Limiting compensation payments may be discriminatory

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If pension benefits are calculated on the reduced hours that an employee works because of their disability the fact it could be calculated in a more generous manner will not be enough to establish unfavourable treatment. In the case of Chief Constable of Gwent Police v Mr S Parsons and Mr D Roberts the question was whether that same principle would apply where a lump sum payment due on termination to a disabled employee was reduced due to their entitlement to an immediate pension? 


Having been certified as unfit to carry out ordinary duties under the Police Regulations the claimants had become entitled to a pension on leaving the force. However rather than leaving they undertook office duties until an opportunity arose for them to leave the police force under a “voluntary exit scheme” which also qualified them for a lump sum payment. Taking into account that they would be entitled to a pension their lump sums were reduced from 21 and 18 months’ pay to just 6 months’ pay. 


It was held that capping the compensation lump sum amounted to “unfavourable treatment” and that there was no reason to bring into account the “deferred pension”. The principles established in relation to the “the award of a pension” did not apply as in this case the employer was “capping the compensation lump sum”. This was clearly “something arising in consequence of [their] disability” and the entitlement to a pension payment had not justified that unfavourable treatment.

Key takeaway point

Employers will need to be wary of reducing or capping entitlements to pay where the reason is linked to the employee’s disability. It will be possible to justify taking that action in some cases where it would otherwise lead to the employees receiving a ‘windfall’. However, there will need to be strong evidence that this would amount to a proportionate means of achieving a legitimate aim which will not be easy for employers to establish.

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