Case update (2): Disabilty discrimination – Enhanced pensions

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What do we already know?

We updated you in our August 2017 Newsletter Case update (1) Disability discrimination – unfavourable advantageous treatment on the Court of Appeal’s decision in Williams v The Trustees of Swansea University Pension & Assurance Scheme and another.

In this case the employee argued that because his enhanced pension was based on part-time salary rather than full-time, this was to his disadvantage and so amounted to “unfavourable” and discriminatory treatment.

The Court of Appeal did not uphold the employee’s claim, but rather found that the employee had been treated advantageously in comparison to his non-disabled colleagues.  This was because the only employees entitled to retire early and to receive an enhanced pension, were those who retired through ill-health and who were necessarily disabled within the meaning of the Equality Act 2010.  Further, a disabled person who is treated advantageously because of their disability, but not as advantageously as a person with a different disability, has not been treated “unfavourably” or discriminated against.

The employee appealed to the Supreme Court.

What’s new?

The Supreme Court has upheld the Court of Appeal’s above decision.

Summary:  Was a disabled employee treated unfavourably (and therefore discriminated against) when his enhanced pension on ill-health retirement was based on the salary he earned when working part time due to his disability, rather than his full time salary?

No, says the Supreme Court in Williams v The Trustees of Swansea University Pension and Assurance Scheme, available here.

Facts:  Mr Williams, the employee, was disabled. He suffered from Tourette’s syndrome, obsessive compulsive disorder and depression. He reduced his hours with his employer, Swansea University, in order to better cope with his condition. His pay was reduced accordingly. After his condition deteriorated further he took ill-health retirement at the age of 38.

Under the rules of Swansea University’s Pension Scheme, Mr Williams was allowed to take his accrued pension benefits immediately and without any actuarial reduction for early receipt, rather than having to wait until his normal pension date nearly twenty-nine years later. His benefits were therefore significantly enhanced, in that he was treated as though he had accrued nearly twenty nine years further pensionable service.

Mr Williams brought a disability discrimination claim at the Tribunal under s 15 of the Equality Act 2010. This section allows for claims of “discrimination arising from disability” which occur where the employee is treated “unfavourably” because of something arising in consequence of the employee’s disability, and does not require comparison with an identifiable comparator (whether actual or hypothetical).

Mr Williams argued that, by using his actual part time salary rather than a full time equivalent, the calculation of the enhancement to his benefits for the period after he took ill-health retirement amounted to “unfavourable” treatment and therefore unlawful discrimination. The Tribunal upheld his claim.

The University successfully appealed to the EAT. Mr Williams appealed to the Court of Appeal.

The Court of Appeal agreed with the EAT, finding that:

  • under the pension scheme rules the only employees entitled to retire early and to receive an enhanced pension were those who retired through ill-health and who were necessarily disabled within the meaning of the Equality Act 2010;
  • Mr Williams had been treated advantageously in comparison to non-disabled colleagues and there is no authority for the proposition that a disability discrimination claim can succeed simply because an individual thinks he should have been treated better;
  • the simple fact that Mr Williams was working part-time hours because of his disability could not be enough to require the employer to justify the treatment. If it were, then it would be difficult to see why an employer would not also have to justify the pay it was giving to a disabled claimant who had never been able to work full-time and therefore had applied for and secured a part-time job; and
  • there is no authority for the proposition that a disabled person who is treated advantageously because of their disability, but not as advantageously as a person with a different disability, has a valid claim that they have been treated “unfavourably”. Were that so, it would call into question the terms of pension schemes or insurance contracts which confer increased benefits in respect of particular disabilities, such as those caused by injuries sustained at work, or which make special provision for disability caused by a particular disease, such as cancer.

Mr Williams appealed to the Supreme Court.

The Supreme Court upheld the Court of Appeal’s decision.  In particular it held that it was appropriate in this case to consider:

  • What was the relevant treatment?
  • Was this treatment unfavourable to Mr Williams?

In this case, the relevant treatment was the award of a pension and there was nothing intrinsically ‘unfavourable’ or disadvantageous about that.  If Mr Williams was not disabled, he would not be entitled to an ill-health early retirement pension. Instead, he would be expected to work until the normal pension age before he would qualify. As a result he was being treated more favourably than someone without a disability by being allowed to take his pension early so this could not be said to amount to unfavourable treatment.

Implications: This is a welcome decision for employers and trustees whose pension schemes provide for ill-health early retirement.  It reinforces the view that where an employee has reduced their hours prior to any application to take ill-health early retirement, the employee is only entitled to be compensated at the rate of pay they were receiving at that time. Whilst this might seem harsh on the employee, they are receiving a significant benefit by being permitted to draw a pension early, on what will usually be favourable terms i.e. the ‘net’ impact of the ill-health criteria was to enhance Mr Williams’ position rather than acting to his detriment.