In this article...

• The facts
• The tribunal's decision
• The EAT's decision
• The Court of Appeal's decision
• What does it mean for me?

Does the Disability Discrimination Act 1995 require an employer to retain an employee on full pay during long-term sick leave – even after contractual sick pay has been exhausted? Julian Hoskins looks at the Court of Appeal’s decision in the recent case of O’Hanlon v Commissioners for HM Revenue & Customs.

The facts

Mrs O’Hanlon had been employed by HM Revenue & Customs (HMRC) since 1985. She 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. Under HMRC’s sickness policy she was entitled to full pay for a maximum of six months in any period of 12 months, and half pay for a further maximum period of six months, subject to an overriding maximum of 12 months’ paid leave in any four-year period.

Mrs O’Hanlon brought a tribunal claim, arguing that HMRC had failed to make a reasonable adjustment to its sick pay policy so as to enable her to continue to receive full pay while absent. She also claimed that she had been subjected to disability-related discrimination, in that her absence related to her disability and her employer’s failure to continue paying her was not justified.

The tribunal's decision

The tribunal rejected Mrs O’Hanlon’s claim, noting that HMRC had made various adjustments designed to help her to return to work, such as reducing her hours. It was entirely reasonable, in the tribunal’s view, to place limits on the contractual sick pay scheme. If Mrs O’Hanlon succeeded in her claim, HMRC would have to change its sick pay policy in favour of disabled employees generally. This would have significant financial implications and would be likely to create a sense of unfairness between disabled and non-disabled employees.

With regard to the claim of disability-related discrimination, the tribunal found that Mrs O’Hanlon had not been treated less favourably for a reason relating to her disability, because HMRC would have afforded the same treatment to a non-disabled person absent for the same length of time. If, however, there had been less favourable treatment, it was justified.

The EAT's decision

On appeal, the EAT upheld the tribunal’s decision on reasonable adjustments. In the EAT’s view, an employer would only very rarely be obliged, as a reasonable adjustment under the DDA, to maintain full pay for disabled employees during sick leave. The purpose of the Act was to help disabled people to obtain employment and to integrate them into the workforce, not to “treat them as objects of charity”, which might discourage them from returning to work.

With regard to less favourable treatment, the EAT held that the tribunal had erred in comparing Mrs O’Hanlon with a person who was absent for a non-disability-related reason. The correct comparator was someone who was not absent, and who would have suffered no reduction in pay. It followed that Mrs O’Hanlon had been less favourably treated. However, the tribunal had been correct to hold that the failure to maintain her on full pay was justified.

Mrs O‘Hanlon appealed to the Court of Appeal.

The Court of Appeal's decision

Before the Court of Appeal, Mrs O’Hanlon argued that she should have received full pay while absent by reason of disability. Alternatively, she argued that periods of disability-related absence should not be aggregated with periods of absence for non-disability-related sickness, so that each type of absence should independently attract the full entitlement to six months’ full pay followed by six months’ half pay.

With regard to the argument that HMRC’s failure to modify its sick pay policy in one of these ways amounted to a failure to make reasonable adjustments, the Court noted that the only factor relied on was the financial hardship experienced by Mrs O’Hanlon.

On this point, the Court agreed with the EAT that she was not in any different position to others who were absent because of disability-related sickness. It would be wholly invidious for an employer to have to determine whether to increase sick pay by assessing the financial hardship suffered by the employee, or the stress resulting from lack of money – stress which no doubt would be equally felt by a non-disabled person absent for a similar period.

Given this conclusion, it was unnecessary to deal with HMRC’s argument that a reasonable adjustment could never include making an extra payment to a disabled employee, but the Court saw much force in the comments made by the EAT.

Assuming that Mrs O’Hanlon had been less favourably treated – and the Court considered that she had – the other main point on appeal was whether or not the treatment had been justified.

The Court held that the EAT’s conclusion on this point was unassailable. Mrs O’Hanlon argued that HMRC had not considered exercising a discretion in her case but had simply treated the situation as covered by a pre-determined policy. The Court held, however, that even if this were the case, HMRC would inevitably have reached the same conclusion if it had exercised its discretion.

What does it mean for me?

		In the light of this decision, an employee will find it very difficult to claim full pay during disability-related sick leave once any contractual entitlement to sick pay has been exhausted – unless the employer caused the absence in the first place by failing to make reasonable adjustments which would have enabled the employee to remain in work.
		When an employee takes disability-related sick leave, employers should therefore consider making adjustments designed to facilitate a speedy return to work, such as reducing the individual’s hours or agreeing to a change of location, either on a temporary or permanent basis.
		Employers may also wish to consider granting managers a discretion to depart from the organisation’s normal sickness policy when dealing with disabled employees. In this case, there was an element of discretion built into the employer’s sick pay scheme whereby disabled employees could be granted additional paid sick leave in specified circumstances. Although this discretion was not exercised in the claimant’s case, the tribunal treated its existence as a relevant factor in establishing that the sickness policy was reasonable.