Managing incapacity

is the best process for dealing with stressed employees taking increasing
amounts of time off work? This difficult area requires managers to work with OH
to recognise and understand the reasons behind the absence before taking steps
to address it, by Karen Seward & Rachel C Smith

the needs of sick, stressed and incapable employees with those of the employer
is a difficult task. But managing incapacity proactively involves taking the
initiative, monitoring absence, identifying problems early and consulting with
employees and their doctors. The objective is to understand the reasons behind
the absence, and what steps can be taken to address it.

myriad of legal issues

legal issues surrounding incapacity are multi-layered and intertwined, and
impossible to consider in isolation.

starting point is the employment contract. Examine what occupational sick pay
is payable. In the absence of any other contractual provision on incapacity,
the employer will be expected to continue a person’s employment as far as
receiving contractual occupational sick pay is concerned, until the end of the
period provided for, and must not take steps that will interfere with that

may arise where a permanent health insurance (PHI) scheme exists. This removes
a huge amount of flexibility. It will be a breach of the contract’s implied
duty of trust and confidence for an employer to dismiss an employee for
incapacity before they have had the opportunity to make a claim under that
policy, or while enjoying benefits under that policy. This is because,
inevitably, it is a term of the policy that the employee must remain employed.

can face negligence claims when dealing with incapacity, often in the form of
stress claims. Sick employees use the word ‘stress’ with increasing frequency,
and there is no denying the difficulties you face when presented with a
succession of sickness certificates bearing the word ‘stress’.

employee bringing a personal injury claim must show that an employer has
breached the duty of care to the employee, that it was reasonably foreseeable
that an injury would result from the breach, and that a loss in the form of
personal injury had occurred. Stressed employees must be monitored to ensure
they are not adding to the stress, and above all, act reasonably.

of the most problematic issues for occupational health when having to manage
sickness absence is the Disability Discrimination Act (DDA) 1995. Uncapped
compensation and no minimum service requirement are an added attraction for
those seeking to bring a DDA claim.

for unfair dismissal will depend on the procedure adopted by an organisation
and how reasonably it acts in dismissing the employee. So, what strategy should
be adopted when faced with an employee’s incapacity?

law is one thing, but practice is another. Whether dealing with persistent
short-term or long-term absentees, the key is proactive management. Only by
taking control of the issues and managing the staff can an employer activate
the green light of dismissal.


the following example. Employee X is an HR assistant with four years’ service.
Since the rapid expansion of the department during the past two years, X has
been bullied by other members of his team. His blood pressure is high, and he
recently started having panic attacks on the way to work.

has taken one or two days off every fortnight for the past six months, and his
performance is deteriorating. His manager started the disciplinary process,
which has resulted in him now being signed off work with stress. What can be
done to address the problem?

identify the issues. Short-term absence is often a symptom of a more serious
problem – in this scenario, possibly harassment.

gain a better understanding of the problem, you need to be better informed of
X’s condition.

interview with the occupational health adviser and an examination with an
occupational physician may help the employer determine whether there is a DDA issue.
This is unlikely based on these facts, but the employer may need confirmation
whether the condition has a substantial adverse effect on the employee’s
ability to carry out normal day-to-day activities.

doing so, you must bear in mind that X will be able to request copies of any
medical reports under the Access to Medical Reports Act 1988 and the Data
Protection Act 1998.

HR and OH will then be in a better position to analyse the costs versus
benefits of managing X back to work, or possibly towards dismissal.

will involve consideration of what his absence is costing in sick pay and
temporary cover, and what possible claims X could bring if dismissed – unfair
dismissal, discrimination, and/or personal injury if the stress is caused by
work and the ‘injury’ is reasonably foreseeable, for example.

he will need to be managed. In practical terms, this could involve transferring
the bullies or X out of the team.

would need to be done in consultation with X to find out what, aside from
stopping the bullying, the company can do to reduce his stress at work.

managing X out is a possibility, X’s sickness absence will need to be monitored
actively and consideration should be made on whether he should be offered
counselling and therapy for his panic attacks and high blood pressure. A
return-to-work interview may be a way of raising X’s performance issues, and
also of letting him know that if his persistent absenteeism continues, it may
become a disciplinary matter.

ultimately, the employer decides it wants to manage X out of the business, it
could dismiss for capability reasons. This would require a fair process and
consultation. It could also consider dismissing him for poor performance. This
would again require a fair procedure involving setting targets for X to meet
and deadlines for assessing his continuing development.

strategy would be quite different if X had already been absent for almost 26
weeks, had exhausted his entitlement to company sick pay and was in the process
of being considered for private health insurance (PHI).

these circumstances, it would be more likely that disability could be an issue.
Consultation with occupational health should have been taking place in this
case throughout the absence to gain an appreciation of how long-term the
effects of the stress were likely to be.

consideration would need to be given to what reasonable adjustments could be
made to get X back to work in some capacity.

could involve part-time hours, a less stressful role and less responsibility,
away from the bullies. A prognosis (if possible) from the doctor about the
potential longevity of X’s complaint would also be of use.

X is rejected for PHI and is not amenable to the adjustments the employer is
proposing, the employer could move towards dismissal. If X does return to work
in some capacity, his performance will need to be managed in the same way as if
he had been a short-term absentee.


difficulty with short-term absentees is that it can take a long time for an
employer to identify that a problem exists and the absence is persistent. This
is where some form of absence-tracking system is beneficial.

it has been recognised that there is a problem, and steps have been taken to
find out the reasons for the absence, there should be a return-to-work
interview with the employee.

purpose of this is to find out what can be done to help reduce the employee’s
absences, communicate the level of attendance expected by the employer and the
standards expected of the employee’s performance.

employee should then be monitored frequently for the first month or so to
assess the level of improvement. If none occurs, a disciplinary process should
be invoked. If there is some improvement, OH needs to continue monitoring. If
the level of improvement varies or declines during the next two months, the
employer will need to invoke the disciplinary process.


key to managing a long-term absence employee is to start the process as soon as
the GP’s sick note indicates a long period of absence.

it indicates, say, a month’s absence for stress or depression, warning bells
should sound for the employer to obtain its own assessment from occupational
health during, for example, weeks four and six of the absence. This will enable
the employer to get an early prognosis and prepare for an application for PHI
by weeks nine to 12 of the employee’s absence.

the employee has a terminal illness, the possibility of an incapacity pension
should be considered at this point. By the end of the normal term for company
sick pay, you will then know whether the insurers will cover, or whether to
manage the employee back in or out of the business.

Seward is a partner and Rachel C Smith is a senior associate at Allen &

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