Risk management programme on managing long term absence and the risks associated with it. We cover the impact of the House of Lords’ ruling in Stringer and the ECJ’s ruling in Pereda, as well as highlighting the risk of unfair dismissal and discrimination claims. The programme includes commentary from lawyers from Pinsent Masons' Employment Group.
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  • Transcript

    Hello and welcome to this risk management programme on managing long term absence. The aim of this programme is to highlight some of the difficulties in managing long term sickness cases and some of the many traps with a view to minimising the risk of claims, including disability discrimination claims, which can prove so very costly for employers who make mistakes in this area.

    But we start with the long term absence policy.  Most employers have been forced to review their policies and bring them into line with the House of Lords decision in Stringer. That is the case dealing with the rights of workers to take claim holiday pay during a period of sickness and it has had a direct impact on how you manage long term sickness cases.

    Philip Titchmarsh:  "The upshot of the House of Lords decision in Stringer is that while a worker is off sick they will continue to accrue leave under the working time regulations and secondly, and this is of considerable practical importance, they can actually take leave, that is annual leave under the working time regulations, whilst they are off sick even though they are off sick.  Now what that means in practical terms is that once somebody has exhausted their entitlement to sick pay they can request that they be allowed to take annual leave under the working time regulations and when they take that leave, albeit at the same time as being off sick, they will be entitled to holiday pay in accordance with the regs.  So, they will be in effect converting a period of unpaid sick leave into a period of paid holiday leave."

    Joe McMorrow:  "In the Spanish case of Pereda which went before the European Court of Justice it was decided that an employee can't be forced to take holiday whilst on sick leave. If they want to they can take it at another time and that's up to them to decide whether to do that and they can request that it is taken at another time even if it involves carrying over the holiday from one leave year to another. Now, in the case of somebody who is on long term sickness that could mean accruing holiday from a number of leave years which could mean that by the end they have banked up quite a lot of holiday entitlement. Over here the regulations haven't been updated to take into account the Pereda case so employers in the private sector can still rely on the Working Time Regulations which say that holiday can't be carried over."

    Sarah Ashberry:  "Traditionally people with employees on long term sick have taken the view that if they are not costing the company anything then there is no great urgency to deal with the issue.  Of course, now there is a cost to the employer because there will be the ongoing cost of statutory holiday pay.  So this might lead employers to think that they will grasp the nettle sooner rather than later get stuck into some kind of termination of employment on grounds of incapacity ill health.  Our advice would be not to be too hasty because there are of course associated risks with these types of dismissals, primarily under the Disability Discrimination Act and if you were to go ahead too quickly without ticking the appropriate boxes and doing the appropriate investigations you could be on the hook for a DDA claim and the scale of that is likely to dwarf any saving that may think you are making under the statutory holiday pay.  The other big risk of course:  if your workplace has a permanent health insurance, or PHI, scheme it is very difficult to dismiss an employee for ill health if by doing so you are denying them access to that very valuable benefit.  So, take a deep breath and consider those two points before you think you can terminate an employment and save yourself holiday pay."

    Jon Fisher:  "These rules do not just apply in the context of sickness absence.  They also apply to other absences such as career breaks and any other agreed periods of leave such as maternity leave for example.  The difference for maternity leave is that we know from a European Court of Justice case that employees are not actually allowed to take their annual leave during that period.  So what employers do in practice is to calculate the leave which will accrue during the period of maternity leave and allow employees to take that in one bulk period either before or after the period of maternity leave.  For other periods of leave such as career breaks it will be open to employees to take their leave during that period and therefore employers will need to amend their policies accordingly."

    And, of course, if you would like help amending those policies that Jon referred to – absence, maternity and career break policies, then we would be happy to help.

    GETTING A MEDICAL REPORT

    Once the absence has become long term – typically 4 weeks - it is a good idea to formally notify the employee so they know the case is being managed under the long term absence procedure and you will be investigating the nature of the employee’s condition.  That means getting a medical report - typically from an employee’s GP or a specialist – a step you will need to take even in cases where the employee is refusing to cooperate:

    Ed Goodwin:  It is absolutely fundamental these days to get a medical report when you have got somebody on long term sick.  The reasons for this, the landscape, has shifted over the last few years because of the Disability Discrimination Act.  The case law makes it perfectly plain now that the employer cannot even get to first base, with considerations of reasonable adjustments, until the employer has a proper medical report.  It also helps you manage any dismissal l for unfair dismissal purposes as well as keeping an eye on whether there is any potential personal injury claim.  But how can you force the employee to go and have that medical report?  Well, very often contracts are drafted with an express right within the contract but even without an express right it is arguable there is an implied contractual right in favour of the employer to get the employee to see a doctor to get a medical report.  That is all very well and good but the employee can still refuse.  Even with an express right the employee can say “no I am not going to do it”.  So in managing how the employee goes to the doctor our advice is that you should always impose a time limit and if by that time limit, which has to be reasonable, the employee has not gone to see the doctor, or volunteered to go and see the doctor, then you need to deal with the matter based on the information you have, and you need to explain that to the employee.  So, if the employee does not go to the doctor the employee knows the employment issue will be dealt with based on the information you have.  But another point that flows from that is to what extent can you as an employer discipline the employee for misconduct if they have refused to go and see a doctor notwithstanding your express requirement that they do so?  In that case the issue is what was the reason for the employee’s refusal?  This is dangerous ground for an employer.  If the employee has a good reason for refusing to go, such as a desire to keep the matter confidential for example, then it is dangerous to move down the misconduct route.  But if you know that the employee has not gone to see the doctor because they are being bloody minded then taking them down the disciplinary route for failure to go to a doctor is perfectly acceptable.”

    When it comes to instructing the medical adviser you will find a note of the key points to cover on the HR Network TV website but this is an area where you may want to take specific legal advice - something we would certainly recommend in cases where the employee may be disabled for the purposes of the Disability Discrimination Act. 

    WHICH MEDIC?

    Having decided that it is the right time to get a medical report the next issue is who do you instruct to do that? 

    Ed Goodwin:  “So, you are in the unfortunate position now where one of your employees is on long term sick and you are managing it as closely as possible.  The question is which type of doctor do you want the employee to go and see?  Normally the employee will have seen their GP and their GP will perhaps be up to speed with what is going on.  Alternatively, you could say no you would rather have your own company appointed doctor and there are pros and cons with each.  If you go to the employee’s GP then you need to bear in mind that the employee will have certain rights over that report under the Access to Medical Records Act.  This broadly means that the employee can insist on seeing a copy of the report before you get your hands on it and, in fact, the employee can even refuse to hand it across to you.  The advantage of going to the employee’s own GP is that it is likely to be a quicker report, and it is going to be cheaper because there will be no cost. If you take the other route and go to a company appointed doctor it means you can avoid the Access to Medical Records Act.  Also, if you know what the illness is then it means you can appoint a specialist at an earlier stage and bearing in mind that you need to get to the bottom of the problem, get an early prognosis and make all reasonable adjustments going to a specialist at an early stage may in the long run work to your advantage, although it does come with consequential cost and it may not be as quick as going to a GP.

    So, armed with the report, whether it is the GPs report or the specialist’s report the next important thing to do is to sit down with the employee and have a formal consultation meeting with them.  You need to explain to them what problems you as the employer are facing and how you are looking to assist the employee to come back to work.   It is important to talk to them frequently about what reasonable adjustments you may be able to make for them now or when the employee comes back to work.  It is also important to mention to the employee how their sick pay is going to work.  That will very much depend on the employee’s contract and the benefits that you offer, but normally, without any contractual enhancement, it will be 6 months SSP followed by Disability Allowance.  It is also worth mentioning PHI, if you offer PHI.  The issue of how the application needs to be made and the extent to which you as the employer need to assist with that application ought to be discussed as well.”

    IS THE EMPLOYEE DISABLED?

    In cases of long term sickness the question of whether the employee is disabled is always important.  If so, the employer faces important duties that need to be satisfied throughout the period during which the absence is managed.  Chiefly, that means making sure the employee is not treated less favourably by reason of their disability, and also that reasonable adjustments are made.  But one area where employees will often expect help from employers is in relation to their pay.  Are you expected to treat them more favourably under your sick pay policy if they are disabled?  If you don’t are you at risk?

    Ed Goodwin:  “So, your employee has now been with you on long term sick for coming up to 6 months. Let’s assume we have a  6 months enhanced sick pay policy says his sick pay is about to run out and he is ill and is going to continue being ill and he wants an extension of his sick pay.  The question is do you as an employer have to extend sick pay? Is it a reasonable adjustment in that situation to extend your own company enhanced sick pay?  It seems very harsh.  I am pleased to say that the merits of that argument are very limited.  There is a case called Meikle that has looked at this and kept it open as a possibility, but in a more recent case the courts have very much narrowed the circumstances to the situation where it is your own action that has caused the disability.  So, if the employee has become ill for other reasons then an extension of enhanced sick pay is probably not a reasonable adjustment that the employer has to make. That is the good news.  The bad news is that the obligation to make reasonable adjustments rests firmly on the employer’s shoulders and it is a high hurdle. You must remember that as an employer you must consult, consult and consult again with your employees.  The extent to which you will need to make reasonable adjustments will depend to some extent on the size of your organisation and the resources that you have but if you are considering dismissing an employee who has a disability you will have to prove to a tribunal, if tested, that you have gone to the “n-th” degree to try to work round, and look at every option, other than dismissal.  As I say, it is a high hurdle and, to some extent, if you think it is going to cost you a lot of money to implement these reasonable adjustments then you have to think twice.  The excuse of cost is one that the tribunals do not like – even if they do accept that argument then they will expect you as the employer to have looked at whether there are any publicly funded opportunities where the cost can be shared with you.”

    CONSULTING WITH THE EMPLOYEE

    Just as important as gathering information from the medical experts is gathering information from the employee himself.  Consulting with the employee is a fundamental part of a fair procedure and the employer must try to do that in all cases.  The individual will, no doubt, have important information about their own state of health, their ability to come back to work, the nature of the work they could do and, importantly, any adjustments that the employer could make to facilitate that return.  In disability discrimination cases this is especially important because of the duty to make reasonable adjustments – that is something where input is required from the employer and the employee, as well as third parties such as occupational health and the medical specialists.

    Linda Jones:  “It is absolutely critical that employers carry on consulting with their employees who are on long term sick on a regular basis.  There is a bit of a tendency to think that out of sight is out of mind and it is not unusual for us to find that employees have been off for 6, 8, 9 or 10 months and nobody has been in contact with them for virtually the whole of that period.  Sometimes managers can have a concern about not being seen to pester or harass employees who are off on long term sick leave, and they are a bit nervous about making contact.  Obviously, it depends on the situation – so if they are off on long term sick leave because they have been harassed by their line manager it would obviously be inappropriate for the line manager to the one responsible for keeping in touch with them and in that case, and indeed in most cases, the most appropriate person to get in touch with them is somebody from HR.  Active management is definitely needed in these cases and the situation should not be allowed to drift.  At the end of the day the employee is still under an employment contract and they have an ongoing obligation to provide information to their employer.  If they are a bit slow to provide that information then the company does have a right to ask them for it.  But there is more to it than that – it is not just about gathering information about why they are absent.  It is about consulting with tem about when they are likely to return to work and it is about keeping in touch with them to make sure they have all the information they might need.  So, for example, if it has already been decided they will not be able to return to their current job because perhaps they have a disability, then they will need to know whether there are any suitable vacancies coming up that might be suitable for them.  In that case, if you do get to the point where there is nothing suitable for them and you are looking at dismissal if you have not been in touch with that employee for the last 6 months then you have got a lot of ground to make up in procedural terms before you can get to the point of carrying out a fair dismissal.”

    ALTERNATIVE EMPLOYMENT

    As we have seen, the gathering of up to date medical information and the need to consult with the employee throughout the period of absence are two essential steps in managing long term absence.  The third crucial aspect is exploring thoroughly the prospect of alternative employment within the employer’s business.  While the employee may be unable to return to his current job that is not to say he cannot perform another role.

    Linda Jones:  “A proper and thorough search for alternative employment is one of the essential elements of carrying out a fair dismissal on capability grounds.  It needs to be a really thorough search. So, if you are a subsidiary that is part of a group of companies that search should not just be in your own company.  It needs to be carried out across the Group.  Any search that is carried out needs to be done in consultation with the employee.  It is no good simply looking at the company’s website and sending through the post details of any vacancies.  You need to talk to the employee about what might be suitable for them and together you need to look at what the vacancies are what you can do for the employee.  There is no duty to actually create a vacancy for the employee, but there is certainly a duty to look for alternative employment and, if the employee is also disabled, which almost inevitably the employee will be if you have got to the stage of looking for a different job completely, you will need to look for alternative employment as part of the duty to make reasonable adjustments.  At that point you will probably need to consult not only with the employee but also perhaps with their medical specialist and anyone else who may have been involved in the case.  So, for example, if the employee is autistic you might want to consult a specialist or someone from a relevant charity, who deals with autistic employees and getting them back into the workplace.

    There has been a recent case dealing with disability discrimination which shows just how far this duty goes.  In that case the employee was off work and it was known that were not able to come back and take up manual work.  The court decided that the company should have started to train him to take up an office job long before he was fit to return to work.  So, you have to treat this duty very seriously – a superficial trawl through websites or sending a few vacancies to the employee isn’t going to do the trick.  You might have done everything else throughout the process very fairly but if you fall down at this stage it will be an unfair dismissal and potentially discriminatory as well.”

    PHI

    Special considerations apply in long term sickness cases where the employer provides permanent health insurance (PHI) or some other scheme providing benefits to the employee in the event of his long term disability. 

    Ed Goodwyn:  “Where employers offer PHI insurance then it does complicate matters and it is very much an issue that need to bear in mind.  PHI is an insurance based product which is offered to employees which provides that if they are long term ill then normally after 6 months, or perhaps a year, a percentage of their salary is paid – 70% or 80% commonly - until that employee either retires or gets better.  The policies are also drafted on the basis that the payout under the scheme will only continue provided the individual remains an employee of the employer.  This issue came to a head in a case called Aspden.  The employee was dismissed by the employer by reason of the fact they were on long term sick at a time when the employee was enjoying the benefit of the PHI payout.  The employee, upset at having lost out, sued the employer on the basis that there was an implied term in the employee’s contract which basically said that while the employee is off sick enjoying the benefit of PHI cover the employer cannot dismiss for sickness.  The employer, on the other hand, relied on the express termination provisions under the contract of employment.  The employee won.  The issue for employers who carry PHI is that if you have employees who are either applying for PHI, enjoying the benefits of PHI or might be applying for PHI then if you dismiss them because of their illness you do so at your own peril because, following the Aspden principle, you are likely to be in breach of that implied term.  This can be hugely expensive, as it was in the Aspden case, where the employer was faced with a bill for damages which amounted to 80% of the employee’s salary until the employee’s retirement.  So, our advice is, if you carry PHI, make sure you keep your long term sick employees on your books even if they have not yet successfully applied for PHI.  Do bear in mind however that the case law has also made it clear that you can dismiss those employees who are enjoying PHI payouts so long as the reason for dismissal is not the illness.  So, for example, where you dismiss them for redundancy – that is perfectly acceptable.  Similarly, a misconduct dismissal will not breach the implied term.

    The way the scheme works is that the insurance company will want the employee to have a medical report carried out on an annual basis to make sure that the employee has not got better.  This is because if the employee does get better then the payout under the scheme ends and the employee will have to come back to work for you.  So, from an employer’s point of view you need to continue to monitor your employees who are on long term sick leave every 6 months or every year just to make sure you keep in touch with them.”

    CONFLICTING MEDICAL REPORTS

    Of course, medicine is not an exact science and sometimes medical reports differ.   The employer may find itself in the position of having to make a decision about an employee and having to decide whether, and how, to prefer one report over another.  The stakes may be very high – in disability discrimination cases a mistake can give rise to a claim which could be very costly indeed.

    We do have some recent guidance from the EAT on dealing with conflicting medical advice in DDA cases in a case called Heathrow Express v Jenkins.  In that case there were three medical reports – two from consultant psychiatrist's supporting the view that she could return to work and that there were reasonable adjustment the employer could make to facilitate that – she wanted weight to be given to those two reports.  There was also, however, a conflicting report the employer wanted to rely on, from an Occupational Health Physician giving a strong view that there were no reasonable adjustments that would allow Mrs Jenkins to return to work.  The tribunal took the view that the employer was wrong to choose that report in preference to the other two.

    Chris Mordue:  “A lot of the issues around the consultant psychiatrists’ reports were about the questions that were either asked of the consultant psychiatrist or the type of questions they thought they were answering.  The consultant psychiatrists in this case were making generalised comments about Mrs Jenkins’ general ability to work.  What they were not doing was putting that in the context of her specific duties and the specific safety critical environment that she had to operate in.  I think it very much emphasises that when you are taking expert medical evidence you do have to think very carefully about the questions that you are asking the medical expert to answer.  The tighter the questions, and the more focused the questions are that you do ask, the more likely it is that you are going to get meaningful responses that are focused on the specific issues that are actually dealing with, and that is why in this particular case the occupational health physician’s report was so much more useful to the employer because it was looking specifically at the issue of whether any adjustments could be made to that particular job and that particular working environment.”

    PERSONAL INJURY CLAIMS

    Another area of risk for employers lies with the personal injury claim.  If the employer is the cause, or one of the causes, of the employee’s absence that gives rise to a new set of problems and that will impact on the way the case is managed.  Again, the stakes are high - personal injury claims, like disability discrimination claims, have no cap on compensation. Having said that though, there are very few cases indeed where the employee has succeeded in bringing a PI claim against their employer.

    Ed Goodwyn:  “Our view is, if managed correctly, whilst this can be a very sizeable claim, the risk of a personal injury claim being successful should be small.  The basis of the claim is that of negligence.   You, as the employer, have a duty of care in relation to your employees.  The employee, in bringing the claim, will argue that you have breached that duty.  The simple watch word here is to keep your ear to the ground and act upon any knowledge you get.  Policies and procedures will help and one of the foundations to this, following the case law, is if you can offer some form of counselling to your employees that can often act as a "get out of jail" card for you.  It is not quite the total panacea we had hoped it was, but it is a very useful policy to have.  Also, keep an eye on what happens in the appraisals:  does your employee say they are over worked?  Are they feeling stressed?  Keep your ear to the ground.  If an employee has been off ill, particularly if their medical report says they have been off with stress, a real red light must be flashing for you, and in your return to work meetings you need to ask the employee questions – are they feeling overworked?  Are they feeling stressed?  What can you do to take the stress off their shoulders?  And it cannot just be empty promises.  The cases where employees have succeeded mainly have been where employer has been given a very clear warning that the employee is suffering and the employer has not done enough to make the employee's working environment better. But that is not the end of it because we are seeing more and more these arguments being thrown at us by employees’ solicitors where the employment relationship has broken down.  They will throw into the mix unfair dismissal, disability discrimination and also, for good measure, the personal injury claim.  Don’t get too put off.  If you have followed the steps we have talked about today the claim should not have any merit.  Also bear in mind that whilst it may be easy to throw the claim in it is actually quite difficult for the employee to prosecute.  Not only do they have to prove their case and prove the causal link between their illness and your conduct – it could be an issue outside of work that has caused the illness – this is a claim that is not brought in the employment tribunal.  Instead it is brought in either the High Court or the County Court and as a result the costs risks would apply to the employee.  So, if they lose their claim then they end up, potentially, paying your legal costs.”

    DECIDING WHETHER TO DISMISS

    In all cases, before you embark on dismissing the employee there are a number of checks to make to be sure that you are complying with all your legal obligations and not leaving yourself open to a claim.  This is the point at which many of our clients take legal advice.  It really does make sense given that the stakes are so high.

    Linda Jones: “This is a notoriously difficult area to get right not least because of the impact of the Disability Discrimination Act.  The costs can be very high if mistakes are made.  There are a number of different issues that need to be considered.  Probably the most important is whether the employee disabled?  If so, have you considered reasonable adjustments to the employee’s job or to their working environment?  Have you got up to date medical advice and an up to date prognosis about when the employee is likely to be able to able to return to work, if at all.  Have you carried out a thorough search for alternative employment and have you spoken to the employee about that?  You may well have gone through all of these issues but the questions remains has the employee had the chance to make their views known and put forward their thoughts on whether it is fair to dismiss them?  They should be given the opportunity to comment on the proposal before any decision is made.  Finally, you have to think about whether the decision is reasonable in all the circumstances.  The circumstances in this situation will be things like how large the organisation is, the impact of the employee’s dismissal and the prognosis for a return to work.  So, if the prognosis is that they will be fit to return to work in two or three months time it will be risky to dismiss, whereas if there is no chance of a return to work then it will be a lot easier. Because this is such a difficult area clients do tend to call us before they make any final decision just to make sure they have covered off all of these steps and they have got all their procedures in place and they have covered all the bases before they move to making a final decision to dismiss.”

    Given the importance of making sure you follow the correct procedure when carrying out a dismissal we have put together a flowchart for you that sets out the various steps very clearly.  You will find that, along with the transcript for this programme, on the HR Network TV website.

    Support Materials

    Long term sickness absence dismissals - flowchart

    Good bye.