The background

An employee’s lack of capability to undertake their role due to long term ill health is one of the six potentially fair reasons for dismissal, set out in section 98 of the Employment Rights Act 1996.

Once an employer has established a potentially fair reason for dismissing an employee, they must then go on to show that they have acted reasonably in the circumstances in making the decision to dismiss, and the question of reasonableness will depend on factors such as the size and administrative resources of the employer and the general fairness and merits of the case.

For a dismissal to be procedurally fair, the statutory dismissal procedures must be followed as a minimum; and the procedure must be generally fair, which may include going beyond the minimum requirements of the statutory scheme.

However, the failure by an employer to follow any additional procedural steps (beyond the statutory minimum) will not, by itself, mean that the employer’s actions are unreasonable, as long as they can show that they would have dismissed the employee even if they had followed those additional steps (section 98A(2) of the Employment Rights Act 1996).

The facts

In First West Yorkshire Limited t/a First Leeds v Haigh. Mr Haigh had been employed by First West Yorkshire Limited (“the Company”) as a bus driver for nearly 30 years. In June 2005 he suffered a suspected stroke and was signed off as unfit to work. The Company’s Occupational Health advisor’s provisional opinion was that Mr Haigh was unfit for work, but may be fit for alternative duties by June 2006. However, Mr Haigh suffered a subsequent attack in October 2005 and the earliest date he could return to work would have been October 2006, when Mr Haigh was due to retire at 60.

The Company provided the following options for employees on long term sick leave:

		sick-pay of 26 weeks' full pay and 26 weeks' half pay. However, if there was no reasonable prospect of a return to work the employee might be retired or dismissed on medical grounds;
		an enhanced ill health pension, provided that a medical certificate confirmed an employee’s permanent incapacity;
		a "holding register" as an option short of dismissal. Seniority and continuity of employment was retained but there was no entitlement to sick pay.

On 20 October 2005, Mr Haigh’s manager decided that Mr Haigh’s condition was not permanent and he was dismissed on the ground of capability, with his notice expiring on 8 February 2006. Mr Haigh appealed against his dismissal. Despite test results still being outstanding, Mr Haigh’s dismissal was confirmed. At a final appeal, a further medical opinion suggested that Mr Haigh’s condition was not permanent and that specialist advice should be sought. That advice was not provided until March 2006.

Notwithstanding this, on 24 February 2006 Mr Haigh’s final appeal was heard and he was given an ultimatum: either be dismissed, or remain employed with sick pay extended until May 2006, to return to the holding register pending normal retirement in October 2006. Mr Haigh was not offered an ill-health pension. Mr Haigh declined to accept the terms and was dismissed.

The decisions

The Employment Appeal Tribunal (EAT) held that Mr Haigh’s dismissal was unfair. The EAT confirmed that fairness requires the reasonable employer to give proper consideration to an ill health retirement scheme before dismissal for long term sickness absence.

The EAT’s reasoning for its finding was that:

		the Company’s sickness policy expressly stated it would consider retirement along with termination on medical grounds;
		under the Company’s retirement scheme, entitlement to an enhanced retirement pension was established by certificate signed by an occupational health advisor. It follows that any entitlement would be referred by the Company to its occupational health advisor for a decision and, therefore, the Company had an essential role in ensuring retirement was considered;
		if an employer could dismiss a sick employee who might be entitled to an enhanced retirement pension, without considering that question, substantial injustice might occur; and
		the Company should have waited for the outstanding medical adviser’s opinion before making a decision to dismiss.

The key feature of this case that lead to the Tribunal’s finding was that it appeared that the Company wanted to avoid the cost of Mr Haigh taking ill-health retirement.

What does it mean for me?

		This case is a useful reminder of the importance of careful sickness absence management and genuine consultation with affected employees.
		Medical evidence will nearly always be crucial in this regard, and decisions should not be made until all the available medical evidence has been considered.
		If you provide the valuable benefit of ill health early retirement, take steps to ascertain whether an employee who is absent on long term sick leave is entitled to that benefit, before taking the decision to dismiss.
		Failure to consider entitlement to ill health early retirement goes beyond a mere procedural failure, so the exception in section 98A(2) will not apply. Therefore, it is wise to ensure that all the options are fully considered before making a decision to dismiss.