Employers should therefore give careful consideration when deciding which benefits package to offer to employees and whether this should be applied directly, without the flexible element.
Mr Brown suffered two breakdowns in 2012 and has been absent from work due to incapacity since. Under a permanent health insurance (PHI) scheme, he received pay equivalent to 75% of his salary during his absence. This was part of a flexible package of benefits offered by his employer. Mr Brown could have opted to reduce his cover from the default of 75% to 50% and receive additional salary under this package, but chose to remain on the higher default level.
In July 2012, he brought claims under the Equality Act 2010 (the Act) for harassment and disability discrimination, among others.
The general rule under the Act is that a successful claimant cannot receive discrimination compensation for any loss which was not actually suffered. An exception to this rule, however, is where that claimant has received an insurance pay-out to cover the loss (the 'insurance exception'). The principle behind this exception is that the wrongdoer should not benefit from your own prudence in taking out insurance.
At the ET, his employer argued that the PHI payments of 75% salary should be deducted in full from Mr Brown's award of compensation on the basis that they had paid the entirety of the PHI contributions. Mr Brown argued that he should be treated as having indirectly contributed to the payments by opting not to reduce the cover to 50% and therefore the payments should only be deductible to a level of 50%.
The ET agreed and held that the extra 25% was not deductible. The employer appealed.
The EAT held that the insurance exception applied. By opting not to take the increased salary, but instead receive the higher protection, Mr Brown had indirectly contributed to the cost of the insurance policy. The fact that 75% cover was the default position was irrelevant as he had still chosen to receive a lower salary for increased protection. The ET was therefore correct to only deduct the equivalent of 50% of his salary from his loss of earnings.
The EAT also found however that the ET had taken the wrong approach when apportioning the loss suffered. The ET had wrongly focussed on what events had been caused by the discriminatory acts, instead of assessing to what extent the discriminatory acts contributed to the harm suffered by the Claimant.
The case was remitted back to the ET to approach the question of apportionment from the right perspective, although it was noted that the outcome might still be the same.