McAdie v Royal Bank of Scotland

An employer’s responsibility for an employee’s ill-health is a relevant circumstance when deciding whether dismissal for incapability is fair. It may require the employer to make greater efforts to retain the employee, including seeking alternative work or tolerating longer absence. It does not, however, create a permanent bar on dismissal.

The statutory question is whether dismissal was reasonable when decided, in all the circumstances then existing. A tribunal must not substitute the different question whether a reasonable employer would have avoided the earlier events which caused the incapability. Where medical evidence and the employee’s own position show no prospect of a return to work or viable continuation of employment, dismissal for capability may be fair despite the employer’s earlier culpability.

The claimant had been a long-serving bank employee. After a temporary transfer and an unresolved grievance about its handling, she developed a severe adjustment disorder and remained absent from work. The Employment Tribunal found that the bank’s handling of the grievance had caused her condition. It held that the capability dismissal was unfair, reduced compensation by 50 per cent, and later awarded £53,083.75. Her sex-discrimination claim was dismissed.

The Employment Appeal Tribunal allowed the bank’s appeal and dismissed the unfair-dismissal claim: UKEAT/0268/06/ZT. The claimant appealed. The central issue was whether an employer can fairly dismiss for health-related incapability where its conduct caused or materially contributed to that incapability.

Appeal dismissed. Wall LJ, with whom Rix and Buxton LJJ agreed, upheld the Employment Appeal Tribunal’s decision.

1. Health-related incapability was a potentially fair reason for dismissal under section 98 of the Employment Rights Act 1996. The fact that the employer had caused or contributed to the incapability was relevant to the fairness assessment. It could require the employer to go further in attempting to preserve employment, for example by considering alternative work or accepting a longer period of absence.

2. Employer culpability could not, however, permanently prevent a fair capability dismissal. An employee injured by an employer’s breach of duty might have a damages claim in the ordinary courts. An unfair-dismissal tribunal must decide the statutory question and must not award compensation for injury merely because it sympathises with the employee.

3. The Tribunal had misdirected itself by asking whether a reasonable employer would have got into the circumstances which produced the illness. The correct question under section 98(4) was whether it was reasonable, on 22 December 2004 and in the circumstances then existing, for the bank to dismiss. Those circumstances included the bank’s mishandling of the grievance, but the inquiry remained focused on the decision at dismissal.

4. The Court approved the EAT’s analysis of London Fire and Civil Defence Authority v Betty [1994] IRLR 384, Edwards v Governors of Hanson School [2001] IRLR 132 and Frewin v Consignia Ltd EAT / 0981 / 02. That analysis should be followed by employment tribunals and the EAT. The Court did not decide the suggested case of an employer maliciously injuring an employee.

5. At the dismissal date, the medical evidence and the claimant’s own position showed no prospect of recovery, return to work or an acceptable resolution that would continue the employment. There was no further step that the bank could reasonably have taken to save it. Dismissal was therefore the only realistic outcome and was fair. The appeal was dismissed.

1. Court of Appeal (Civil Division) — dismissed the claimant’s appeal and upheld dismissal of the unfair-dismissal claim: [2007] EWCA Civ 806.

2. Employment Appeal Tribunal — allowed the bank’s appeal and dismissed the claimant’s unfair-dismissal claim: UKEAT/0268/06/ZT.

3. Employment Tribunal, Ashford — held that the claimant had been unfairly dismissed, reduced compensation by 50 per cent, and awarded £53,083.75 at the remedy hearing. It dismissed the separate sex-discrimination claim.