7 July 2008

Last week, the House of Lords handed down a judgment in relation to the interpretation of Part 3 of the Disability Discrimination Act. Even though the case concerned a matter of housing, the same provisions can be found in Part 2 of the Act, which deals with employment. It is significant in the fact that it has overturned a leading precedent and completely changes the approach towards establishing disability discrimination. In an employment context, what is the prospect for a successful claim now?

The case in question was London Borough of Lewisham v Malcolm. Basically, the facts were that Malcolm, a Council tenant, had breached the terms of his tenancy by subletting his flat. As a consequence he was served with notice of eviction and subsequently an order for repossession was made.  However, Malcolm, unbeknown to the Council at the time the eviction proceedings started, suffers with schizophrenia. He claimed that his decision to sublet had been made when he had not been taking his medication and his judgement had been impaired. He argued that the reason for his eviction was therefore related to his disability and unlawful. Under Part 3 of the Disability Discrimination Act (DDA) it is unlawful to subject a tenant to eviction, or any other detriment, for a disability related reason, unless the treatment can be justified. Unlike employment, justification is limited to a number of specified grounds and it was accepted that, in these particular circumstances, none of them applied. So, if Malcolm’s argument was correct, the repossession order would be unenforceable by the courts.

Conversely, the Council’s position was that the treatment did not amount to disability related discrimination or, if it did, it was not less favourable compared to a non-disabled tenant who had sublet, as he too would have been evicted.  The difficulty for the House of Lords was that a decision in favour of either party would have ramifications. A finding in favour of Malcolm rang alarm bells, as potentially it meant that landlords in similar situations would have no legal recourse. On the other hand, a finding for the Council would be contrary to the Court of Appeal decision in Clark v Novacold, which has formed the legal basis for disability discrimination for nearly 10 years. The decision went in favour of the Council and the reasoning focused on two main issues, pertinent to employment related claims.

Was the treatment complained of related to the disability?
It was decided, by a majority, that the reason for the treatment did not relate to his disability. The actual reason why Mr Malcolm was being evicted was because he had sublet his flat and breached the terms of his tenancy. The general consensus was that, in order for the reason to relate to the disability, the disability would itself have had to have played at least some part in the decision making process, consciously or unconsciously. It was not enough for Malcolm to show that the circumstances giving rise to the Council’s reason for the treatment were related to his disability. It was apparent in this case that the Council had no knowledge at the time that Malcolm was schizophrenic. Accordingly, the disability could not have influenced the Council’s decision to evict in any way and it was held to be purely a housing management decision, and not disability related discrimination.

In reaching this decision, the House of Lords rejected the argument that the Council could still be held liable even if it had no knowledge of the disability. Over ruling an earlier decision of the EAT in Borough of Hammersmith and Fulham v Farnsworth (2000) which suggested that the employer's knowledge of the disability was irrelevant.  Instead, they agreed unanimously that a respondent can only be held liable for discrimination if it knows, or ought reasonably to know, of the complainant’s condition, which could amount to a disability under the legal definition.

Who is the correct comparator to establish less favourable treatment?
Following the precedent set in Clark v Novacold, it has long been established that in determining whether disability-related discrimination has occurred, the treatment of the disabled person must be compared with that of a person to whom the disability-related reason does not apply. The comparator may be non-disabled or disabled but the key point is that the disability-related reason for the less favourable treatment must not apply to him.

Following this principle, had the Council’s treatment, namely the eviction proceedings of Mr Malcolm, been related to his disability, he would have had to have been compared with others to whom the reason for that treatment did not apply i.e. Council’s tenants who had not sublet.  Based on this comparison, Mr Malcolm would have been less favourably treated as the Council would not evict a tenant who had not breached the terms of their tenancy.

It was noted that if this comparison was the correct one, less favourable treatment would always be shown, since a person to whom the reason does not apply could not be subjected to treatment for that same underlying reason. Effectively, the comparison exercise served no purpose whatsoever, which cast doubts on its correct application.  This, together with other observations, led the majority to the decision that Clark v Novacold was wrongly decided. 

It was held that the correct comparison should be made with a tenant with no mental illness who had sublet. Such a tenant would have been treated in exactly the same way.  As there was no less favourable treatment, there was no discrimination. Based on this decision, the comparator used to show disability related discrimination is now very much the same as that used for direct discrimination; a non-disabled person whose relevant circumstances are the same or not materially different.

The effect of this decision should be good news for employers. It means that disability related discrimination will now be much harder to establish. Similar to direct discrimination, where the treatment must on grounds of the disability, the employee will now need to show that their physical or mental impairment also influenced the employer’s decision and formed part of the reason for the treatment. Even in cases where this can be established, it will now be easier for employers to demonstrate that the treatment was not any less favourable, if they can show that they would have treated a non-disabled employee in the same way. An obvious example is an employee who has been dismissed after being absent for a year, owing to disability related ill -heath. Following this decision it is more likely that the reason for the treatment will be found to be the fact that the employee was not attending work and unable to perform his duties, rather than underlying disability that caused the absence. Therefore the dismissal would not be disability related and, if it was, the comparator would be an employee who had been absent for a year on grounds other than ill-health. Provided the employer would have dismissed in those circumstances too, there can be no less favourable treatment.

It is important to note that, this decision does not change the employer’s duty to make reasonable adjustments for a disabled employee to alleviate a substantial disadvantage. This duty is classed as a separate form of discrimination, so a claim can be made independently of a complaint of direct or disability related discrimination.  Employers should also be aware, that they can not necessarily rely on having no knowledge of the disability to avoid liability for discrimination. Employers will still be expected to have noticed the warning signs.