Can I put a cap on compensation?

Background

Mr Parsons and Mr Roberts, the Claimants, were disabled police officers. They both had a “H1 certificate” which entitled them to immediate access to a deferred pension on leaving the police force. They left the police under a “voluntary exit scheme” which also provided them with “compensation lump sums”. However, because they were in receipt of a deferred pension, their compensation was capped at 6 months’ pay, instead of 21 and 18 months’ respectively. If the cap had not been imposed, the Claimants would have collectively received around £90,000 extra in payments.

Employment Tribunal (ET)

The Claimants brought claims against the Chief Constable, successfully arguing that capping their compensation was “discrimination arising from disability” under section 15(1) of the Equality Act 2010.

The ET found that the reason for the application of the 6 months’ cap on compensation was directly linked to the issuing of the H1 certificates which had only been issued because the Claimants were disabled. The cap was therefore found to be unfavourable treatment which arose as a consequence of their disabilities.

The Chief Constable appealed on the grounds that (1) the H1 certificate was not a consequence of the disability; (2) capping the compensation was not discriminatory as they only received the payments because they were disabled (seeking to rely on Williams v Trustees of Swansea University Pension and Assurance Scheme [2018]) and; (3) the treatment was justified as otherwise the Claimants would have received a windfall.

Employment Appeal Tribunal

The EAT dismissed the Chief Constable’s appeal. The EAT distinguished the case from Williams (which found no unfavourable treatment because the treatment, the receipt of a pension, only occurred because he was disabled and paying a pension could not be construed as unfavourable) and found that capping the compensation was “unfavourable treatment” under section 15(1) of the Equality Act 2010. The Chief Constable has not established on the evidence provided that the compensation payments amounted to a windfall.

As to the possession of the H1 certificates, the EAT applied Pnaiser v NHS England and Coventry City Council [2016] and held that the Claimants’ treatment arose as a direct result of the disability. They concluded that possession of the H1 certificates was “something arising in consequence of [their] disability” as the H1 certificates pertained to exactly the same impairments which meant that the Claimants were disabled under the Equality Act 2010.

Comment

This case provides a good example of how section 15 of the Equality Act 2010 works in practice and is helpful guidance for employers dealing with compensation payments.

The decision confirms that preventing a “windfall” may be a legitimate aim, but applying a cap on compensation may not be deemed a reasonable and proportionate way of achieving this aim if it results in the “unfavourable treatment” of employees or, in this instance, police officers.

If you have any questions on the above and how it will affect you, please do not hesitate to get in touch with a member of our employment team.