Case of the month: Fair dismissal for incapacity: McAdie v Royal Bank of Scotland

The Court of Appeal has confirmed that an employer can fairly dismiss an employee for incapacity even in circumstances where the employer’s conduct has caused – or contributed towards – the employee’s incapacity.

Transfer and related grievance

McAdie worked for the Royal Bank of Scotland (RBS) for many years, latterly as a customer service officer. When RBS moved her to a different branch, McAdie complained, and discussions about the move quickly became fraught, with McAdie complaining that her manager’s behaviour amounted to harassment.

McAdie was signed off sick with stress and subsequently brought a grievance about the transfer and her manager’s behaviour. The grievance was mishandled for various reasons, including delay and failure to deal with all of the complaints. RBS did not uphold the grievance.

McAdie remained off sick despite RBS’s attempts to get her to return to work. After more than a year’s absence, she was dismissed, following a series of meetings and a review of medical evidence, which identified “a severe adjustment disorder secondary to alleged workplace issues including harassment”, and confirmed that a return to work was very unlikely in the foreseeable future. McAdie brought unfair dismissal proceedings against RBS.


The tribunal found that McAdie’s transfer and grievance had been badly handled, and that her medical condition had been caused by RBS’s handling of the grievance. It said the dismissal was unfair as no reasonable employer would have handled things in the same way.

The Employment Appeal Tribunal and Court of Appeal disagreed with the tribunal on the unfair dismissal finding. Both appeal courts agreed that while a tribunal should not ignore the fact that an employer has contributed to an employee’s ill-health, the fact that the employer has done so cannot prevent the employer from ever effecting a fair dismissal. The courts suggested that in such cases it might be necessary for the employer to “go the extra mile” in finding alternative employment for the employee, or put up with a longer period of absence than might otherwise be reasonable.


The question in an unfair dismissal claim is the reasonableness of the employer’s decision based on what it knew at the time, and for that purpose there should be no need to look at what caused the illness and who was responsible for it. Although RBS’s handling of the grievance was regrettable, there was no possibility of the employment continuing, and no alternative to dismissal.

This case provides some relief for employers in the context of unfair dismissal claims where the employer is wholly or partly responsible for the employee’s inability to work. Had the tribunal’s decision stood, an employer found responsible for contributing even partly to a stress condition would be precluded from ever dismissing the employee.

However, it is also important to remember that this decision only applies to unfair dismissals. An employer responsible for causing an employee’s stress is also at risk of claims for personal injury, discrimination and constructive dismissal, as well as claims under the health and safety legislation.

Key points

  • An employer contributing to an employee’s incapacity does not prevent the employer from ever fairly dismissing the employee.
  • The test in an unfair dismissal case is the reasonableness of the employer’s decision based on what it knew at the time, and for that purpose there should be no need to look at what caused the illness and who was responsible for it.
  • A finding of work-related stress could lead to other claims, including constructive dismissal, discrimination and personal injury.

What you should do

  • Deal with grievances promptly and effectively to avoid stress-related claims.
  • Where an employee alleges that their incapacity is work related, wait longer than normal before dismissing.
  • ‘Go the extra mile’ in finding alternative employment.
  • Introduce a stress policy so that managers and staff know how to deal with stress at work.

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