Long-term sickness and ill-health retirement

First West Yorkshire Limited t/a First Leeds v Haigh, Employment Appeal Tribunal

Where an employer provides an ill-health retirement benefit, it must consider an employee’s entitlement to that benefit before dismissing for long-term sickness.

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This article was checked on 9 December 2011 to make sure all content was up-to-date and correct.

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FACTS Mr Haigh was a bus driver for First Leeds. He was signed off as unfit for work following a suspected stroke, and his driving licence was withheld for a minimum of 12 months.

The company had three schemes: a sick pay scheme, which provided full pay for 26 weeks and half pay for 26 weeks, with a discretion to extend an enhanced ill-health retirement pension scheme, if a medical certificate confirmed an employee to be permanently incapable of fulfilling their role and a holding register – as an alternative to dismissal, the employee’s seniority and continuity of employment would be retained, but there was no entitlement to sick pay.

Haigh’s manager considered that his ill health was not permanent, and decided that he should be dismissed on the ground of incapability, or go on the holding register. Haigh initially went onto the register, but disagreed that his sick pay should end, and was dismissed.

His appeal meeting was adjourned pending further medical information, which the company’s occupational health adviser sought from Haigh’s specialist.

At the resumed appeal, relying on only the occupational health advice that Haigh’s condition could not be considered permanent, Haigh was given the choice to be dismissed or remain on the books with sick pay extended for a few months, before going onto the holding register and retiring with no application for an ill-health pension. Haigh declined the company’s terms and was dismissed. He claimed unfair dismissal, and was successful at tribunal. The employer then appealed.

DECISION The Employment Appeal Tribunal (EAT) upheld the tribunal’s finding that Haigh’s dismissal was unfair.

The company had failed to take reasonable steps prior to dismissal. Reasonable steps in this context include consulting with the employee, taking medical advice and considering alternative employment. Where the employer provides an ill-health retirement pension, it should also take reasonable steps to ascertain a long-term sick employee’s entitlement to that benefit, which includes seeking medical advice.

The EAT said that the company had failed to honour its own sick pay scheme which stated that it would consider ill-health retirement along with termination on medical grounds, but also that it was “good industrial practice” to consider ill-health retirement where this forms part of the employee’s benefits package.

The requirement for an ill-health retirement application to be signed off by a medical adviser meant that the company had an essential role in ensuring that retirement was considered before dismissal.

The EAT found that, in this case, the company was motivated by wanting to avoid the cost of an ill-health retirement claim.

KEY IMPLICATIONS An employer should take reasonable steps before dismissing an employee on long-term sick leave, including consulting with the employee, seeking up-to-date medical evidence, and considering alternative employment.

Where the employer provides an ill-health retirement or similar benefit, it should also take reasonable steps to ascertain whether an employee on long-term sick leave is entitled to that benefit. Reasonable steps include seeking medical advice on the question of entitlement.

A failure to consider an employee’s entitlements on termination for long-term sickness could result in an unfair dismissal. To avoid this, employers should put in place a proper system for the management of long-term sickness absence to ensure that all the necessary steps are taken before dismissal.

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