Case update (1): Disability discrimination – pay protection

Summary: Is it a reasonable adjustment to protect a disabled employee’s pay?

Yes, in certain circumstances, says the EAT in G4S Cash Solutions (UK) Ltd v Powell available here.

Facts:  The employee, Mr Powell, worked for G4S Cash Solutions as an engineer. After a back injury prevented him from doing heavy lifting he was moved to the lower graded role of ‘key runner’, delivering materials to engineers based in different locations. Initially he retained his existing salary. However, after about a year, he was told that the change wasn’t permanent and that his salary was going to be reduced by 10%. Mr Powell was not prepared to accept a lower salary and was ultimately dismissed.

Mr Powell brought claims of unfair dismissal and disability discrimination. Mr Powell argued that his contract had been validly varied so that he was carrying out the key runner role on the engineer pay rate. He also claimed that G4S had failed to make reasonable adjustments by refusing to allow him to work permanently as a key runner at the salary rate of an engineer.

The Tribunal found that that there was no valid variation of contract but that G4S had failed in its duty in relation to make reasonable adjustments.

The EAT held that there had been a valid contractual variation of Mr Powell’s contract when he returned from sickness absence to a changed role and that Mr Powell had consented to the variation.   Also, G4S had failed in its duty to make reasonable adjustments for Mr Powell. There was no reason in principle why an employer cannot be required to protect an employee’s pay as a reasonable adjustment and Mr Powell’s higher rate of pay should have continued indefinitely.  In particular the EAT noted that:

• Protecting an employee’s pay in these circumstances is no more of a cost to an employer than any other form of cost. For example, there may be a choice between keeping the employee in an existing role, paying for support and assistance, or transferring to a new role where there is no support or assistance but the pay is lower. In that situation, it may be reasonable to protect the employee’s pay.
• It will not be an “everyday event” for an employer to provide pay protection but there may be situations where it will be a reasonable adjustment to enable an employee to return to work or remain in work. The financial impact will always have to be considered. In the case of G4S, it had substantial resources and the additional cost of employing Mr Powell was affordable.
• Whether pay protection is a reasonable adjustment will very much depend on the particular facts and circumstances including the cost of making the adjustment, the financial and other resources of the employer and the effectiveness of the higher pay in retaining the employee or getting them back to work.
• It was relevant that G4S had already protected Mr Powell’s salary for a significant period and led him to believe that the key runner role was a long term adjustment.
• The fact that the additional 10% salary cost was affordable for G4S, being a company with significant resources, was taken into account.
• The potential impact on others of an adjustment is not generally relevant when deciding on its reasonableness. G4S stated that they did not continue to pay the engineer rate because of the likely discontent from other employees but this was rejected as an ‘unattractive reason’.

Implications: This decision is important for employers as it shows that it is possible for an employee’s pay to be permanently protected when they are redeployed and that employers should consider carefully their reasons for not protecting pay for disabled employees moving to new roles because of a disability. Cost may be a reason to argue that pay protection is not a reasonable adjustment, but Tribunals will look at this in the context of the employer’s resources and whether or not there would be wider cost or policy ramifications.

However, this decision does not mean that such pay protection will be considered reasonable in every case.  The reasonableness of potential adjustments must be assessed on a case-by-case basis, taking account of the factors set out in the Equality and Human Rights Commission Code (available here) including the costs of making the adjustment and the financial and other resources available to the employer. The EAT also made it clear that an adjustment may cease to be reasonable, for example, if the employer’s economic circumstances change.