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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> O'Hanlon v Commissioners for HM Revenue & Customs [2007] EWCA Civ 283 (30 March 2007) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2007/283.html Cite as: [2007] EWCA Civ 283, [2007] ICR 1359, [2007] IRLR 404

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Employment Appeal Tribunal (EAT)
Mr Justice Elias, Mr A Harris, Mr M Motture
UKEAT/0109/06/MAA

		Royal Courts of Justice Strand, London, WC2A 2LL
		30 March 2007

LORD JUSTICE HOOPER :

Introduction

1. This is an appeal from the unanimous decision of the Employment Appeal Tribunal ("EAT") dismissing an appeal from the unanimous decision of the Employment Tribunal ("ET") sitting at Bury St Edmunds in which it rejected the Appellant's complaints of disability discrimination.
2. I take the background facts from the decision of the EAT.

3. Mrs. O'Hanlon has been employed by the Respondents, the Commissioners for Her Majesty's Revenue & Customs, since September 1985. She has suffered from clinical depression since 1988. It is accepted that she is suffering from a disability within the meaning of the Disability Discrimination Act 1995.

4. The Appellant started to take long periods of absence from work from 2001. There is an absence of 129 working days between the 4 June and the 20 November 2001. She was allowed to return on a part time basis between the 2 December 2001 and the 18 June 2002. Thereafter, there was a further absence of 84 working days until the 31 October 2002, and a second return on a part time basis from the 1 November 2002, gradually building up to full time from the 2 December 2002. In total, in the four years prior to the 15 October 2002, Mrs O'Hanlon had a total absence of 365 days of sickness, which comprised 320 relating to her disability and 45 of unrelated days of sickness absence.

5. Thereafter, from December 2002 she was only absent for three days between December 2002 and August 2003. That was for gastro-enteritis, and then two days due to an allergic reaction.

6. There was a further period of absence from the 4 September 2003. Part of her difficulty was the commuting involved in travelling to her office in Welwyn Garden City, so the employers transferred her to Hertford with effect from the 3 February 2004. The intention was to assist her because she had found the travelling to Welwyn Garden City a significant impediment.

7. In 2004 there were certain short absences unrelated to disability, but also a period of between three and five days which were attributable to her depression."

3. The respondent submits that an analysis of the appellant's history of absence from work because of sickness/disability tends to show that the appellant returns to work when sick pay is reduced. The appellant does not accept this. She says that the reduction of pay aggravates her condition, and that it tends to drive people back to work when they are still unwell.
4. The ET found:

65. ... In this case, there is no complaint by Mrs O'Hanlon that she has been put at any disadvantage by reason of her disability other than in the reduction of her pay. The evidence before us proves that the employers have not put her under any sort of unfair pressure to return to work from her lengthy absences, apart from the pressure which naturally results from reduced pay. On at least two occasions, they have assisted her return to work by reduced hours gradually built up by agreement. They have further assisted her by the transfer to a location which would reduce the pressures of commuting. It will be recalled that in the discussion about that transfer, the opinion was expressed, and not contradicted, that there was no need to make any special arrangements for her once she was back at work.

The employer's sick pay rules

5. Central to this case are the respondent's sick pay rules. The relevant rules are as follows - I have underlined parts of the rules to emphasise those which are of particular importance :

TG 1.8 – The main contractual rules about sick absence

…

The main contractual rules about sick pay

If you fall ill while working full-time, and you satisfactorily self-certify your absence or let your manager have a satisfactory medical certificate, we will normally allow you to take paid sick absence. You may be allowed:

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 normally to an overriding maximum of 12 months' paid sick absence in any period of four years.

After that you may be paid your equivalent pension rate of pay, or half pay, whichever is the less, unless you have less than two years' pensionable service in which case the absence will be unpaid.

You will not qualify for paid sick absence if, exceptionally, it appears that your illness will prevent you from resuming your duties with us.

TG 5.8 – Additional paid sick absence

In certain circumstances your Manager in consultation with your HR/AOH team may allow you additional paid sick absence after you have used up your normal entitlements at full and half pay. This only applies when you have taken all your paid sick absence due to a long illness or injury and then after a return to work.

You fall ill again with an unrelated and minor illness or injury, or

You later need further sick absence in connection with the original illness or injury – but only for active medical treatment, or for debilitating side-effects for which you need time off work.

In these cases your Manager, in consultation with your HR/AOH Team, can allow you up to 40 days additional sick absence at full pay (including any Statutory Sick Pay to which you are entitled – see TG 5.11.

A further 20 days at full pay may be allowed by your HR/AOH Team for active medical treatment of your original illness or injury – but only where you have returned to work in the meantime and later need to be away from work to receive treatment or recover from its after-effects.

Remember that these concessions are designed to avoid you having to attend work when you are not fully fit to do so. You must apply as soon as you take any time off or as soon as you are aware that you may need to take time off whether in connection with your original illness or injury or in respect of an unrelated minor illness or injury. You will not be allowed to convert unpaid absence or absence at pension rate retrospectively into paid sick absence.

Requests for either of these concessions should be dealt with by HR teams without referral to the Department's Occupational Health Advisers.

TG 16.3 – Pregnancy or disability related absences

If your absences are related to pregnancy, this will not count as unsatisfactory attendance. If your absences are related to disability then these might not count as unsatisfactory attendance if we accept that allowing some additional sickness absence constitutes a reasonable adjustment. In both cases your managers should speak to their Human Resources team for further help unless this has already been obtained.

If Disability Adjustment Leave has been granted to cover your absence, then that absence will not count as unsatisfactory attendance. …

PN 02/03 – Disability adjustment leave

…

Background

The Disability Discrimination Act (DDA) 1995 brought in measures aimed at ending the discrimination that many people with disabilities face. The definition of a disabled person is a person who 'has a physical or mental impairment which has a substantial and long term adverse effect on his or her ability to carry out normal day to day activities'. See appendix for a more detailed definition.

DDA introduced the concept of reasonable adjustments to avoid discrimination against disabled employees or prospective employees. We have a duty to make a reasonable adjustment if any physical feature of the premises occupied by the Department, selection arrangements, working terms and conditions or other arrangements cause a substantial disadvantage to a disabled employee compared with a non-disabled employee or a person with a different disability.

Disability Adjustment Leave (DAL)

TG 4.19 and 5.8 make provision for people to be allowed the time off they need through a mixture of special leave and sickness absence. The introduction of DAL allows us to regularise our arrangements for people with a disability and to improve consistency of application across the Department.

DAL is an example of a reasonable adjustment as it allows people with a disability to take reasonable absences during work time for medical treatment, assessment of a medical condition and assessment of any adjustment required.

Note that DAL is not intended to cover sickness absence.

DAL may be a reasonable adjustment in the following circumstances:

undertaking an assessment of the effects of the impairment on the individual's ability to carry out day-to-day activities, and identification of potential adjustments (e.g. by BMI, Disability Service team or other specialist such as RNIB)

treatment/training to help manage the effects of the disabling condition (e.g. medical appointments, short term hospital treatment, training to use a guide dog), which cannot be arranged outside normal working hours.

awaiting procurement of the necessary equipment and training for its use, including replacements or repairs.

to allow time to check whether there is any suitable alternative work if other adjustments to the current job prove impossible or unreasonably difficult.

6. In a letter dated January 2003, the Cabinet Office gave more guidance about "Attendance management for disabled staff", HRDG (Main) (03) The letter included the following:

The Use of Trigger Points and Their Possible Legal Implications

10. The use of reference points to trigger management action may discriminate against employees with an accepted disability. Departments should make distinction between those absences due to general ill health and those which are directly related to an individual's disability, seeking advice from their occupational health provider on what level of sickness absence can be expected and any increase in the reference points for triggering administrative action where a long-term condition or disability has been identified.

11. Whether the use of trigger points constitutes discrimination is not clear and legal opinion is divided on the issue. There has been case law which states that employers are not under a duty to treat disabled employees more favourably than other employees. However, in practice any legal liability can turn upon the facts of the case and whether reasonable adjustments have been considered. Employers who mechanically apply trigger points may leave themselves open to a claim from an employee who has suffered a financial loss (e.g. they have been reduced to half pay under an organisation's contractual sick pay limits) or been dismissed.

7. In 2005 further guidance was given by the Cabinet Office:

HRD Main (05)

...

MANAGING ATTENDANCE FOR DISABLED STAFF

Departments and agencies were provided with best practice guidance in January 2003 for managing the attendance of disabled staff (HRD Main 03 (02), Small 03 (01), NDPB 03 (01)). This advised departments and agencies that they might leave themselves open to claims of discrimination if sickness absence procedures were followed mechanically.

The guidance advised that absences which were as a result of the individual's disability should be disregarded when considering trigger points for inefficiency action or the entitlement to contractual sick pay. Absences as a result of a condition not relating to the individual's disability should be considered to be counted in the usual way. Departments were further advised that they might wish to consult their Occupational Health Advisor to confirm whether a specific trigger point should be set for the individual concerned.

Some departments also have a provision for the entitlement to Disability Leave. This can be used when a disabled individual is fit to return to their duties but as a result of a reasonable adjustment not having been made is unable to do so. Departments and agencies might wish to consider introducing this provision.

8. In June 2005 the Cabinet Office issued revised guidance.

AMENDED GUIDANCE ON MANAGING ATTENDANCE FOR DISABLED STAFF

…

Background

1. Several departments have sought clarification following the issue of HRDG (Main) (05) 16 [see above] on managing attendance for disabled staff. This is to clarify that departments should not automatically disregard any sickness absence related to a disability when considering whether inefficiency/unsatisfactory attendance procedures should be put in place or when reducing pay when either full or half pay has been exhausted as a result of absence."

9. In the ET it was the appellant's case that the operation of the sick pay scheme was unlawful in relation to those absent from work on the grounds of disability. As the EAT said:

64. ... [I]t is plain that the case advanced before the employer was that the policy was unjust to the disabled (or at least those who would have to take disability related sickness absences).

10. This case has now been abandoned.
11. There is now, rightly in my view, no challenge to the rules themselves. It seems to me that the sick pay rules provide for the generous, fair and flexible treatment of those suffering from a disability. As I understand it, the rules form part of a package of obligations and responsibilities on the employer and employees worked out between the employer and the two Unions who represent public service employees.
12. What is now said is that the rules were applied to the appellant in a discriminatory manner. It is important to note, in this respect, that, as the ET found:

66. The Respondent's policies are not rigid and inflexible. They do contain some provisions for the exercise of discretion to the benefit of disabled people. An obvious example is disability adjustment leave.

A summary of the appellant's submissions

13. It is submitted now that the appellant, as a reasonable adjustment, ought to have received full pay whilst absent for reasons of disability after the expiry of the six month period and whilst such payment constituted a reasonable adjustment. The case put to the ET was wider:

72. ... The step proposed by Mr Toms is that for however long Mrs O'Hanlon is absent from work, she should always receive full pay.

14. That was an unrealistic case because of the doctrine of frustration, if for no other reason. That doctrine, so it appears to me, is reflected in the sick pay rules TG 1.8 (set out above):

You will not qualify for paid sick absence if, exceptionally, it appears that your illness will prevent you from resuming your duties with us.

15. If the appellant was entitled to full pay then the amount of money owed to her in respect of the pre-ET claim period would be in the region of £3,000.00. As the ET said

21. The sum which would be payable to Mrs O'Hanlon to restore her to the position she would have been in if she had received full pay instead of reduced pay is £4,722.87, subject to tax and national insurance, which would make her net claim £3,261.77.

16. I shall call this argument the "full pay argument".
17. It was submitted in the alternative that, as a reasonable adjustment, periods of absence for a reason of disability should not be aggregated with a period of absence for non-disability related sickness. To put it another way the appellant would have been entitled in any four year period to six months at full pay during any absence due to her disability, six months at full pay during any absence for non-disability related sickness, six months at half pay during any absence due to her disability and six months at half pay during any absence for non-disability related sickness.
18. I shall call this the "non-aggregation argument".
19. Mr Jeans QC submits, with some force, that if the appellant is right, employers minded to introduce sick pay schemes or to vary those already introduced, will be tempted to keep at a minimum the period during which employees receive full pay whilst absent for reasons related to their health. He submits that if the appellant's arguments are correct the generous employer is penalised.
20. The ET put the arguments in this way:

32. Reasonable adjustments would be:

(1) Disregard her disability and pay her in full for any disability related absence.

(2) Separate disability and non-disability absences and pay her in full for the latter absences. The adjustments are reasonable because.

(1) They are possible.

(2) They are affordable. The Respondent's arguments on costs have not been proved. Furthermore the Respondent has the resources to afford them.

(3) The adjustments would alleviate the disability.

(4) The Respondent must deal with reasonableness on a case by case basis, and not have a blanket policy.

(5) The Respondent already pays for longer periods in some situations, such as an injury at work.

Statutory provisions

21. Before examining the arguments, it is necessary to set out the relevant statutory provisions in the Disability Discrimination Act 1995 ("the DDA").

4A Employers: duty to make adjustments

(1) Where –

(a) a provision, criterion or practice applied by or on behalf of an employer, or

(b) any physical feature of premises occupied by the employer

places the disabled person concerned at a substantial disadvantage in comparison with persons who are not disabled,

it is the duty of the employer to take such steps as it is reasonable, in all the circumstances of the case, for him to have to take in order to prevent the provision, criterion or practice, or feature, having that effect… .

3A Meaning of "discrimination"

(1) For the purposes of this Part a person discriminates against a disabled person if -

(a) for a reason which relates to the disabled person's disability, he treats him less favourably than he treats or would treat others to whom that reason does not or would not apply, and

(b) he cannot show that the treatment in question is justified.

(2) For the purposes of this Part, a person also discriminates against a disabled person if he fails to comply with a duty to make reasonable adjustments imposed on him in relation to the disabled person.

(3) Treatment is justified for the purposes of subsection (1) (b) if, but only if, the reason for it is both material to the circumstances of the particular case and substantial.

(4) But treatment of a disabled person cannot be justified under subsection (3) if it amounts to direct discrimination falling within subsection (5).

(5) A person directly discriminates against a disabled person if, on the ground of the disabled person's disability, he treats the disabled person less favourably than he treats or would treat a person not having that particular disability materially different from, those of the disabled person.

(6) If, in a case falling within subsection (1), a person is under a duty to make reasonable adjustments in relation to a disabled person but fails to comply with that duty, his treatment of that person cannot be justified under subsection (3) unless it would have been justified even if he complied with that duty.

18B: Reasonable adjustments: supplementary

(1) In determining whether it is reasonable for a person to have to take a particular step in order to comply with a duty to make reasonable adjustments, regard shall be had, in particular to:

(a) the extent to which taking the step would prevent the effect in relation to which the duty is imposed;

(b) the extent to which it is practicable for him to take the step;

(c) the financial and other costs which would be incurred by him in taking the step and the extent to which taking it would disrupt any of his activities;

(d) the extent of his financial and other resources

(e) the availability to him of financial or other assistance with respect to taking the step;

(f) the nature of his activities and the size of his undertaking.

(2) The following are examples of steps which a person may need to take in relation to a disabled person in order to comply with a duty to make reasonable adjustments –

(a) making adjustments to premises;

(b) allocating some of the disabled person's duties to another person;

(c) transferring him to fill an existing vacancy;

(d) altering his hours of working or training;

(e) assigning him to a different place of work or training;

(f) allowing him to be absent during working or training hours

for rehabilitation assessment or treatment;

(g) giving, or arranging for, training or mentoring (whether for

the disabled person or any other person);

(h) acquiring or modifying equipment;

(i) modifying instructions or reference manuals;

(j) modifying procedures for testing or assessment;

(k) providing a reader or interpreter;

(l) providing supervision or other support."

22. There is no doubt that the Act envisages a measure of positive discrimination in favour of those suffering from a disability (see eg Baroness Hale in Archibald v. Fife Council [2004] UKHL 32, [2004] ICR 954 at para 57).

The three kinds of disability discrimination

23. I adopt what the EAT said about the three kinds of disability discrimination:

20. Section 3A identifies three kinds of disability discrimination. First, there is direct discrimination. This is the situation where someone is discriminated against because they are disabled. This particular form of discrimination mirrors that which has long been found in the area of race and sex discrimination. As with other forms of direct discrimination, such discrimination cannot be justified. Here, where all employees are subject to the same rules irrespective of their disability, there can be no basis for a claim of direct disability discrimination and none is alleged.

21. Second, there is disability related discrimination: section 3A(1). This is in some respects similar to indirect discrimination found in other discriminatory legislation, but there is no requirement here that the discrimination should have a disparate impact on the disabled as a body. It is enough that the employee is treated less favourably for a reason related to his or her particular disability. This form of discrimination can be justified. However, justification can only be established if the employer shows that the reason for the treatment is both material to the circumstance of the particular case and substantial: section 3A(3).

22. Third, there is the failure to make reasonable adjustments form of discrimination in sub-section (2). Here, the employer can be liable for failing to take positive steps to help to overcome the disadvantages resulting from the disability. However, this in only once he has a duty to make such adjustments. That duty arises where the employee is placed at a substantial disadvantage when compared with those who are not disabled.

23. There is a close relationship between these two latter forms of discrimination. Section 3A(6) provides that treatment can only be justified under sub-section (1) if it would have been justified even if the employer had complied with any duty to make reasonable adjustments. It follows that logically it makes sense to consider the question of reasonable adjustment disability discrimination first. That was made clear by Lord Rodger of Earlsferry in the case of Archibald v Fife Council [2004] ICR 954 para.32, a case which we consider below.

The full pay argument- reasonable adjustments

24. As I have said, the appellant submits that she was discriminated against because she did not receive full pay whilst absent for reasons of disability after the expiry of the six month period
25. I start with the employer's duty to make adjustments, a duty which only arises where the employee is placed at a substantial disadvantage when compared with those who are not disabled. The respondent argues that the claimant was not placed at a substantial disadvantage. I return to that argument later in the judgment. For present purposes I shall assume that the appellant was placed at a substantial disadvantage.
26. I have already shown that some reasonable adjustments were made and that the appellant claims that she has been put at any disadvantage by reason of her disability only because of the reduction of her pay.
27. The EAT described the ET's conclusions on this aspect of the case in the following way:

44. The Tribunal made certain preliminary observations before focusing on the questions we have set out.

45. First, they noted that the statutory provisions of the Code of Practice are aimed to assist disabled people to return to work or to remain at work. They are not, in general, designed to encourage people to remain away from work. In this case, as the Tribunal noted, the employers had made adjustments on three occasions to assist the return to work of this Appellant. They had twice reduced her hours so as to enable her to come back to work without facing the immediate strain of full time employment, and they changed her location so as to reduce the pressures from commuting. They also noted that it was not suggested in any way that her absence could be attributed to any failure on the part of the employer to take steps to assist her in her return to work, and they observed that although any financial pressures might be a detriment to the employee, at the same time they also amount to an incentive to return to work.

46. The Tribunal then concluded that the pay scheme did place the Claimant at a substantial disadvantage. ...

47. However, they went on to find that the Respondents had taken such steps as were reasonable in all the circumstances. They first identified the various steps that had been taken to assist the disabled to overcome the disadvantages resulting from their absence as follows (para 70):

"For the reasons we have set out in our preliminary comments, it seems to us that we must consider this issue in the broad context of the range of the Respondent's policies. The principal ways in which the Respondents have sought to reduce the financial disadvantages of long term absence are two fold. Firstly, they have done all they can to enable Mrs O'Hanlon to return to work so that her absences are no longer than they need to be. Secondly, they have not added to her causes of depression by the threat of any disciplinary proceedings."

48. They then further analysed the issue of reasonableness having regard to all the factors identified in section 18B as follows (paras 71- 72):

"We accept that the Respondents are entitled to have a pay policy based on the fundamental premise that employees should normally be paid for the work they do. It should not be treated as a normal obligation on an employer to pay people when they are absent from work. Once a scheme is introduced and operated which provides the benefit of full pay to those who are absent from work, it is entirely reasonable to have limits placed upon it, especially when those limits are graduated so that there is a reduction to half pay, and then a lower rate of pay, rather than a sudden absence of pay. This scheme is also reasonable in that it contains, as we have noted, provisions for the exercise of discretion in clearly defined circumstances.

It is appropriate to this point to remind ourselves of the provisions of section 18B, taking each of the relevant subparagraphs:

(a) The step proposed by Mr Toms is that for however long Mrs O'Hanlon is absent from work, she should always receive full pay. The extent to which that step would prevent the effect in relation to which the duty is imposed is a mixture. On the one hand, she would suffer no financial detriment whatsoever, but on the other hand she would have no incentive to return to work and earn her salary. We do not see that this is a desirable outcome.

(b) The extent to which it is practicable for the Respondent to take that step depends on how the cost is measured. If we restrict the cost in respect of Mrs O'Hanlon alone, then it is comfortably affordable by the Respondents. However, that is an unrealistic perspective on this factor. There would be no reason to withhold from all disabled employees the same benefit being afforded to Mrs O'Hanlon. The Respondents would have to change their pay policy, either to provide the same benefits to all disabled people; or to create an area of discretion for managers to allow some employees to have such benefits, and others not to receive them. There would therefore be the potential for animosity and a sense of unfairness as between disabled and non disabled employees.

(c) In respect of those accepted to be disabled it can be difficult, as the evidence in this case revealed, to distinguish between absence related to the disability and that not so related. There may be concurrent causes for absence or over lapping symptoms.

(d) Subparagraphs (c), (d) and (e). We run these together, in the particular circumstances of this case. Since the outcome of providing full pay to Mrs O'Hanlon for any period of time for which she is absent from work because of her disability would involve a change to the overall policy, and therefore affect a much larger group of employees, the true financial costs are those which have been put forward by the Respondents, as being in the millions of pounds, and cannot rationally be limited to the individual claim of Mrs O'Hanlon. Furthermore, an additional expenditure of that scale will clearly disrupt other activities, since inevitably, the funds to pay for it would have to come from some other part of the budget and the activities of the Respondent department. It is, of course, obvious that the financial resources of the Respondent could, in broad terms, afford such changes, and if they were necessary because of the legal obligations on the Respondent, then it would be money well spent. It is equally true that the availability of financial assistance with respect to taking this step would be one part of the overall picture of the way in which government, as a whole, distributes its expenditure.

(f) The nature of the activities of the Respondent, and the size of the undertaking, obviously provide the basis for a very large budget. However, on the evidence before us from Mr Grace, we must also take into account that at the level at which Mrs O'Hanlon works, if she is not there to do her job then someone else has to do it for her. If that position is expanded to take account of all of those who are disabled being absent from work, on full pay, then the overall effects on other employees are significant. We are bound to take into account that fact that it is government policy at present that the size and cost of the civil service should be confined, so far as possible. We should not proceed on the basis that absences will be dealt with simply by hiring in temporary staff."

49. They therefore concluded that although Mrs O'Hanlon was placed at a substantial disadvantage, the employers had made reasonable adjustments and it was not reasonable to expect them simply to pay the salary in full.

28. The EAT summarised the grounds of appeal and concluded:

Did the employers make reasonable adjustments?

58. Mr Toms accepts that the Tribunal set out in some detail the reasons for their finding that it was not a reasonable adjustment. But he makes a number of detailed submissions taking issue with some of the particular matters identified by the Tribunal. For example, he says that the Tribunal were not entitled to conclude that it would sometimes be difficult to distinguish disability and non-disability absences, or that the differential treatment would be likely to sow dissension amongst the staff; that the Tribunal erred in saying that there was normally no obligation to pay sick pay for employees absent from work, it being contended that there is generally a presumption that sick pay will be paid (Mears v Safecars Securities Ltd [1982] IRLR 183); that it was unjustified to say that making full payments would discourage a disabled employee from returning to work; and that the evidence of Mr Grace was suspect and could not properly be relied upon.

59. The Respondent contends that the Tribunal was fully entitled to refer to the matters which it did. In particular, since the purpose of adjustments is to help employees to obtain work or remain in employment, it was material to note that the proposed adjustment here would have the opposite effect and would provide a disincentive to return. The observation that giving management a discretion to determine whether an absence was disability related or not could sow dissension was plainly a proper one, and the Tribunal cannot be criticised for so commenting. It was for the Tribunal to give such weight to Mr Grace's evidence as it thought appropriate. Finally, Mr Craig submits that the Tribunal was in fact right to say that the default position is that in the absence of an express term there is no right to sick pay.

60. We reject these grounds of appeal. In our judgment these were all matters to which the Tribunal could properly have regard. The central issue went to the cost, and on the whole these matters were relatively peripheral, but they were not immaterial. The Tribunal may arguably have erred in its analysis of sick pay, but whether it did or not – and the case law on the common law right to sick pay is not entirely easy to interpret, and it is in particular far from clear that there is a right to full pay indefinitely - it plainly had only the most marginal impact on the Tribunal's analysis. The question of whether any reasonable adjustment was required over and above what had already been provided depends on an objective assessment of what could be done to ameliorate the disadvantage in fact created. The fact - if it be a fact - that there would have been no disadvantage if the common law rules had applied does not assist in that analysis. The Tribunal had to deal with the case before it, focusing on the sick pay rules which did in fact create a disadvantage.

61. The argument that the Tribunal was not entitled to rely on the evidence of Mr Grace is in our view hopeless. The Tribunal observed that Mr Grace himself recognised certain limitations in his evidence, but they were fully entitled to accept that evidence as reliable and providing them with some, albeit inevitably general, information about the cost implications of the Appellant's argument.

Two broader challenges

62. Apart from these detailed points, Mr Toms made two broader challenges to the Tribunal's analysis. First, he contended that the Tribunal should only have focussed on the particular needs of this employee. Accordingly, his original submission was that the wider cost implications had effectively to be ignored. The financial implications for Mrs O'Hanlon should have been considered quite independently of any other similar claims which might follow a successful challenge.

63. Subsequently Mr Toms modified his argument and accepted that it is in principle appropriate for an employer, faced with a claim of this kind, to have regard to the cost of applying the policy across the board. But he submitted that even if there is a proper justification for adopting such a policy as a general rule, it would still be necessary in each case to consider the individual circumstances. He contended that this was not done on this occasion; the employer merely said that its policy precluded the payment claimed, and no further particularised assessment was made. He suggested, for example, that the employers ought to have considered how long the anticipated absence might be (on the assumption that it would be more justified to make a payment if the prognosis was for a long absence); what hardship the employee was suffering as a result of the reduction in pay; and whether this might have been causing any additional stress.

64. We accept of course that in the usual case the focus must be on the particular disability and the steps taken to alleviate the disadvantages to the individual. But that is because each case is generally unique. The adjustments depend on the particular way in which the disability manifests itself. Here it is plain that the case advanced before the employer was that the policy was unjust to the disabled (or at least those who would have to take disability related sickness absences). It was suggested that she would suffer hardship as a result of the reduction in pay, but it was not alleged that she was in any essentially different position to others who were absent because of disability related sickness. In these circumstances, where the employers responded to the claim as it was advanced, it would be quite unjust and unrealistic to say that the employers should now be found to have failed to establish justification because they did not have regard to other unstated factors relating to this Appellant. In any event, it seems to us that it would be wholly invidious for an employer to have to determine whether to increase sick payments 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.

...

Discussion: is the claim for enhanced sick pay ever sustainable?

67. In our view, it will be a very rare case indeed where the adjustment said to be applicable here, that is merely giving higher sick pay than would be payable to a non-disabled person who in general does not suffer the same disability related absences, would be considered necessary as a reasonable adjustment. We do not believe that the legislation has perceived this as an appropriate adjustment, although we do not rule out the possibility that it could be in exceptional circumstances. We say this for two reasons in particular.

68. First, the implications of this argument are that Tribunals would have to usurp the management function of the employer, deciding whether employers were financially able to meet the costs of modifying their policies by making these enhanced payments. Of course we recognise that Tribunals will often have to have regard to financial factors and the financial standing of the employer, and indeed section 18B(1) requires that they should. But there is a very significant difference between doing that with regard to a single claim, turning on its own facts, where the cost is perforce relatively limited, and a claim which if successful will inevitably apply to many others and will have very significant financial as well as policy implications for the employer. On what basis can the Tribunal decide whether the claims of the disabled to receive more generous sick pay should override other demands on the business which are difficult to compare and which perforce the Tribunal will know precious little about? The Tribunals would be entering into a form of wage fixing for the disabled sick.

69. Second, as the Tribunal pointed out, the purpose of this legislation is to assist the disabled to obtain employment and to integrate them into the workforce. All the examples given in section 18B(3) are of this nature. True, they are stated to be examples of reasonable adjustments only and are not to be taken as exhaustive of what might be reasonable in any particular case, but none of them suggests that it will ever be necessary simply to put more money into the wage packet of the disabled. The Act is designed to recognise the dignity of the disabled and to require modifications which will enable them to play a full part in the world of work, important and laudable aims. It is not to treat them as objects of charity which, as the Tribunal pointed out, may in fact sometimes and for some people tend to act as a positive disincentive to return to work.

70. Mr Toms relied upon the Meikle case, to which we have made reference, in support of his case that payments are appropriate. But in fact a careful analysis of that case suggests that it is, if anything, at odds with his claim. The claimant was a teacher who suffered from deteriorating vision. The employers were asked to make various adjustments to accommodate her difficulties, such as providing enlarged written materials and providing her with more non-contact hours to enable her properly to prepare her classes, but they failed to do so. She was absent for lengthy periods because of eyestrain and was suspended because of these absences. She was put on half pay because, as in this case, the policy of the employers was to reduce the pay after a certain length of sickness absence. She claimed, amongst other matters, that the failure to keep paying her full pay when she was absent sick constituted a failure to make a reasonable adjustment and therefore constituted a breach of the Disability Discrimination Act.

71. It is however, important in our view to see exactly how her case was put to the Tribunal, as summarised by Keene LJ in the Court of Appeal (para 55):

"In the present case Mrs Meikle claimed that the reduction in sickness benefit to half-pay because of her absence from work amounted to both forms of disability discrimination. The cause of her absence from work was the employer's failure to make reasonable adjustments and the placing of her on half-pay put her at a substantial disadvantage. A reasonable adjustment then would have been to retain her on full pay, by way of sickness benefit, but the employer failed to comply with its section 4A duty and made no such adjustments. That was unjustified and so there was section 3A(2) type discrimination. In addition, there was "direct" section 3A(1) discrimination, in that putting her on half-pay was less favourable treatment for a disability related reason, and this was unjustified".

(We have substituted the current statutory provisions, and note that when this decision was reached a failure to make reasonable adjustments could be justified, but that is no longer the case.)

72. The Employment Tribunal held that there could be no such discrimination because the payment of sick pay fell outside the scope of section 6 (now section 4) by virtue of section 6(11) (now 4(11)). It is not necessary to rehearse the arguments about that subsection. Suffice it to say that the Court of Appeal agreed with the EAT that this was a misconstruction of that sub-section; it did not apply to payments made directly from the employer to the employee. Accordingly, reasonable adjustments had to be made even where the effect of failing to do so was to affect the level of sick pay.

73. The EAT had upheld the appeal. The employers conceded that the reduction to half pay constituted less favourable treatment by reason of her disability. The question was whether it was justified. Because of what is now section 3A(6), that had to be considered on the assumption that any relevant reasonable adjustments had been made. Had they been made in this case, Mrs Meikle would not have been absent for anything like as long as she was and the reduction in pay would not have occurred. Accordingly, the EAT held that the employers were not justified in reducing the pay to half pay. The Court of Appeal agreed with this analysis. (Query whether an alternative analysis might have been that there was a failure to make reasonable adjustments and the loss flowing from that breach was the loss of pay flowing from the fact that she was absent sick.)

74. It is important to note, however, that the Court did not find that the payment of full pay was a reasonable adjustment independently of the other specific adjustments which ought to have been made and would have resulted in the employee returning to work without having to take such lengthy absences. It was never suggested that the adjustment lay simply in granting full pay. Liability arose because of the failure to make reasonable adjustments to accommodate her back into the classroom. This had the knock-on effect of rendering the failure to give her full pay unjustified. Admittedly there was no express finding that the case could not have been put in that way, but it was not even suggested that this might have been a more straightforward route.

75. For all these various reasons, in our view the Tribunal's decision on this aspect did not display any material error of law, and this part of the appeal fails.

29. I start with paragraph 64 of the EAT's judgment. It is in that paragraph that the EAT points out that the case advanced before the ET was that the employer's policy was unjust to the disabled (or at least those who would have to take disability related sickness absences). That case, as I have pointed out, has now been abandoned. The EAT accepted that it was argued before the ET:

that the appellant would suffer hardship as a result of the reduction in pay, but it was not alleged that she was in any essentially different position to others who were absent because of disability related sickness.

30. That conclusion that it was not alleged that she was in any essentially different position to others who were absent because of disability related sickness was very much in issue before us. I posed the question: "Had the appellant before the ET submitted that there were particular reasons why the application of the rule providing for reduction from full pay after six months disability related absence would amount to discrimination?" Miss Williams submitted that she had. Mr Jeans submitted that she had not. If Mr Jeans is right, then this part of the appeal is, in my view, doomed to failure.
31. We were taken in some detail through the documents.
32. On 20 September 2004 the appellant wrote:

TG 5.8 Additional paid sick absence

As you will be aware from my records due to a long-term illness covering a period of approximately 4 years I no longer get paid for sick leave.

I confirm that I still suffer from depression and still on medication. As you will also be aware I am covered by the Disability Discrimination Act.

Not being paid during periods of illness can only add and does, to my illness. I feel that financial worries are making matters worse.

It has been brought to my attention that sick pay can be extended for a period of up to 40 days. I confirm that as in TG 5.89 the illnesses have been unrelated to my depression.

I would ask that you consider extending my sick leave by 40 days at full pay and making the necessary amendments to the deductions that have already been made from my salary.

33. On 24 September 2004 the respondent replied:

I am afraid it is not possible to allow the additional paid absence referred to at TG5.8 retrospectively. However, I am able to allow up to 40 days paid sickness absence in the future for absences unrelated to your depression.

I have copied this letter to your manager who will ensure that Human Resources is advised promptly of any future absences in order that we may ensure that your pay is amended appropriately.

34. This letter accurately stated the rule that additional paid absence cannot be allowed retrospectively. It was no part of the appellant's case before the ET that the application of this part of the rule to her was itself unlawful discrimination.
35. On 22 April 2005 Chris Simpson of the Public and Commercial Services Union wrote to the respondent:

Acting on advice from PCS HQ I wish to submit an equal opportunities complaint on behalf of Mrs Kate O'Hanlon (East Herts West Essex C) Hertford Office. Kate has suffered from clinical depression on and off since she was 22 years old. Since 2001 Kate has suffered some particularly severe episodes which resulted in 6 months off in 2001 and 2002 and a period of six weeks in 2003. Due to the length of her sickness absences she is now being paid at pension rates of pay. During the period March 2001 and May 2004 Kate has actively sought help for her depression from her GP, a psychiatrist, psychologist therapist and counsellor. Kate has been covered by the DDA since 2002.

...

Our desired outcome from this complaint would be that said reasonable adjustment be made and any entitlement to full pay be calculated, and that restitution be made to Kate as necessary.

36. There was then a meeting on 22 June 2005. At the meeting the appellant put forward the non-aggregation argument (to which I return later) and said:

that being on less that full pay puts her under pressure. This is an additional stress feeding into her depression. If she did not have the financial worry, it would ease the pressure.

37. Following a meeting the respondent, on 13 July 2005, replied to the letter in the following way:

Thank you for agreeing the notes of our meeting. I have now had time to consider all the information and am in a position to make my decision.

Your PCS representative, Rose O'Mahoney, wrote to me 24 February and submitted an equal opportunities complaint on your behalf.

Your complaint was that you suffered depression and as a result of this illness you had had six months off in 2001 and 2002 and six weeks in 2003. Due to the length of your sick absence, you were now being paid at pension rate. You are protected by the Disability Discrimination Act and you ask that as a reasonable adjustment the Department separates your disability related sick absence so that it does not affect your sick absence records or your entitlement to sick pay.

Your desired outcome would be that this reasonable adjustment be set in place, any entitlement to full pay be calculated and restitution be made as necessary.

Under normal circumstances on an Equal Opportunities complaint, I would have arranged for a trained Equal Opportunities investigator to be appointed. The investigator would have interviewed yourself and any other person relevant to the complaint and sought to obtain documentary evidence to corroborate the facts. The investigator would then provide me with a report pulling together the evidence to support your case and that which conflicts before I made my decision. As I explained to you at our meeting, I don't believe there is any dispute as to the facts, so the matter has not been investigated in this way. Thank you for agreeing my approach.

I wrote to Rose, inviting you to meet me to make any oral representations before I came to my decision. Unfortunately, this meeting was postponed on one occasion as Rose had urgent business that had cropped up unexpectedly but we finally arranged a date after a couple of unsuccessful attempts on my part on 23 June 2005.

I have considered carefully the case you put forward to me at that meeting and I can see that you have had to overcome a lot of difficulties in managing your illness and this has been distressing for you. I accept that you are undertaking all the treatment that you feel you can manage at this time.

You will be aware that it is not Departmental policy to separate and distinguish disability related sick absence and treat it differently for absence record and pay purposes.

...

On that basis I am unable to uphold your complaint that you have been discriminated against. I know that this will be disappointing for you.

38. There is an undated grievance form, in which the appellant wrote:

I have been suffering from clinical depression on and off since I was 22 years old. In the last few years I've suffered from quite severe episodes. This has resulted in me having a considerable sickness absence record, and I no longer get paid for sick leave. ...

My desired outcome is that ... my absences for my depression are not included in my overall sickness absence. The knock on effect of you not doing this causes me more stress and financial hardship.

39. The appellant made reference in this document to an earlier case.
40. In her ET claim form the appellant said that she felt that it was unfair for her to be penalised for disability related absences and "I'm struggling financially because of this".
41. In her written statement she said on this topic:

10. I think that the Respondent's policy of including disability related absences in calculating sick pay, which is subject to a copy of 365 days in a 4 year period, is discriminatory and very unfair. Someone in my position is put in a very difficult situation. After exhausting their entitlement to six months at full pay and half pay for a further six months, should they take any time off for up to three years afterwards the time taken will not count towards their service. In addition, they will only be paid at the pension rate, rather than at the full rate. Essentially I have been penalised as a result of my disability.

11. I recognise that the Respondent's sickness policy permits further paid sick leave on a discretionary basis. The important word is discretion – it is not a contractual right and a person with a disability cab still be left vulnerable or subject to detriment, as I have been.

16. I also believe that I should have been paid my normal salary for the periods of absence which were related to my disability. I believe the Respondents should have made a reasonable adjustment to the sick pay policy to pay me for any disability related sickness.

17. I do not believe that my disability related absences should be included in the calculation of my sickness absences. I consider their inclusion in the calculation to be discrimination contrary to the Disability Discrimination Act 1995. I am experiencing financial hardship as a result of this discrimination which places me under additional pressure. I find that the stress caused by the additional pressure feeds into my depression. (Underlining added)

42. As one can see, the statement contains an attack on the sick pay rules in so far as they apply to all disabled employees. The only reason given for not applying the sick pay rules to the appellant herself was the additional pressure placed on her by financial hardship feeding into her depression.
43. The skeleton argument prepared by Mr Toms for the ET does not, it is agreed, set out any particular reason why the application of the rules discriminated against the appellant personally as opposed to all disabled employees.
44. It is clear from the ET's reasons that it was submitted that the Respondent must deal with reasonableness on a case by case basis, and not have a blanket policy. That is not the same as setting out the particular reasons why the policy should not have applied to the appellant.
45. In my view the only particular feature put forward on behalf of the appellant was that of financial hardship. I agree with the EAT that it would be quite unjust and unrealistic to say that the employers should now be found to have failed to establish justification because they did not have regard to other unstated factors relating to this appellant.
46. As to the particular feature I agree with what the EAT said about it:

64. ... It was suggested that she would suffer hardship as a result of the reduction in pay, but it was not alleged that she was in any essentially different position to others who were absent because of disability related sickness. ... [I]t seems to us that it would be wholly invidious for an employer to have to determine whether to increase sick payments 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.

47. Given my agreement with the EAT on this point, the appeal on the full pay argument must fail. In the light of that I shall deal only briefly with the other submissions made by Miss Williams.
48. She reiterates the criticism made before the EAT of the ET's comment: "It should not be treated as a normal obligation on an employer to pay people when they are absent from work." She referred us to cases in which courts had to decide whether a particular contract of employment required an employer to pay their employees even though absent from work because of sickness. Those cases have nothing to do with the point being made by the ET. The ET was referring to the fact that it is for the employer to decide whether or not to include in a contract of employment an express obligation upon the employer to pay employees during periods of absence for sickness and, if so, how much.
49. She criticises the ET for saying, and the EAT for accepting, that payment for disability related absences would provide a disincentive to return to work. The ET said about the full pay argument as presented by Mr Toms:

On the one hand, she would suffer no financial detriment whatsoever, but on the other hand she would have no incentive to return to work and earn her salary. We do not see that this is a desirable outcome.

50. Miss Williams argues that there was no basis for asserting that. The view on this issue of two Tribunals (the ET and the EAT) which included employer and employee representatives, is entitled to considerable respect and I do not accept that the conclusion is one which no reasonable tribunal could adopt.
51. Miss Williams criticises the passage in the ET's determination in which the ET said:

The Respondents would have to change their pay policy, either to provide the same benefits to all disabled people; or to create an area of discretion for managers to allow some employees to have such benefits, and others not to receive them. There would therefore be the potential for animosity and a sense of unfairness as between disabled and non disabled employees.

52. She points out that the Code of Practice refers specifically to the danger of an employer being influenced by the improper pressure of employees faced by a situation in which a disabled employee is receiving an advantage not shared by other employees. Paragraph 5.22 states:

It is unlikely to be a valid defence to a claim under the Act that staff were obstructive or unhelpful when the employer tried to make reasonable adjustments.

53. The EAT rejected this criticism.
54. The Code does not prevent the employer from taking into account anticipated legitimate concerns. Again, the view on this issue of two Tribunals is entitled to considerable respect and I do not accept that the conclusion is one which no reasonable tribunal could adopt.
55. Miss Williams criticised the following passage in the ET's determination:

In respect of those accepted to be disabled it can be difficult, as the evidence in this case revealed, to distinguish between absence related to the disability and that not so related. There may be concurrent causes for absence or over lapping symptoms.

56. The EAT rejected this criticism made to it by Mr Toms. Miss Williams points to the considerable health resources of the respondent and that the reasons for non-attendance may need to be determined under the current scheme. Again it seems to me that this is a matter essentially within the knowledge and experience of a specialist tribunal and I would be loath to interfere.
57. Given my conclusions it is not necessary to deal with the argument submitted by Mr Jeans that a reasonable adjustment could never include making an extra payment to a disabled employee. I see much force in the approach taken by the EAT in paragraphs 68-74, which I have set out above.

The non-aggregation argument- reasonable adjustments

58. The ET did not, it is agreed, deal in terms with the non-aggregation argument, i.e. the argument that periods of absence from work because of disability should not, at least in the appellant's case, be aggregated with periods of absence from work because of non-disability sickness.
59. The EAT said:

65. His second broad objection to the decision was his submission that the Tribunal focused only on part of his case. He had put his case in two ways; first, his primary case was that the employers should disregard Mrs O'Hanlon's disability and pay in full for all sickness absences. Alternatively, he argued that they should separate out the disability and non-disability related absences and pay in full for the latter only (unless, presumably, the length of absences exceeded the limits for full pay even when considered on their own). He says that whilst the Tribunal originally noted that the case had been put in the alternative, in fact they never did address this alternative issue, except to comment that it might be difficult to separate out the two types of sickness absence.

66. We accept that the Tribunal has not in terms dealt with this alternative argument. Had we any doubts as to how it would be resolved, it would be appropriate for us to send it back to the Tribunal for further consideration and reasons. But we have no such doubts. It is true that the cost of this method of adjustment would be likely to be less overall, but in our view the basic objections which the Tribunal had to the principal claim would apply equally here. Moreover, it is difficult to see the rationale behind this way of formulating the claim. Why, we ask rhetorically, should it be consistent with the principles of the legislation to allow the non-disability related absence to be treated more favourably than the disability related absence?

60. Miss Williams submits that we should remit the matter to the ET for a proper consideration. If the ET would inevitably have come to the same answer as that reached by the EAT in paragraphs 65-66, then there can be no remission.
61. In my view, the non-aggregation argument fails for the same reason as the full pay argument fails. The policy is not attacked. It is said that there were special circumstances which would require the employer in the appellant's case not to aggregate. But there are none. The only one relied on – financial hardship causing stress - I have already considered and rejected in paragraph 43 of this judgment.
62. I also agree with the EAT that: "the basic objections which the Tribunal had to the principal claim would apply equally here". Miss Williams submits that, since the respondent provided no evidence as to the cost implications of this particular adjustment and the ET made no findings of fact in relation to this, any argument based on cost is without foundation. Even if this were right, it does not affect the overall conclusion of the EAT.
63. Mr Jeans gave a practical example of how making this suggested reasonable adjustment, which he describes as disaggregation adjustment, would discriminate against a disabled person, an example which he subsequently reduced into writing:

Consider the position of Employee A who has a disability (consisting in, say, a form of depression which is found to satisfy the definition of disability under the Disability Discrimination Act 1995) and has the benefit of a sick pay scheme which provides for 6 months full pay and 6 months half pay. Under the disaggregation adjustment the employer is required to have a separate and parallel scheme for disability related absences.

On 13 March 2007, Employee A exhausts his sick pay entitlement for disability related absences (6 months full pay and 6 months half pay).

Assume that he then returns to work on 14 March 2007.

The following week he has a 2 day absence for depression. The absence is disability related and therefore Employee A will not be paid for this absence on the basis of the "disaggregation adjustment" for which the claimant contends, because he has used up his disability-related absence tariff.

.....

The result is that (although the employer can clearly afford to pay for a further 2 days of sickness absence), the "disaggregation adjustment" means that he treats the disability related absence less favourably than non-disability related absence. Employee A is only paid if his absence is not caused by his disability. The "disaggregation adjustment" would therefore result in the less favourable treatment of disability.

64. I do not find this a persuasive reason for not accepting the appellant's non-aggregation argument. There would be many more examples when the disabled employee would benefit from not aggregating the disability and sickness periods.
65. He gave another example. If either the full pay argument is accepted or the non-aggregation argument is accepted, employees who do not wish to disclose their disability will be pressurised to do so. I do not find this example of any help.

The full pay argument and the non-aggregation argument- section 3A(1), disability discrimination

66. The respondent in the cross appeal submits that the appellant was not treated less favourably and therefore there is no disability discrimination. I return to that topic shortly.
67. Assuming that the appellant was treated less favourably, has the respondent shown that the treatment was justified? As to this the EAT said:

89 ... The challenge to the Tribunal's finding on justification was effectively doomed to fail once the Tribunal found that increasing sick pay was not in the circumstances an adjustment a reasonable employer would be required to make. If the objective test for imposing the duty did not bite, then there was never any real possibility that the more subjective test of justification would not be satisfied. That is not inevitably so in all cases, but in our view it is here where the same failure to make full pay lies directly behind both discrimination claims.

68. The EAT's conclusion seem to me to be unassailable. However Miss Williams submits at page 27 of her second skeleton, on the basis of Post Office v Jones [2001] EWCA Civ 558, [2001] ICR 805 that the respondent has not shown that the treatment was justified because it had never properly exercised the discretion given to it under the rules. Miss Williams wrote:

On the other hand, the question of whether justification is established is essentially a subjective one, the ET may not substitute its own view for that of the employer and is limited to considering whether the reason for the treatment relied upon by the employer can properly be described as both material to the circumstances of the particular case and substantial: Jones v Post Office [2001] ICR 805 at paragraphs 25, 26, 37 and 39. However, precisely because the ET's role in relation to justification is to conduct an evaluation of the employer's subjective reasoning process (rather than to arrive at its own conclusions as to the validity of the reason relied upon), this may involve an assessment of whether there was evidence upon which the employer's decision could properly have been taken and/or whether it went beyond the band of reasonable responses in the circumstances: see paragraph 26 in Jones. Thus, an employer's failure to make any reasonable inquiries/apply his mind to the relevant factors before arriving at a decision may not be fatal to the question of whether an adjustment is reasonable (if by the time of the ET hearing there is evidence to show that it would not be) but may be fatal to a contention of justification.

Secondly, the statutory test for justification requires in terms that the circumstances relied upon by the employer be 'material to the circumstances of the particular case'. Thus an employer who has failed to apply his mind to the claimant's particular circumstances may find difficulty in establishing justification. The ET recognised this point at paragraph 77 of their reasons [79], but failed to appreciate that their earlier finding that R had not considered exercising a discretion in A's case but had simply treated the situation as covered by a pre-determined policy (see paragraph 9 above) impacted on this issue. (Underlining added)

69. It is not clear to me that this argument was presented in the form in which it is now presented to the ET and EAT, although Jones was certainly referred to.
70. She took us to the letter of 13 July (which I have set out above). The employer wrote:

You will be aware that it is not Departmental policy to separate and distinguish disability related sick absence and treat it differently for absence record and pay purposes.

71. This shows, so she submits, that the employer applied the rules without applying its mind to the existence of a discretion.
72. In paragraph 25 of Jones Pill LJ said:

Upon a consideration of the wording of section [3A(3)] in context I conclude that the employment tribunal are confined to considering whether the reason given [by the employer when he reached his decision] for the less favourable treatment can properly be described as both material to the circumstances of the particular case and substantial.

73. Pill LJ said that the task of the ET was "not very different from the task employment tribunals have to perform in cases of unfair dismissal" (para 28, see also Arden LJ to a similar effect at para 41).
74. Counsel for the employee in Jones had argued that the ET had to determine objectively whether the reason given for the less favourable treatment is justified. Objectively, was the reason given for the less favourable treatment both material to the circumstances of the particular case and substantial?
75. Miss Williams argues that it follows from Jones, that if the employer fails to make any reasonable inquiries or to apply its mind to the relevant factors before arriving at a decision, the ET must find that the employer has unlawfully discriminated against the employee. During the course of argument, Sedley LJ expressed some doubt on the correctness of the passages in Jones upon which Miss Williams relies. He pointed to the use of the word "justified" and noted that "justified" was used rather than "justifiable". Like him, I nevertheless accept that we are bound by the passages upon which Miss Williams relies.
76. Miss Williams accepts that the employee's claim will not succeed if the employer would inevitably have come to the same conclusion if the exercise, which Miss Williams submits the employer must carry out, had in fact been carried out.
77. In my judgment, if the employer did not carry out the exercise and if it had carried out the exercise then the decision would have been the same. For reasons which I have already given, the appellant did not identify any factor which would have led to the employer to exercise its undoubted discretion to reach a different conclusion in the appellant's case.

Substantial disadvantage (section 4A)/less favourable treatment (section 3A)

78. Given my earlier conclusions, I do not in fact need to deal with the arguments relating to the cross appeal which raises the issue as to whether the appellant was placed at a substantial disadvantage or whether the appellant was accorded less favourable treatment. I shall therefore restrict myself to giving my views in a comparatively brief manner.
79. The ET finding on substantial disadvantage was, in the words of the EAT:

46. The Tribunal then concluded that the pay scheme did place the Claimant at a substantial disadvantage. They noted that the Revenue kept the disabled outside the unsatisfactory attendance procedure in the sense that absence by reason of disability was not treated as part of the relevant absence period. This was therefore to their advantage but nonetheless the Tribunal concluded that overall the employee was placed at a substantial disadvantage.

80. With this finding the EAT agreed. Mr Jeans argues that both the ET and the EAT were wrong to reach this conclusion.
81. The EAT concluded:

Was the Appellant substantially disadvantaged?

54. The employers submit in the cross appeal that Mrs O'Hanlon was treated in all respects in precisely the same way as other employees; the sick pay scheme was applied to all alike in the same manner. Accordingly, they say, there was no proper basis for saying that she suffered a substantial disadvantage. Mr Craig, counsel for the employer, further observes that it was curious for the Tribunal to find that there was no disability related discrimination and yet to find a substantial disadvantage. They should have found neither.

55. Mr Toms, counsel for Mrs O'Hanlon, contends that the argument is fundamentally misconceived and that the whole point of the section 6 duty is to recognise that there will sometimes be situations where the disabled will as a consequence of their disability be disadvantaged by general rules or policies ostensibly applicable to all. He also makes a similar observation to Mr Craig as to the apparent incompatibility of the findings on substantial disadvantage and disability related discrimination. However, whilst the employers suggest we draw the inference that the Tribunal's finding on substantial disadvantage is wrong, he contends conversely that it suggests that the finding on disability related discrimination is incorrect. He submits that there was a plain disadvantage here in financial terms, and the Tribunal could not have sensibly come to any other finding.

56. We agree with those submissions. In our judgment there is no basis for saying that the Tribunal erred in law in reaching this conclusion. It is plainly no answer to a claim of this kind to assert that the same rules apply to all. The whole premise of this provision is that the disabled employee may be disadvantaged by the application of common rules. Unlike other forms of discrimination, the employer may be obliged to take positive steps which involve treating the disabled employee more favourably than others are treated to remove or alleviate the consequences of the disability. Section 18B(3) provides many examples of the kinds of steps which may be appropriate. So in Archibald, for example, the employer had to consider taking positive steps to appoint the employee to a position for which she would not otherwise have been appointed in order to overcome the disadvantages resulting from the fact that she was not fit enough to carry out her original job. This was despite the fact that risk of dismissal facing an employee who was incapable of carrying out his or her functions was equally applicable to all staff.

57. In our view the only conceivable basis on which it could be said that the Tribunal erred in law is if it could be argued that the duty to pay money to someone absent sick from work falls out with the scope of the section 4 duty. This has a superficial attraction if only because the claim that the Disability Discrimination Act may require employers to pay the disabled more generously than other staff is at least at first blush a surprising one. However, this was a matter considered and resolved in favour of the employee by the Court of Appeal in Meikle v Nottinghamshire County Council [2005] ICR 1. We return to consider this case below in the context the Tribunal's finding on reasonable adjustment.

82. In so far as less favourable treatment was concerned the ET found that the employer did not treat the appellant less favourably. In the words of the EAT summarising the ET's decision:

50. Then [the ET] went on to consider the alternative form of discrimination, namely whether Mrs O'Hanlon was being treated less favourably because of her disability, and they concluded that she was not. They held that the relevant question to ask in order to determine that issue was this:

"When Mrs O'Hanlon is reduced to half pay, is she being treated less favourably for a reason which relates to her disability than the employer treats others to whom that reason does not or would not apply?".

They answered it as follows:

"…her pay is being reduced because she is not at work after six months absence. She is thereby being treated in the same way as a non disabled person. The same reasoning would apply to absence 12 months away from work."(para 75).

83. On the appellant's appeal the EAT disagreed with this finding and held that there had been less favourable treatment. The EAT had earlier discussed the case of Clark v Novocold Ltd [1999] ICR 951:

30. The approach which Tribunals must adopt when determining whether or not there is disability related discrimination was considered by the Court of Appeal in the important case of Clark v Novocold Ltd [1999] ICR 951. It is central to part of this appeal and therefore justifies detailed analysis. In that case, the employee was dismissed after he had become disabled following an accident at work. The employers were informed the likelihood was that he would be unable to resume work for about a year. The employers accepted that he was disabled within the meaning of the Disability Discrimination Act.

31. The Employment Tribunal found that there was no disability related discrimination because the employers would have treated any employee equally who had been sick for a similar length of time, whether he was disabled or not. In other words, the appropriate comparator was held to be someone absent for the same length of time, but for a reason other than disability.

32. The Employment Appeal Tribunal accepted that this was a correct approach when considering the appropriate comparator, but remitted the case on the grounds that the hypothetical comparator in this case had not been adequately identified.

33. The Court of Appeal upheld the employee's appeal and held that this was an improper construction of the section. The proper approach to determining the question of whether or not there was disability related discrimination was identified in the following way by Lord Justice Mummery (at page 961 to 962, but substituting the current statutory provisions):

"The two questions posed by the statutory provisions are: (1) Was the applicant dismissed for a reason which relates to his disability? (2) If so, did the employers treat him less favourably that they would treat others to whom that reason would not apply?

Question (1) is one of fact. It is common ground that "dismissal" is caught by section [3A(1)]: see section 4(2)(d). The finding of the industrial tribunal on the reason for dismissal is stated above. It is clear that that was a reason which related to his disability. In order to answer question (2), it is necessary to compare the employers' treatment of the applicant with the treatment of others to whom "that reason" would not apply. What is meant by "that reason?"

34. Mummery LJ then analysed the possible interpretations of "that reason" in what is now section 3A (1)(a). Did it simply mean the reason for the treatment and no more? In this case that would mean that the reason was the fact of being absent for the requisite period and thus the comparison would be with someone not absent for that period. Or did it mean the reason for the treatment but embracing the causal link to the disability? In this case that would mean that the reason was absence connected to disability and the comparison would be with those absent for the same period but for a reason not connected with any disability. The analysis is crucial. If the first interpretation is correct then there is less favourable treatment because a person not absent for the requisite period will still receive full pay. If, on the other hand, the second approach is right then there is no less favourable treatment since all absentees are treated alike (save where the absence stemmed from an accident which was work related.).

35. The Employment Tribunal and the EAT in that case had both preferred the latter interpretation. The Court of Appeal held that they were wrong to do so. Mummery LJ accepted that the term was ambiguous, but considered that it should be construed in the manner which would best give effect to the purpose of the legislation. He then continued as follows (p.963F to H):

"The result of this approach is that the reason would not apply to others even if their circumstances are different from those of the disabled person. The persons who are performing the main functions of their jobs are "others" to whom the reason for dismissal of the disabled person (that is inability to perform those functions) would not apply.

In the context of the special sense in which "discrimination" is defined in section [3A] of the Act of 1995 it is more probable that Parliament meant "that reason" to refer only to the facts constituting the reason for the treatment, and not to include within that reason the added requirement of a casual link with disability: that is more properly regarded as the cause of the reason for treatment than as in itself a reason for the treatment. This interpretation avoids the difficulties which would be encountered in many cases in seeking to identify what the appeal tribunal referred to as "the characteristics of the hypothetical comparator."

36. In the course of giving judgment, Mummery LJ also referred to an example of what the Minister in Parliament had identified as disability related discrimination in the field of the provision of services. It concerned the café owner who refuses to have any dogs in the café, including guide dogs accompanying the blind. Lord Justice Mummery demonstrated that the employer's preferred interpretation would not give such a disabled person a discrimination claim; the reason for the treatment was the fact that he had a dog, but all dog owners were similarly treated. However, the Minister envisaged that the blind man would be able to establish a case of prima facie discrimination in these circumstances i.e. discrimination which would be unlawful unless justified. That could only be on the assumption that the employee's interpretation was correct. The comparison had to be with those who did not have dogs rather than non-disabled who did have dogs but for reasons wholly unconnected with any disability.

37. This case demonstrates that the approach to disability related discrimination is, as Mummery LJ pointed out, quite different from that which applies to other forms of indirect discrimination. However, it still requires the Tribunal to find the subjective reason why the employer acted as he did; that must be a disability related reason. It is not enough that the disability was causally relevant if the actual reason was not disability related: see the decision of the Court of Appeal in Taylor v OCS Group [2006] IRLR 613 per Lady Justice Smith at paras. 72-73.

84. Later in its judgment the EAT went on to ask whether there was disability related discrimination in the instant case.

Was there disability related discrimination?

76. The Tribunal found that there was no disability related discrimination, again essentially because all employees were treated alike.

77. The Respondent submits that the Tribunal reached the correct conclusion which was entirely in accordance with London Clubs Management Ltd v Hood [2001] IRLR 719, a decision on which it heavily relies. In that case the payment of sick pay was discretionary. The employer was faced with a high level of sick pay absence and chose to exercise the discretion so as not to pay sick pay to anyone. The employee was absent with cluster headaches which it was accepted were related to his disability. He claimed that he had been subject to unlawful disability related discrimination. The Employment Tribunal found that he had been so discriminated against, but the EAT disagreed. However, this conclusion turned on a very narrow point relating to how the case had been pleaded.

78. The Employment Tribunal had concluded that there was a prima facie case of disability related discrimination because the employee was being treated less favourably than those not suffering from the disability who were not off sick and received full pay. The EAT held that this was wrong because the claim had never been for ordinary pay but for sick pay. The question which the Tribunal ought to have asked itself was whether the employee was denied sick pay for a reason related to his disability. The EAT concluded that had that question been asked, there was only one possible answer, namely that it had nothing to do with his disability at all. The reasoning of the EAT (Ms Recorder Elizabeth Slade QC) at para 16 was as follows:

"If the tribunal had asked the correct question, was Mr Hood refused sick pay for a reason related to his disability, on the facts found by it in paragraph 9 of its decision the only conclusion open to it would have been that the reason for the treatment was the application of the policy on sick pay. That reason does not relate to Mr Hood's disability. Accordingly, the finding that LCM unlawfully discriminated against Mr Hood under [s.3A(1)] of the Disability Discrimination Act 1995 cannot stand. Because of the view that we take of the outcome of applying the correct question to the facts as found by the tribunal, a finding of discrimination under [s.3A(1)] would be perverse." (Section numbers as now amended).

79. The Respondent relies strongly on this case and says that this applies equally here, as the Employment Tribunal found. The only reason the Appellant received what she did was because this was the effect of the sick pay policy. That was not related to her disability; it was not the disability related absence which caused the loss of pay but rather the policy of reducing pay after a particular period of illness absence. Were it otherwise, employers would be obliged to make what would effectively be "disability pay" to all disabled employees. Indeed, Mr Craig for the Respondent says that if the Appellant were right, it is misleading for her to suggest that she is seeking some modification of the sick pay scheme at all. Rather, she is claiming full pay for a period when she is not at work, at least provided the illness causing her absence to trigger the reduction in pay is disability related.

80. The Appellant does not dispute that she is effectively claiming full pay for the periods when she is not at work. But she says that on a proper analysis of the authorities it is plain that she suffered less favourable treatment for a reason related to her disability. Her case was different to that in London Clubs because she was claiming ordinary pay or sick pay in the alternative.

81. We do not dispute the correctness of the decision in London Clubs but it is a case which turns on the very narrow point indeed, namely that the claim was for sick pay, and it has no application where the claim, as here, is for pay, or alternatively for sick pay which is the equivalent to full pay (as it is here for the first twenty six weeks.). If the claim is for sick pay but no such pay is awarded to anyone, then the employee is not at a financial disadvantage as a result of being sick at all. The reason for the refusal to pay sick pay is not then the fact that the employee is absent sick; indeed, that would be a condition precedent to obtaining sick pay. Rather the reason is that the employer pays no-one sick pay when absent sick. That we think is what Ms Recorder Slade meant when she said that it was the employer's policy which was the reason for the non payment of sick pay. That policy itself was not disability related and therefore the classification of the issue in dispute effectively determined the outcome of the case.

82. We have no doubt that the analysis in London Clubs cannot run when the claim is for ordinary pay, or indeed sick pay where full pay is given for a period of sickness. The decision of the Court of Appeal in Clark v Novacold then requires a comparison with someone who has not had the disability related sickness absence. Such a person would not have suffered the loss of pay since he would not have been absent for over twenty six weeks. It was the disability related sickness absence which took the Appellant over the sick pay threshold.

83. We think it is clear from the question which the Tribunal posed to itself and answered in the manner we have set out in para.50 above, that they fell into the trap of comparing the claimant with a non-disabled person also absent for the same length of time, rather than someone who would not have been absent at all. In so far as they were influenced by the London Clubs case they failed to recognise that it turned on its own unusual facts and ought not to have been followed in the very different circumstances of this case.

84. Furthermore, in such circumstances it is simply no answer at all for the employer to say, as he does in this case, that it was the policy rather than the disability which caused the difference in treatment. It obfuscates the real reason for the treatment simply to assert that it is the application of a policy. A policy is not an abstraction, disembodied from or independent of the rules or conditions of which it is comprised. When an employer says that he is acting in a particular way because that is what a policy requires, this is simply shorthand for referring to the particular rule or condition which dictates his response once relevant facts have been established. The issue is why subjectively he did what he did: see OCS v Taylor [2006] IRLR 613. In this case the reason for cutting pay is the fact that the employee is absent for 26 (and then 52) weeks. It cannot seriously be disputed that the absence was disability related and the reason was therefore a disability related reason.

85. Rules of such a kind are almost universally adopted as a policy because in general it is good industrial relations practice to apply rules equally to all and, as we have said, such equal application defeats any direct discrimination claim. But in this case it is the 26 week absence which, at the first stage, causes the reduction in pay. That is the reason for the reduction, not the policy; that merely dictates what is to happen once the relevant absence is established. Were the employer's case correct then it would mean that whenever an employer had adopted a policy, he could avoid potential discrimination of this kind by asserting (which would be true) that the reason for the disputed treatment was the application of a policy and not the existence of the set of facts which caused the policy to bite in the particular case.

86. We do not see, for example, why the café owner who says "no dogs allowed" could not equally say that he was applying his policy and that it was this non-disability related policy which was the reason he acted as he did rather than the fact that the person had a dog. Yet it is plain from the Novacold case that there is disability related discrimination if the reason why the person has a dog is related to his disability.

87. It follows that in our judgment that this aspect of the appeal succeeds. There is what might be termed prima facie disability related discrimination and the only question therefore is whether it can be justified.

85. Miss Williams seeks to uphold the EAT's reasoning. Mr Jeans submits that the EAT is wrong both in respect of less favourable treatment and substantial disadvantage. He accepts that Mummery LJ in Novacold reached the right conclusion because what was in issue in that case was dismissal. He submits that Mummery LJ was wrong in his guide dog example. The blind man is placed at a substantial disadvantage in comparison with persons who are not disabled but he is not treated less favourably than the owner would treat others to whom the reason does not apply. The "comparator" is the dog owning customer wishing to enter the café with his dog. The dog owning customer is not allowed in and therefore the blind dog owning customer is not being treated any differently. Citing a passage of the speech of Lord Rodger in Archibald v. Fife Council (paragraph 36), he submits that "one cannot identify a single class of 'persons who are not disabled' for the purposes of comparison". Miss Williams refers to what she submits is a contrary passage in the speech of Baroness Hale (para 64). Mr Jeans submits that to compare in this case the employee absent from work because of a disability with other employees who are not absent makes no sense. The comparison must be with employees who are absent from work because of a non-disability related sickness.
86. In my view the EAT is right for the reasons given by the EAT.
87. I would however wish to add few words about the blind man with his dog example. Given that this is an employment case I shall assume that a blind employee cannot work in the employer's premises without the assistance of his guide dog and that the employer has an absolute rule "No dogs". Applying section 3A(1) the tribunal can, in my view, properly approach the case by going through the following questions:

Q1. What has the employer done?

A. He has refused to allow the blind employee to come to work.

Q2. What was his reason for refusing to allow the blind employee to come to work?

A. Because the blind employee insisted that he would not come to work unless he was accompanied by his dog.

Q3. Was his insistence on being accompanied by the guide dog related to his disability?

A. Yes.

Q4. Would the employer have refused to allow other employees to come to work if they did not insist on being accompanied by a dog?

A. No.

88. In the light of the last answer, the employer is treating the blind employee less favourably than he treats the other employees to whom the reason for not allowing the blind man to come to work would not/does not apply.
89. The effect of Mr Jeans' submissions is that question 4 should be worded:

Would the employer have refused to allow any employees to come to work with a dog?

The answer to that question being "Yes", Mr Jeans submits that the blind person is not being treated less favourably.

90. In my view my question 4 more nearly approaches the test laid down by Mummery LJ in Novacold than the question formulated by Mr Jeans. In any event it produces what, in my view, most people would believe to be the correct answer to the problem discussed by Mummery LJ. The same reasoning can be applied, even more easily, to section 4A.
91. For the reasons which I have given earlier and for the reasons given by Sedley LJ, I would dismiss this appeal. As I have explained, it has not been necessary to resolve the cross appeal.

LORD JUSTICE SEDLEY:
 


92. I agree with the judgment of Hooper LJ and wish to add only the following.
93. The Disability Discrimination Act 1995 in its amended form is not at all easy to follow. This is a particular misfortune in an Act which it ought to be possible for employees and managers to read, understand and implement without legal advice or litigation. It can at least be said with confidence that it creates three kinds of discrimination:

a. direct discrimination "on the ground of" a person's disability, which is not open to justification: s.3A(5) and (4);

b. disability-related discrimination, which is open to justification: s.3A(1) and (3);

c. failure to make reasonable adjustments: ss. 4A, 3A(2), 18B.

In cases where there is no direct discrimination, it will often be useful to take issue (c) before issue (b). The present case is an example.

94. As to reasonable adjustments, the material provision here is the sick pay scheme. It is said to place Mrs O'Hanlon at a substantial disadvantage in comparison with employees who are not disabled because its effect is that paid sick leave attributable to her disability absorbs the paid sick leave she would otherwise be entitled to for occasional ailments. The employment tribunal accepted this argument and in my view were right to do so. The consequent question, as it has emerged in this court, is whether the employer had made "such adjustments as it [was] reasonable, in all the circumstances of the case, for him to have to make in order to prevent the provision … having that effect".
95. The reasons for the affirmative answer of both tribunals below necessarily dealt with the much more radical – and untenable – way the case had been principally put. But for reasons which they also touched upon, and which are clarified in the judgment of Hooper LJ, their answer was also correct in relation to Ms Williams' more moderate claim. Whether the relevant adjustment is regarded as the introduction of a discretion in the scheme to alleviate the disadvantage or as the exercise of such a discretion, both were present here, the former in the scheme, the latter in its operation insofar as its exercise was ever sought by Mrs O'Hanlon.
96. Was there then any disability-related discrimination? The critical question, and one which bedevils our equal opportunity legislation, is with whom the comparison is to be made. For reasons analysed and explained by Hooper LJ, in a case like the present it is an employee who is not disabled. Both have the benefit of the sick pay scheme, but one has the full cushioning of the scheme for occasional ailments or injuries while the other has to cope under the scheme with a (by definition) chronic disability as well as with occasional ailments and injuries. The guide dog example is illuminating less because it was used by a minister in debate than because if the answer were what Mr Jeans QC contends it is people would justifiably wonder what the point of the Disability Discrimination Act was.
97. While the test is not the same as for substantial disadvantage, it is unsurprising to find that what constitutes a substantial disadvantage also constitutes less favourable treatment. The more difficult question is whether the treatment is justified.
98. We are bound in this regard to follow the decision of this court in Post Office v Jones [2001] ICR 805, and I respectfully agree with Hooper LJ's application of it. But in case it one day comes up for reconsideration I reiterate the reservations about the decision which, with the concurrence of the other members of the court, I expressed in Collins v Royal National Theatre Board [2004] 2 All ER 851, §§14-16, 22-26. In particular I am troubled by the conclusion that justification is a matter for the employer, subject only to a Wednesbury-type test. The word in s.3A(1)(b) and (3) of the 1995 Act is "justified", not – as in the Sex Discrimination Act 1975 and the Race Relations Act 1976 – "justifiable". Yet even the word "justifiable", which is if anything more consonant with a subjective test, has been held to import an objective test in relation to both sex and race discrimination: see Bilka-Kaufhaus v Weber von Hartz [1986] ECR 1607, Rainey v Greater Glasgow Health Board [1987] AC 224, Hampson v Department of Education and Science [1991] 1 AC 171. There is also now a problem of proof by reason of s.17A(1C).
99. For the present, it seems to me that justification has been established by the respondent in Mrs O'Hanlon's case on an objective as well as a subjective basis. While collectively agreed pay structures for a very large establishment are not in principle beyond the reach of the 1995 Act, they are not ready candidates for individual variation. The whole point of a comprehensive pay scale and scheme is that it applies to everyone, so that individual departures are likely to create justified resentment and require the exercise of discretion in both the legal and non-legal sense of the word.
100. It is relevant that the aspect of the scheme with which we are concerned is not a term of a kind which every contract of employment has to contain. An employee who is absent for 6 months or more because of chronic illness, whether or not it amounts in law to a disability, might well find that at common law the contract has been frustrated by illness and that a consequent dismissal is held to be fair. A scheme which preserves the contractual relationship in such circumstances and assures first full pay and then half pay for extended periods of time therefore goes well beyond anything required by law. This is not of course to say that it is permissible, much less justified, to construct or administer such a scheme so that it operates arbitrarily to the disadvantage of the disabled. But any unplanned discriminatory impact may well be justified on the ground that such exceptions as can fairly be made in favour of disabled employees are already programmed into the scheme.
101. That, in my judgment, is this case. Both tribunals below were understandably concerned at the impact on staff relations of extending full pay indefinitely to those whose sick absence was caused by disability, which was the principal way the case was put to them. But the same concern, in kind if not in degree, arises from any enlargement of the entitlement to full pay and then to half pay based on the nature of the employee's illness. The respondent's scheme, even so, permits a measure of enlargement in individual cases, and that is all that Ms Williams, in her more discreet argument, contended for. It is not for us to say which cases these should be, and for the reasons explained by Hooper LJ Mrs O'Hanlon's was not necessarily one.
102. For these reasons and those set out in the judgment of Hooper LJ I too would dismiss this appeal.

LORD JUSTICE WARD:

103. Since I agree with both judgments there is nothing more I can usefully add. The appeal must therefore be dismissed.