It used to be common to place a cap on redundancy compensation for employees approaching normal retirement age, on the basis that this prevented employees from obtaining a "windfall" from their termination and that any age discrimination was justified. That argument became harder to sustain with the removal of the default retirement age. The same issue has now arisen in the context of employees whose voluntary exit payments were capped not because of their age, but because they were entitled to an immediate disability related pension. The EAT decision in Chief Constable of Gwent Police v Parsons confirms that this was unfavourable treatment arising from a disability and not justified.
The claimants were police officers who were recognised as disabled for the purposes of the Equality Act. Although they could not carry out front line duties, they were not permitted to take early ill health retirement because they could still perform back office duties. However, they were eligible and applied for a voluntary exit scheme. As they had what was referred to as "H1 certificates" reflecting their disabilities, they were entitled to an immediate pension when they left the force. Their voluntary exit payment was capped at six months' pay to prevent them gaining financially by leaving with a payment and a pension rather than continuing to work. They challenged the decision to cap their payments as disability discrimination.
The tribunal and EAT found in favour of the claimants. Applying a cap to a payment that would otherwise have been much larger was clearly unfavourable treatment. The treatment was triggered by the H1 certificates, which were issued in consequence of the claimants' disabilities. Finally, the treatment was not justified. Saving money was not a legitimate aim in itself, although preventing individuals from receiving a windfall could be. It was also possible that an entitlement to an immediate pension could justify capping a payment under a redundancy/voluntary exit scheme. However, this would depend on the nature of the financial benefits arising under the different schemes.
In this case, there was no evidence before the tribunal that compared the benefits to which the individuals were entitled under the pension and exit scheme with the cost of giving up their careers with the police. That meant that the police were unable to demonstrate that the individuals would have received a windfall had their exit payments not been capped and the justification defence failed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.