An employer whose pension scheme provides for ill-health pensions to permanently incapacitated employees is expected to consider ill-health retirement before dismissing employees on long-term sickness absence for incapacity.

The Facts

Mr Haigh was employed by First West Yorkshire as a bus driver. In June 2005, he had a suspected stroke following which he was signed off as unfit for work and DVLA suspended his PSV licence for 12 months. He then had a second suspected stroke in October 2005 and so it appeared unlikely he would regain his PSV licence until October 2006 at the earliest. A medical report was produced to the employer in which it was written that the suspension of the licence would be for a minimum period of 12 months.

Mr Haigh was advised in November 2005 that he would be dismissed on notice by reason of incapability with dismissal to take effect on 8th February 2006. At the dismissal hearing, the dismissing manager concluded that Mr Haigh's incapacity was not permanent as the available medical opinion showed that Mr Haigh could reapply for his licence in 12 months' time so the option of ill-health retirement was not available.

Mr Haigh appealed that decision and during the course of the appeal process some further medical evidence was obtained. In early February 2006, the employer obtained the opinion of its occupational health specialist who advised that Mr Haigh was unfit for driving duties but fit for sedentary duties not involving cleaning or other manual work involving stairs. The doctor advised that he could not at that time classify Mr Haigh's condition as permanent, but he also informed the employer that he had written to the specialist treating Mr Haigh seeking an up to date report. That report was not available to the employer when it took the decision to dismiss Mr Haigh, dismissal taking effect from 28th February 2006. As at that date, Mr Haigh had approaching 30 years' continuous service and was aged 59.

The specialist treating Mr Haigh responded to the request for his opinion on 9th March 2006 and so after Mr Haigh's employment had ended. The specialist was of the opinion that Mr Haigh had probably not suffered strokes and that the nature of his cerebral disturbance was such that he may be able to regain his PSV licence. Mr Haigh was in fact able subsequently to regain his licence in October 2006 and so evidence was available, albeit after the date of termination, to show that Mr Haigh had no permanent incapacity.

The Sickness and Pension Schemes

The company's sick pay scheme provided for 26 weeks' full pay and 26 weeks' half pay. As at the date of dismissal, Mr Haigh had not exhausted his contractual sick pay but that of itself is not a bar to a fair dismissal for ill-health. The scheme also provided for redeployment to suitable alternative work in the event of either temporary or permanent incapacity by reason of ill-health, subject to there being a vacancy available. In the event of there being no reasonable prospect of the employee being able to take up alternative employment or there being no suitable alternative work available, the employee may then be retired or dismissed on medical grounds.

The sick pay scheme's reference to retirement was seen in the context of the employer's pension scheme which included provision for retirement on the grounds of permanent incapacity where an appropriately qualified doctor (usually engaged by the employer) certified that the employee was permanently incapable of discharging his normal duties because of ill-health and that he would also similarly be incapable of discharging the duties of any comparable post were one available. An employee who so qualified benefited from an enhancement to his pension.

The Employment Tribunal's Findings

The Employment Tribunal was critical of the employer at each stage of the process for the inadequacy of the employer's consideration of medical evidence. The evidence available at the dismissal hearing clearly showed that the suspension of the licence would be for a minimum period of 12 months and the period of suspension in fact could prove to be longer and could conceivably be permanent. However, the main criticism of the first hearing was that there was no adequate evidence available either way. Furthermore, at the appeal stage when further medical evidence from the employer's occupational health service was available, the employer concluded that the meaning of that evidence was that Mr Haigh was not permanently incapable of work when in fact the report offered no such opinion and indeed made clear the physician's need for a specialist's opinion.

The Tribunal further found that on this occasion, the employer had wished to avoid the cost of Mr Haigh taking ill-health retirement and it was that consideration that had caused the employer to take the decision it had. There was further criticism of an ultimatum given by the employer at the appeal stage to the effect that it would continue to employ Mr Haigh and pay him sick pay until he reached normal retirement age provided he agreed to make no application for ill-health retirement failing which it would give effect to the dismissal.

The Employment Tribunal had for these reasons found that Mr Haigh had been unfairly dismissed. The employer appealed that decision.

The Employment Appeal Tribunal's Judgment

The case came before the EAT on 20th November 2007. The EAT's main conclusions were these:

As a general rule, when an employee is absent through long term ill-health, an employer will be expected, prior to dismissing the employee, to take reasonable steps to consult him, to ascertain by means of appropriate medical evidence the nature and prognosis for his condition, and to consider alternative employment. An employer who takes those steps will normally meet the requirements for a fair dismissal;

However where an employer provides an enhanced pension on retirement through ill-health, that employer will also be expected to take reasonable steps to ascertain whether the employee is entitled to the benefit of ill-health retirement;

Furthermore, the Tribunal concluded that the ultimatum described above was unreasonable.