LONDON CLUBS MANAGEMENT LTD v MR DAVID HOOD [2001] UKEAT 184_00_1809

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2001] UKEAT 184_00_1809Case No Appeal No. EAT/184/00Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
LONDON CLUBS MANAGEMENT LTDAPPELLANTMR DAVID HOODRESPONDENT
Before
MISS RECORDER ELIZABETH SLADE QCMR D J HODGKINS CBMR P M SMITHDate 18 September 2001
[1]APPEARANCES For the Appellant MR S LIVINGSTONE (of Counsel) Instructed By: Messrs Charles Russell 8-10 New Fetter Lane London EC4A 1RS For the Respondent MS S DREW (of Counsel) Instructed By: Messrs Thompsons Congress House Great Russell Street London WC1B 3LW MISS RECORDER ELIZABETH SLADE QC : London Clubs Management Ltd ("LCM") appeal from the Decision of an Employment Tribunal that it had unlawfully discriminated (contrary to section 4(2)(d)) against Mr Hood on the grounds of his disability (ie within the meaning of) Section 5(1) and by failing to make a reasonable adjustment contrary to (ie within the meaning of) Section 5(2) of the Disability Discrimination Act 1995 . The passages in parentheses have been added by us for clarification. Monetary orders and recommendations were made by the Tribunal at a subsequent remedies hearing. There is no appeal against the orders made at that hearing. In this judgment all statutory references are to the Disability Discrimination Act 1995 unless is otherwise stated. The issues on the appeal[2]The following issues fall for determination in this appeal: 1 Whether the Employment Tribunal erred in law or reached a perverse conclusion in deciding that the reason for the treatment of Mr Hood related to his disability; 2 Whether the Employment Tribunal erred in law or came to a perverse conclusion in deciding that LCM treated Mr Hood less favourably than it treated someone to whom that reason did not or would not apply; 3 Whether the Employment Tribunal gave adequate reasons for its decision that LCM had unlawfully discriminated against Mr Hood by failing to make a reasonable adjustment contrary to sections 5(2) and 6; 4 Whether the Employment Tribunal erred in law or came to a perverse conclusion in failing to hold that Mr Hood was not placed at a substantial disadvantage in comparison with persons who were not disabled by not being paid sick pay. 5 Whether the Employment Tribunal erred in law in concluding that the payment of sick pay was a reasonable adjustment within the meaning of section 6;[3]For LCM Mr Livingstone accepts that Mr Hood was disabled for the purposes of the Disability Discrimination Act 1995 , and he abandons the ground of appeal against that finding. Further, there is no appeal against the finding of the Tribunal that LCM had not justified the difference in treatment or failure to make reasonable adjustments which the Tribunal found to be prima facie discriminatory. The relevant facts[4]Mr Hood worked as an inspector on the gaming floor of the Golden Nugget, a casino run by LCM. His contract of employment contained the following provision relating to sick pay:
"Payment for absence through illness will only be made at the discretion of the Club Director (or equivalent at Head Office). Where payment is made it will be subject to the limits set out in the following table."
The maximum sick pay for an employee of Mr Hood's length of service, 24 years, was 26 weeks' full pay in any year. In 1995 Mr Hood began to develop headaches which interfered with his sleep and affected his ability to cope with his job on the following day. He was referred by his general practitioner to a consultant who diagnosed migrainous neuralgia or "cluster headaches". The diagnosis was made before November 1997.[5]In 1998 Mr Hood was paid sick pay for 39½ days of sickness absence. It was not suggested by LCM that Mr Hood's absences were not genuinely due to his headaches. At paragraph 9 of the Decision the Employment Tribunal held:
"It appears that there was a high level of sickness amongst all employees. However, the Club management became concerned in 1999 because there was not only a high level of sickness absence but a budget deficit as well for the Golden Nugget Club. For that reason Ms Roberti, the Manager, decided not to exercise her discretion to pay sick pay generally, although she did do so in particular cases for example for a person who was injured at work. So at the beginning of 1999 she stopped paying Mr Hood sick pay when he was absent due to his cluster headaches. She also stopped paying in relation to absences of all other workers in similar situations. The Tribunal has examined the records and we see no discernible difference between the treatment of Mr Hood and the treatment of others in the same grade. The Company continued to pay full pay to persons in the management grades because it was obliged to do so under their contracts. The Company also continued to pay full pay under the contracts of employment to those workers who were still at work."
The proceedings[6]In his originating application Mr Hood complained of the decision not to pay him sick pay. At paragraph 11:12 he stated:
"I believe that I have been discriminated against on grounds of my disability. My sickness absence is not significantly higher than that of non-impaired colleagues who have continued to receive sick pay."
In addition to claiming that he had been discriminated against by reason of his disability, Mr Hood complained that he had been victimised contrary to the Disability Discrimination Act 1995 . That complaint was dismissed by the Employment Tribunal and there is no appeal by Mr Hood against that finding.[7]At an Interlocutory Hearing the following issues were identified:
"(1) was Mr Hood a disabled person within the meaning of the legislation and, if he was, (2) did the Company unlawfully discriminate against him on the grounds of his disability and, in particular: (a) whether the Company unlawfully discriminated against Mr Hood by treating him less favourably contrary to section 5(1) of the Disability Discrimination Act by not paying him sick pay in respect of two weeks in February 1999; … (c) whether the Company unlawfully discriminated against Mr Hood, contrary to section 5(2) of the Act, by failing to make reasonable adjustments under section 6 of the Act by not paying sick pay when he was off work."
The Chairman who conducted the Interlocutory Hearing was not the Chairman who conducted the substantive hearing.[8]On these issues, the Employment Tribunal reached the conclusions summarised at paragraph 1 of this judgment.[9]The relevant statutory provisions Section 4(2)(d) renders it unlawful for an employer to discriminate against a disabled person whom he employs - "(d) by … subjecting him to any other detriment." The failure to pay sick pay falls within section 4(2)(d).[10]Section 5 provides:
"(1) For the purposes of this Part, an employer 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, an employer also discriminates against a disabled person if - (a) he fails to comply with a section 6 duty imposed on him in relation to the disabled person; and (b) he cannot show that his failure to comply with that duty is justified."
Section 6 provides:
"(1) Where – (a) any arrangements made by or on behalf of an employer, (b) any physical feature of premises occupied by the employer, place 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 arrangements or feature having that effect. (2) Subsection (1)(a) applies only in relation to – … (b) any term, condition or arrangements on which … any other benefit is … afforded. (7) Subject to the provisions of this section, nothing in this Part is to be taken to require an employer to treat a disabled person more favourably than he treats or would treat others. (11) This section does not apply in relation to any benefit under an occupational pension scheme or any other benefit payable in money or money's worth under a scheme or arrangement for the benefit of employees in respect of - … (c) … sickness … (12) This section imposes duties only for the purpose of determining whether an employer has discriminated against a disabled person; and accordingly a breach of any such duty is not actionable as such."
Section 9(1)(b) provides: "(1) Any term in a contract of employment or other agreement is void so far as it purports to – … (b) exclude or limit the operation of any provision of this Part; … The findings under the Disability Discrimination Act 1995, Section 5(1) Issue 1 Did the Employment Tribunal err in law or reach a perverse conclusion in deciding that the reason for the treatment of Mr Hood related to his disability?[11]In paragraph 16 of its Decision, the Employment Tribunal reached the following conclusion:
"We find on the evidence that the Company did not pay Mr Hood when he was absent due to his disability and that in not paying Mr Hood while he was off work due to cluster headaches the Company acted for a reason which related to his disability and treated him less favourably than it treated someone 'to whom that reason did not or would not apply'."
Mr Livingstone who appears for LCM and Ms Drew, who appears for Mr Hood, are in agreement that "the treatment" in this case is the non-payment of sick pay. On behalf of LCM it is said that the "reason" for the treatment for the purposes of section 5(1)(a) is the Company's policy. On behalf of Mr Hood it is said that the reason for the treatment is absence from work. Further, for Mr Hood it is said that the reason for the treatment relates to his disability. But for his disability he would not have been absent.[12]In Clark v TDG Ltd v Novacold [1999] IRLR 318 , considering a complaint of discrimination under the Disability Discrimination Act 1995 , section 5(1) Mummery LJ said at page 323 paragraph 52: "The two questions posed by the statutory provisions are:(1) Was Mr Clark dismissed for a reason which relates to his disability?(2) If so, did Novacold treat him less favourably than they would treat others to whom that reason would not apply? In Clark the "treatment" for the purposes of section 5(1) was dismissal. Mummery LJ considered that the answer to question (1) was clear. The dismissal of Mr Clark was for his absence, which was a reason related to his disability. The judgment in Clark focussed on the correct approach to question (2).[13]In its approach to section 5(1) the Employment Tribunal considered why LCM did not pay Mr Hood wages ordinarily due rather than why it did not pay Mr Hood sick pay. Its reasoning was based on the premis that the treatment of which complaint was made was the failure to pay ordinarily due wages (as contrasted with sick pay) to Mr Hood. On that basis it reasoned that Mr Hood was not paid wages because he was absent, he was absent for a reason related to his disability, therefore the treatment was for a reason related to his disability.[14]In our judgment this reasoning is based on the wrong premis. The "treatment" in respect of which complaint is made in this case is the non-payment of sick pay. This was the treatment of which complaint was made in the Originating Application, identified by the Chairman at the Interlocutory Hearing in issue (a) and the treatment agreed by both counsel before us to be material for the purposes of section 5(1). Applying question (1) posed by Mummery LJ in Clark at p.323 paragraph 52, the Employment Tribunal should have considered whether Mr Hood was refused sick pay for a reason which related to his disability rather than whether he was not receiving pay ordinarily due for that reason.[15]The Employment Tribunal found as a fact in paragraph 9 of its Decision that in 1999 the Manager decided not to exercise her discretion to pay sick pay generally and that it was for this reason that she stopped paying Mr Hood sick pay.

(b) It held:

"It is clear applying Clark v Novacold that the comparison must be with someone who was not absent and who was therefore receiving full pay. We are not satisfied that the treatment was justified. The burden of proof is on the Company and, although there was some evidence that the budget of the Golden Nugget was overspent, no real attempt was made to show that failure to pay sick pay was justified by the financial situation of the Company at large."
There was thus a lack of correspondence between the treatment upon which the Tribunal based its reasoning for the purpose of considering section 5(1)(a) and the treatment in respect of which it considered the issue of justification in section 5(1)(b). The conclusion reached by the Tribunal on section 5(1) was also expressed in terms of failing to pay sick pay.[16]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 section 5(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 section 5(1) would be perverse. Issue 2 Did the Employment Tribunal err in law or come to a perverse conclusion in deciding that LCM treated Mr Hood less favourably than it treated someone to whom that reason did not or would not apply?[17]As Mummery LJ made clear in Clark at p.323 paragraph 52, the question of whether there has been less favourable treatment than that of a comparator only falls to be determined if the treatment complained of is shown to be for a reason which relates to the complainant's disability. Since the first of the two questions posed in Clark has been determined against Mr Hood, the issue raised in this appeal of error of law in the approach of the Employment Tribunal to less favourable treatment falls away. The findings under Disability Discrimination Act 1995 Sections 5(2) and 6 Issue 3 Did the Employment Tribunal give adequate reasons for its decision that LCM had unlawfully discriminated against Mr Hood by failing to make a reasonable adjustment contrary to sections 5(2) and 6 of the Disability Discrimination Act 1995 ?[18]On behalf of LCM it is contended that the Employment Tribunal failed to give adequate reasons for its decision that the Company had unlawfully discriminated against Mr Hood contrary to section 5(2) by failing to pay sick pay. The Tribunal deal with the complaint of discrimination contrary to section 5(2) in paragraph 16 of its Decision. It held:
"We also find that the Company's failure to pay sick pay amounted to a failure to make a reasonable adjustment without justification, contrary to section 5(2) and section 6 of the Disability Discrimination Act."
Mr Livingstone's principal complaint about the adequacy of the reasons given is that the Tribunal failed to hold whether and if it is to be taken as so holding, why Mr Hood was placed at a substantial disadvantage in comparison with persons who are not disabled. Further, he attacks such a conclusion as perverse. Ms Drew, on behalf of Mr Hood contends that it was not part of LCM's case before the Tribunal that Mr Hood was not at such a disadvantage.[19]Before the Tribunal it was contended on behalf of LCM that:
"Payment of sick pay was discretionary and there was no entitlement in his grade to sick pay. Compared with others, he had been treated with utmost parity,"
The employer led evidence before the Tribunal which was accepted that there was a high level of sickness amongst all employees. In his Originating Application Mr Hood stated:
"My sickness absence is not significantly higher than that of non-impaired colleagues who have continued to receive sick pay."
In the circumstances of this case, in our judgment it was not open to the Tribunal to assume that Mr Hood had more absences than persons who were not disabled and thus be placed under a substantial disadvantage by the non-availability of sick pay. The submissions made on behalf of LCM before the Tribunal in our view raise the issues of comparative treatment and substantial disadvantage.[20]For a section 6(1) duty to arise at all the arrangements made by an employer must place the disabled person concerned at a substantial disadvantage in comparison with persons who are not disabled. In Morse v Wiltshire County Council [1998] ICR 1023 the Employment Appeal Tribunal held at page 1033G that the first sequential step a Tribunal must decide in considering a case brought under section 5(2) and 6 is whether the provisions of section 6(1) and (2) impose a section 6(1) duty on the employer in the circumstances of the particular case.[21]In our judgment it is not apparent from the Decision of the Employment Tribunal that it considered the question of whether Mr Hood was placed at a substantial disadvantage by the non-payment of sick pay in comparison with persons who were not disabled. If the Tribunal is to be taken to have concluded that Mr Hood suffered a substantial disadvantage because of the sick pay arrangements, the reason for that conclusion is not evident from the Decision. We consider that if such a conclusion were reached, it was particularly important to give the reasons for doing so in the circumstances of this case where the evidence appears to have indicated that non-disabled employees in common with Mr Hood had significant periods of unpaid sickness absence. Thus in our judgment insufficient reasons were given for the Tribunal's conclusion that there had been discrimination (see Meek v City of Birmingham District Council [1987] IRLR 250 ) contrary to sections 5(2) and 6. On this point the Tribunal gave insufficient reasons to enable the parties to know why they had won or lost. Issue 4 Did the Employment Tribunal err in law or come to a perverse conclusion in failing to hold that Mr Hood was not placed at a substantial disadvantage in comparison with persons not disabled by not being paid sick pay?[22]We are not satisfied that the conclusion of the Tribunal on Section 5(2), based as it appears to have been on an assumption of substantial disadvantage, was plainly and unarguably right notwithstanding the apparent omission to consider the issue. Nor are we satisfied, as is contended by the Appellant, that it was not open to the Tribunal to hold that Mr Hood was placed at a substantial disadvantage. If the Tribunal had expressly considered the issue it may have made additional findings of fact to enable it to determine whether Mr Hood was placed at a substantial disadvantage by the non-availability of sick pay in comparison with persons who were not disabled. Issue 5 Did the Employment Tribunal act perversely in concluding that the payment of sick pay was a reasonable adjustment within the meaning of section 6 of the Disability Discrimination Act 1995 ?[23]Mr Livingstone contended that sick pay was either not within the scope of section 6(1) or was excluded by section 6(11). He invited us to look at Hansard House of Lords Records (24 October 1995) at column 1001 as an aid to the construction of section 6(11). Mr Livingstone also submitted that the finding of the Tribunal that the failure to pay sick pay amounted to a failure to make a reasonable adjustment would have the consequence that full pay, possibly for more than the maximum length of time specified in the Company's sick pay scheme would have to be paid. This would result in requiring LCM to treat Mr Hood more favourably than it treats or would treat others, contrary to section 6(7), or requiring it to justify non-payment.[24]Ms Drew contended that the exclusionary effect of section 6(11) was not relied upon below and the argument should not be permitted to be raised at this stage. In support of her contention that we should not exercise our discretion to permit the Appellant to argue that the effect of section 6(11) is to remove contractual sick pay from the scope of section 6 Ms Drew rightly points to the fact that the point is not raised in the Notice of Appeal but was first taken in the skeleton argument in the Employment Appeal Tribunal and that the point was not raised below. She relies upon Jones v Governing Body of Burdett Coutts School [1998] IRLR 521 in seeking to persuade us not to entertain the new point. Unlike Jones , the new point sought to be argued does not require any fresh evidence. It is a pure point of construction. Nor is any prejudice caused by allowing it to be argued. It is a point of some importance. Allowing it to be argued will not extend the proceedings, since the finding of the Tribunal on section 6 is already subject to attack on other grounds. For these reasons we exercise our discretion to permit this point to be raised now and for the Notice of Appeal to be amended accordingly.[25]Further, Ms Drew submitted that sick pay falls within section 6(1) and that it is not excluded by section 6(11). She submits that section 17, which inserts a statutory non-discrimination rule into occupational pension schemes, and section 18, which imposes certain liabilities on insurers who enter into arrangements with an employer under which the employer's employees receive certain benefits including benefits in respect of sickness, are of assistance in the construction of section 6(11). Those sections provide protection in relation to benefits excluded from the scope of section 6 by section 6(11). She also relies upon a passage in Hansard House of Lords Records (24 October 1995) in the speech of Lord Mackay of Ardbrecknish at column 995 as an aid to resolving any ambiguity in construction of section 6(11).[26]Ms Drew further contended that the limit on sick pay in LCM's scheme does not fall foul of section 9(1)(b). She submitted that the Tribunal was entitled to come to the conclusion that there had been a breach of section 6.[27]In our judgment, section 6 plainly applies to monetary benefits as well as to other arrangements. Were this not so, there would have been no need for section 6(11). This provision excludes from the application of section 6 any benefit under an occupational pension scheme and other benefits payable in money or money's worth under a scheme or arrangement for the benefit of employees in respect of specified events including sickness. Further, paragraph 3(2) of the Disability Discrimination (Employment) Regulations 1996 , clearly contemplates that financial benefits fall within section 6. Paragraph 3(2) provides:
"Arrangements consisting of the application to a disabled person of a term or practice of the kind referred to in paragraph (1) above (performance related pay) are not to be taken to place that disabled person at a substantial disadvantage of the kind mentioned in section 6(1) of the Act."
[28]In our judgment the natural meaning of "scheme or arrangement for the benefit of employees" does not include payment of sick pay by an employer to an employee under a contract of employment. Such payments are made by the employer to rather than "for the benefit of" the employee. Further, they are made pursuant to the contract of employment, an expression used in section 4(3), rather than "under an arrangement" the expression used in section 6(11). In our judgment section 6(11) is not ambiguous or obscure neither does its literal meaning lead to an absurdity. Thus the conditions enabling us to rely on the extracts of Parliamentary material laid down by Lord Browne-Wilkinson in Pepper v Hart [1993] 1 AER 42 at page 64 (e) are not met. Even if they were, the Parliamentary material supports a construction of section 6(11) which does not include benefits paid to an employee by the employer pursuant to the contract of employment.[29]In our judgment section 6(7) does not preclude a finding which would require the payment of sick pay to Mr Hood. The provision that "nothing in this Part is to be taken to require an employer to treat a disabled person more favourably than he treats or would treat others" is made "Subject to the provisions of this section". Thus the section 6(1) duty prevails over section 6(7). Conclusion[30]Accordingly, we allow the appeal. We set aside the Decision of the Employment Tribunal that LCM unlawfully discriminated against Mr Hood on the grounds of his disability and by failing to make a reasonable adjustment contrary to section 5(1) and (2) of the Disability Discrimination Act 1995 . In the light of our conclusions we dismiss the complaint under sections 4(2)(d) and 5(1). We remit the complaint under sections 4(2)(d) and 5(2) for re-hearing before the same, or, if that is not practicable, a differently constituted Employment Tribunal for reconsideration in accordance with the terms of this judgment. On such reconsideration, the findings of fact made by the Employment Tribunal in its Decision entered in the register on 20 December 1999 are to stand with liberty to the parties to lead evidence on the issue of whether the non-availability of sick pay placed Mr Hood at a substantial disadvantage in comparison with persons who are not disabled.[31]We note that there is no appeal against the financial orders and recommendations made by the Tribunal at a subsequent remedies hearing. No point was taken that this appeal was academic. We consider that the issues raised in the appeal are of practical importance for LCM both in relation to their future dealings with Mr Hood and their workforce generally.