Powell, without his agreement, to accept adjustments that allowed GCSU to meet its statutory duty; a reasonable adjustment requires an employee’s consent.

But, the EAT agreed with the tribunal’s decision that it was reasonable for GCSU to protect Mr Powell’s pay on a long-term basis. It viewed the protection as one of many available reasonable adjustments, such as the provision of training. The legislation clearly envisages that employers should bear some additional costs to fulfil their duty to keep employees in work.

However, there are some important limitations to the EAT’s decision.

  • It did not foresee it as an “everyday event” for tribunals to require employers to protect pay on a long-term basis. Each case will turn on its facts.
  • The resources available to an employer are a key consideration. On the facts, GCSU was deemed to be a large company that could easily absorb the additional cost.
  • Reasonable adjustments can cease to be reasonable, and long-term protected pay may not be guaranteed to continue indefinitely: for example, jobs may disappear or the economic circumstances of a business may alter.

What does this mean for me?

The decision confirms that pay protection for disabled employees may be one of a range of potential reasonable adjustments available to employers. It is unlikely to be required as a matter of course, but a reasoned (and documented) analysis should be made. If, as in this case, the cost of pay protection could easily be absorbed the employer, or could be to a large extent set off against, for example, recruitment or other costs, then it is more likely that it will be classed as reasonable adjustment.

GCSU’s main reason for ending Mr Powell’s pay protection was potential discontent from other workers. The EAT ruled that impact on other employees (actual or potential) is an irrelevant factor to take into consideration when determining reasonableness.

A final note of caution is that cases considering the scope of the duty to make reasonable adjustments turn very much on their own facts, making it difficult to draw general, definitive, conclusions. If in any doubt, it is advisable to seek specific guidance, preferably under legal professional privilege in order to avoid the risk of disclosure of internal discussions in any subsequent litigation.

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