This is something I've been thinking about, in terms of how employers might use that discretion, and I don't think there are firm rules about it. (My workplace H&S ken is a long time in the past, so anyone feel free to knock me down)
I can see it being used for health reasons, ie 'Tim has prostate problems and might get caught short when the nearest gents is out of order'
I can even see it being used for gender reasons, ie 'We all know and trust Nicki and nobody has a problem with her using the ladies'
I think it's most viable in smallish workplaces with high levels of trust between the staff. And even then the exception would always be provisional and could be thrown into question if a single person objects. I have a feeling SK was grasping towards this, even if he was having to invent his own hoops to jump through.
(FWIW if I were an employer I'd be very reluctant to allow an exception in the first place, not least because revoking an exception previously agreed to could get quite ugly)
It would require employers to be reasonable and sensitive, and hopefully to have some underpinning principles to help them resolve disputes, so they don't end up in front of a tribunal saying 'We asked Isla Bumba and she said we were grand'.
Of course the best thing would be for the HSE to have some guidance about how to resolve disputes in this area. Does such guidance exist? If not, does anyone in the HSE feel that it might be a good idea to produce such guidance?