Basing disabled employee’s pension on reduced hours was not discrimination, Supreme Court rules

Employee retired early due to ill health – but full-time staff member would have had no right to pension, judges point out

Calculating a disabled employee’s pension based on the reduced hours he worked due to his disability did not amount to discrimination, the Supreme Court has ruled. 

The decision confirmed the reversal of a tribunal’s earlier decision in the case of Andrew Williams, who retired early on the grounds of ill health from his role at Swansea University. 

Williams’ final salary pension on retirement contained enhanced benefits based on his earnings at the point of retirement, when he was working part-time. But the Supreme Court held that since if he had been working full-time, he would have had no immediate right to a pension, it could not be argued that his retirement entitlement amounted to unfavourable treatment.  

Williams was employed by the university from 12 June 2000 until he retired on 30 June 2013. He suffered from Tourette’s syndrome, OCD and depression. 

In late 2010, Williams requested, and the University agreed, a reduction in his working hours. For the first 10 years of his employment, he worked full-time, but for the final three he worked between 17.5 and 26 hours per week when he was fit to do so. 

He underwent specialist surgical treatment in 2012. In February 2013, the University's occupational health (OH) department advised that the treatment was likely, on balance, to enable him to return to work and that it could not be said at that time that he was likely to be permanently incapacitated.

On 15 April 2013, OH advised there had been sufficient improvement to allow a phased return to work starting on 29 April. After this was agreed, Williams returned to work, but on 9 May 2013 OH reported a deterioration in his condition and said he was unlikely to be able to sustain a return to work in the foreseeable future.

Williams then applied for ill-health retirement. It was subsequently held that he was likely to be permanently incapable of efficiently carrying out his role. His GP and a second OH physician agreed and the application was successful. 

An initial tribunal concluded he had been treated unfavourably since his disability was the reason he was working part-time at the point of retirement and led to his reduced pension benefits. But the employment appeal tribunal (EAT) disagreed, with Judge Langstaff saying Williams’ reasoning could not  “possibly be sufficient to establish disability discrimination. If it were, it would be difficult to see why it would not apply to a disabled claimant who applies for and secures a part time job because that is as much as he can manage, but would otherwise have worked full time.”

The Supreme Court has now also dismissed the first ruling. 

Croner associate director Paul Holcroft said the case was a useful illustration of the burden of proof placed upon employees to demonstrate their treatment was unfair in comparison with a non-disabled employee.

“Here, it was the fact that the employee would not have automatically been entitled to receive the enhanced pension if they had not had to work reduced hours that meant they had not suffered discrimination; a comparable, non-disabled employee would have had no right to the pension at all. It was therefore ‘perverse’ to conclude that the scheme was discriminatory against disabled employees.”

Reacting to the decision, Nicola Ihnatowicz, employment partner at Trowers & Hamlins said: “The policy behind an employer's duty to make reasonable adjustments is to help overcome barriers and disadvantages faced by disabled employees at work. It is not uncommon for employees who are suffering from a disability to reduce their hours (and correspondingly their pay) as a reasonable adjustment which enables them to continue working. 

“If the employee then takes ill-health retirement, it is likely that the provisions of any defined benefit pension scheme will base the pension on their final reduced salary at retirement or a career average, without requiring employers to incur the significant cost of making up the difference.”