Unfair dismissal and ill-health retirement

The EAT has held in First Leeds v Haigh that where an employee is long-term absent on grounds of ill health and his pension scheme contains provisions entitling him to an ill health pension, an employer will generally be expected to give consideration to ill health retirement before dismissing for incapacity.

Mr Haigh had worked for First Leeds (the Company) for nearly thirty years. In June 2005 he had some kind of brain disturbance while he was driving a bus. A stroke was suspected and Mr Haigh was subsequently signed off from work. In October 2005 Mr Haigh was informed that his licence would be suspended for a minimum of twelve months. However, in the same month Mr Haigh suffered another attack. A meeting was held in November 2005, and Mr Haigh was dismissed on grounds of incapability, after refusing to stay with the company and relinquish his right to sick pay. A number a subsequent appeals took place, but at the final meeting in February 2006 Mr Haigh was given a choice; either he stay with the company taking sick pay but relinquish any right to seek an ill-health pension (which was a provision in the Company's pension scheme) or he be dismissed. Mr Haigh refused to accept such terms and was dismissed.

Mr Haigh brought a claim for unfair dismissal in the Employment Tribunal. The Tribunal, and subsequently the EAT, agreed that he had been unfairly dismissed. The choice imposed on Mr Haigh, to choose between dismissal and forgoing any right to an enhanced pension, was unfair and made without any real justification. There was no clear medical evidence either way as to whether Mr Haigh was entitled to ill health retirement on grounds of permanent incapacity. The Company should have waited for a report as to whether Mr Haigh was permanently incapacitated. Their failure to do so appears to have been motivated by a desire to close off the prospect of a claim under the ill health pension provisions.

Employers should be mindful of the EAT's approach in this case. Where there are possible options other than dismissal, employers should ensure that these are properly explored when carrying out dismissals so that it can be established that the employer has acted reasonably.