Yorkshire Housing Ltd v Cuerden

An Employment Tribunal must consider the utility of a proposed reasonable adjustment in a disability discrimination claim. A finding that the adjustment was very likely to prevent the disadvantage is sufficient where it is adequately reasoned in the factual context.

In assessing compensation, awards for pre-termination injury to feelings and personal injury, together with related interest, are not subject to grossing up where the parties accept that they are non-taxable. Compensation for loss of pension rights is not a payment under a tax-exempt pension scheme. Grossing up must reflect the claimant’s actual tax position, including personal allowances and applicable tax bands.

The claimant succeeded before the Leeds Employment Tribunal in claims including constructive dismissal and disability discrimination arising from her employer’s failure to make reasonable adjustments during a period of sickness absence. The Tribunal awarded total compensation of £173,972.08, including pension loss and a grossed-up element for taxation.

The employer appealed on liability, pension loss and taxation. The Employment Appeal Tribunal considered whether the Tribunal had properly assessed the utility of the proposed adjustment, whether it was unfair to determine pension loss without further directions or evidence, and how the tax consequences of the award should be calculated.

1. Reasonable adjustments. The Tribunal was required to consider whether the proposed adjustment would alleviate the claimant’s substantial disadvantage. Applying the guidance in Environment Agency v Rowan, it did so. Its conclusion that a meeting involving the claimant, her counsellor and solicitor was very likely to prevent the adverse effect was permissible in the context of its findings and was adequately reasoned. The liability appeal therefore failed.
2. Pension loss. The employer had notice that remedy, including pension loss, could be considered at the hearing. The claimant’s Schedule of Loss expressly indicated that the stated pension figure was only a minimum illustrative sum. The Tribunal was entitled to hear submissions on remedy at the extended hearing and to use its collective experience of the industrial landscape when assessing the prospects of alternative pensionable employment. Its conclusion was not impermissible.
3. Taxation. Applying the reverse-Gourley principle, the Tribunal had erred by grossing up awards for pre-termination injury to feelings and psychiatric injury, and the associated interest, totalling £16,998.16. The pension-loss award was not a payment under a tax-exempt pension scheme for the purposes of section 407(1)(a) of the Income Tax (Earnings and Pensions) Act 2003.
4. The Tribunal had also erred by applying a flat 40 per cent rate. The taxable balance of £67,396.36 had to be calculated by reference to the claimant’s personal allowance, standard-rate band and higher-rate band. The correct tax was £17,928.54. That figure was substituted for the Tribunal’s grossed-up figure, reducing the total award by £38,334.46. The appeal was allowed to that extent only, with liberty to apply on the calculations within 21 days.

• Leeds Employment Tribunal: upheld claims for breach of contract, unfair dismissal and disability discrimination and awarded compensation totalling £173,972.08.
• Employment Appeal Tribunal: rejected the challenges to liability and pension loss, but allowed the taxation appeal in part and substituted the correct grossed-up amount.