Capability and ill-health dismissal — advising clients

In this long form article Christine Peacock helps with advising clients facing capability dismissal after long-term sickness absence

Introduction

This article aims to help advisers provide the most appropriate advice to clients facing capability procedures linked to being off sick from work long-term. It aims to help with securing the best outcomes for clients. It is a companion to Sick and tired — common problems facing clients off on long-term sickness.

Advisers will want to start by exploring the client’s circumstances to:

• understand where things are up to;
• establish what the client is hoping for from getting advice; and
• establish the best and most realistic options for them in the circumstances.

Capability and dismissal

Clients often find it difficult to understand that the law does allow an employer to dismiss someone who has genuinely been off sick for some time, with this potentially being a ‘fair’ dismissal.

It will always be necessary to understand the facts of the client’s case, but the starting point is that ‘capability’ (which includes someone not deemed capable of attending work and fulfilling their duties on health grounds) is a potentially fair reason for dismissal. This is particularly the case for clients with less than two years’ continuous employment, as they don’t have protection from unfair dismissal in any event.

For clients with more than two years’ service, the employer needs to show that dismissal was for this potentially fair reason, and follow a fair procedure. This means the employer should review their absence, hold meetings to consult with the employee (typically about likely length of absence and any changes that might be made to help the employee return to work), allow the employee the opportunity to comment and get relevant medical evidence or reports before taking the decision to dismiss.

Getting this medical evidence may include a referral to Occupational Health (OH) or writing to the client’s GP. Whilst clients can refuse both an OH referral and consent for a GP report, it will almost always be in the client’s best interests to cooperate with the employer’s requests. If they don’t, it will be reasonable for the employer to proceed based on only the information available, which may just be a fit-note. This should always be explained to clients who are unsure about agreeing to such requests. More information about OH referrals and clients’ rights can be found in our article Sick and tired — common problems facing clients off on long-term sickness.

Payments are due to the client

Clients need to be paid any wages due, notice pay and any outstanding or accrued holiday pay. It is particularly important to check this for those who have been off sick for a lengthy period, as holiday pay continues to accrue during absence and can be paid when employment terminates. There is no obligation on employers to make any other type of ‘severance’ or ill health payment, unless there is some contractual entitlement. It is also always worth checking whether ill-health retirement may be an option for clients, if they are in an occupational pension scheme. However, it can be the case that a client may be deemed unfit to remain at work, yet not qualify for an ill-health pension, which will be covered by the terms of the pension scheme.

Occasionally, clients may work for employers who provide Permanent Health Insurance (PHI), which pays sick pay under an employer’s insurance policy. In certain circumstances these may include long-term payments to clients who are unable to work (sometimes up to retirement). So advisers may on occasion be asked for advice about PHI. More information about different types of illness insurance can be found on Advisernet.

Disability and reasonable adjustments

Disabled clients may also be dismissed fairly for capability, on the same basis, but the duty to make reasonable adjustments must first be considered. If there are no adjustments that would keep the client in work, or if there are, but it is not reasonable or practical for the employer to make them, then it is likely a dismissal on capability grounds will be found fair.

No possible adjustments — example:

A client might have a terminal prognosis and be struggling with many aspects of daily life. So things like adjusting working hours or offering light duties may not help this client return to work.

Not reasonable or practical — example:

The client needs to use a wheelchair and works in a small, independent shop. It might not be reasonable or practical to expect a lift to be installed. But the employer might provide ramps or adapt a toilet.

‘Frustration’ of contract

Employers sometimes try to suggest that the employee’s long absence and unfitness for work amounts to ‘frustration’ of the contract, meaning the contract has ended without there even being a dismissal. However, this is not something applied normally in an employment context and employment tribunals will generally be unwilling to deny clients the right to bring an unfair dismissal claim or accept this as a fair reason for dismissal. They will still expect an employer to have followed a fair procedure.

What to check for

If a client is facing capability proceedings leading to possible dismissal, advisers will want to be aware of the factors a tribunal would take into consideration in deciding whether such a dismissal was fair. These include:

• whether other staff are available to carry out the absent employee’s work
• the nature of the employee’s illness
• the likely length of their absence
• the cost of continuing to employ the employee
• the size of the employing organisation; and
• (balanced against those considerations), the unsatisfactory situation of having an employee on very lengthy sick leave.

Fair procedures

Additionally, a fair procedure is essential. This requires:

• consultation with the employee
• a thorough medical investigation (to establish the nature of the illness or injury and its prognosis), and
• consideration of other options, such as alternative roles.

There is doubt over whether the Acas Code of Practice on Discipline and Grievances applies in these situations, as capability is not essentially a disciplinary matter. But the Code and accompanying guidance,Discipline and grievances at work: The Acas guide, may be helpful in considering what kind of procedure an employer should follow.

It is also very important to consider whether a client may be disabled and therefore whether the employer has first met the duty to consider reasonable adjustments before dismissing. This is vital whether or not clients have more than two years’ service, as a failure to make reasonable adjustments may make the dismissal unfair (for those who can bring such a claim) or amount to disability discrimination regardless of length of service. For more information about reasonable adjustments see the companion article Sick and tired — common problems facing clients off on long-term sickness.

What the employee must be told

If the employer does dismiss, they must tell the client:

• why they’ve been dismissed
• when their employment contract will end
• their notice period, if there is one
• their right to appeal the decision.

It’s automatically unfair and discriminatory to dismiss for pregnancy-related sickness.

In situations where the client does want to keep their job and return to work when fit, or if the client is considering a tribunal claim for unfair dismissal and/or disability discrimination, they should normally be advised to appeal against dismissal.

Payments and notice due

If the client is dismissed, in addition to checking what steps have been taken and procedures followed, advisers should check if clients have been paid all outstanding sums due. This includes checking:

• Has correct notice been given and/or paid up to termination?
• Have all outstanding wages and/or sick pay been paid?
• Have you checked the client was being paid at least the National Minimum Wage for hours worked when at work?
• Has holiday pay been paid (including holiday accrued but untaken from previous years if the client has been off sick for more than one leave year)?

Clients normally have a right to be paid for their notice period if they are dismissed by their employer (unless dismissed summarily for gross misconduct), so advisers should get the client to check their contract to see what it says about notice. If the client only has an entitlement to statutory notice pay then they are entitled to be paid their full notice pay on dismissal, even if their sick pay has run out. This can be very valuable, especially for clients with long service, as they may be entitled to several weeks’ full pay. But if their contractual notice is at least one week longer than the statutory entitlement they lose this right (although some employers will choose to pay for notice on dismissal in ill-health capability cases). See our article What will a client be paid if they are off sick in their notice period? for more information and examples on this point.

More information about this can be found on Advisernet at Your notice period when resigning.

Dismissal — other reasons

Sometimes clients may face disciplinary or dismissal proceedings for reasons other than capability, but related to their sickness absence.

Employees need to follow their employer’s sickness absence reporting procedures, including supplying fit notes and attending meetings. Failure to do this can result in clients having sick pay withheld and could lead to disciplinary action for conduct rather than capability. For more information about certifying absence and fit notes see the companion article Sick and tired — common problems facing clients off on long-term sickness.

Negotiating an exit

Not all clients will want to return to work after a period of long-term sickness absence, making it vital to explore what the client’s wishes are. Clients may see no prospect of returning to work, due to their physical or mental health conditions, or may have lost confidence in their employer’s handling of their difficulties. They may instead want an adviser’s help in negotiating an exit agreement.

If a client is in a trade union it’s likely that they will be much better placed to help with this, as they will have the right to accompany the client to workplace meetings, and may well be familiar with the employer’s procedures. Clients in a union should always be referred there for help, unless the union has declined assistance.

It isn’t possible to give standard advice on what might be negotiated for clients, as the prospect of an exit package will depend on where the client works, what job they do (including level of earnings), their length of service, whether they are disabled, and whether they have been engaged in grievance or disciplinary proceedings. A higher-earning client, with long service, who may be disabled and has had a grievance handled poorly is likely to be in a far stronger position to negotiate a termination package than someone with short service who has gone off sick while disciplinary proceedings are outstanding. Advisers can only seek to explore the circumstances, including whether the client may be in a position to bring a legal claim (for unfair dismissal if they have over two years’ service, or disability discrimination if the employer has failed in its duties) and help the client to understand what may be possible.

Depending on an adviser’s capacity, they might help with calculating a reasonable sum to represent loss of earnings and, in disability or or other discrimination cases, something to reflect injury to feelings. If the client may have a potential unfair dismissal claim, further amounts could be added to represent sums equivalent to an unfair dismissal basic award (like a redundancy payment). However, if a client is genuinely unfit to work they would be unlikely to get much in the way of a compensatory award for lost earnings from a tribunal. Clients may then be able to use this either directly in any meetings with the employer, if absence is being reviewed or termination of employment is being discussed, or in negotiations through Acas, using early conciliation and the possibility of a COT3 agreement. Some employers may also wish to consider offering a settlement agreement. More information about Negotiating a settlement can be found on Advisernet.

Advisers will need to manage clients’ expectations actively about whether settlement may be an option, what sums might realistically be sought and how this will be driven by the strength of any potential employment tribunal claim an employer might want to resolve at an early stage.

Tribunal claims

Finally, although early resolution of problems faced by clients who are sick long-term will almost always be the best solution, some clients may have potential claims they may prefer to pursue in an employment tribunal. If this is the case, the client should be advised that tribunal claims are usually stressful, and are likely to take a long time to get resolved.

The most likely claims clients will have in these circumstances include unpaid wages (for example, sick pay or holiday pay); notice pay; disability discrimination; or unfair dismissal. The information outlined above should help advisers with identifying which, if any, of these claims applies in the client’s circumstances. If the claim relates solely to a refusal to pay SSP then the client’s best option may be to make a complaint to the Statutory Payment Dispute Team — GOV.UK. This is the only option when liability to pay SSP is in dispute. There is a deadline of 6 months from the earliest date from when their entitlement to SSP was in issue to make a complaint to HMRC, who will investigate and can recover sums due for the client.

Otherwise, clients will usually be pursuing claims in an employment tribunal, with the first step being to register for Acas early conciliation. Different claims may have different limitation dates and advisers will need to establish the facts in each case to help the client identify the relevant date. Dismissal claims will have a time limit of 3 months (less one day) from the dismissal date, whereas a discrimination claim will have 3 months less a day from the date of the act of discrimination. To help advisers work out the relevant time limit, more information is available on our website at: If you’re thinking of making a claim to an employment tribunal.

Once again, the role of advisers will be to support clients with the information they need to start and progress a claim. But managing clients’ expectations about what can be achieved even from a successful tribunal claim is a necessary part of advising clients dismissed after being off sick long-term.

Christine Peacock works as an employment expert in the Expert Advice team at Citizens Advice

The information in this article is correct as of the date of publication

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