In the recent case of Holmes v Qinetiq Ltd, the Employment Appeal Tribunal (“EAT”) considered for the first time whether the power to increase or decrease an award of compensation for a failure to comply with the ACAS Code of Practice extends to dismissals on the grounds of ill health. The EAT concluded that the ACAS Code does not extend to such dismissals, and is instead limited to disciplinary and poor performance situations.

The background to the decision

Employers are required to follow the ACAS Code of Practice on Disciplinary and Grievance Procedures where a disciplinary procedure has been invoked. If they do not follow the ACAS Code, then employees may be entitled to an increase in compensation of up to 25% (section 207A(2) of Trade Union and Labour Relations (Consolidation) Act 1992 (“TULR(C)A”)).

In this case, the Employment Tribunal had awarded the claimant, a security guard, compensation for unfair dismissal and unlawful discrimination. He had been dismissed on the grounds of ill health on the basis that he was no longer capable of doing his job. At the tribunal the employer conceded that the dismissal was unfair because it had failed to obtain an up to date Occupational Health report about the claimant’s ability to attend work after an operation to resolve his pain.

The Tribunal dealt with the question of whether the power to increase compensation for failure to comply with the requirements of the relevant ACAS Code of Practice extends to dismissal on ground of ill health. It concluded that the ACAS Code of Practice does not extend to ill health dismissals. The reasons given by the Tribunal relate to the issue of culpability – in that the ACAS Code of Practice “does not apply to internal procedures operated by an employer concerning an employee’s alleged incapability to do the job arising from ill health or sickness absence and nothing more”. The ACAS Code’s application is therefore limited to internal procedures relating to disciplinary situations, including misconduct or poor performance and “the correction or punishment of culpable behaviour of some form or another”.

In this case, no disciplinary procedure was invoked because nothing in his conduct or performance gave rise to a disciplinary situation.

Employment Appeal Tribunal decision 

Amongst other issues, the Employment Appeal Tribunal examined the issue of whether the Tribunal was correct to refuse an increase to the award.

Its view was that the Tribunal was correct to refuse such an increase, and concluded that the power under section 207A(2) of TULR(C)A to increase or decrease an award for compensation for failure to comply with the relevant ACAS Code of Practice does not extend to dismissals on the grounds of ill health.

What does this mean for employers?

This decision has important implications for employers, because it sheds light on the scope and limits of the ACAS Code.

In practice this means that in scenarios where employers dismiss employees forill health , they are not obliged to follow the ACAS Code of Practice. As a result the increase in compensation under 207A(2) of TULR(C)A is not available to employees in this type of situation.

However, Employers should keep in mind that the position would be different were an employee’s ill health leads to a disciplinary issue and a procedure is followed to address the employee’s alleged misconduct, for example a failure to follow sickness reporting procedures.

The full judgment is available here.