McAdie v Royal Bank of Scotland

The Court of Appeal held that an employer's culpability for causing or contributing to an employee's incapacity does not, as a matter of law, automatically preclude a fair dismissal for capability under section 98 of the Employment Rights Act 1996. The correct enquiry is whether, in the circumstances as they existed at the date the dismissal was taken (including any employer responsibility), it was reasonable for the employer to dismiss.

The Employment Tribunal had misdirected itself by focussing on the proposition that no reasonable employer would have found itself in the position caused by the employer and therefore could never fairly dismiss. The EAT was right to allow the Bank's appeal because on the facts at the date of dismissal the employee was incapable of returning to work and there was no realistic alternative to dismissal.

Background and parties: The appellant, Mrs Suzanne McAdie, formerly long-serving employee of the Royal Bank of Scotland, brought claims for unfair dismissal and sex discrimination. The discrimination claim was not pursued on appeal. The central issue was whether dismissal for capability (ill-health) could be fair where the employer's conduct had caused or materially contributed to the incapacity.

Procedural history:

• The Employment Tribunal (Ashford) found that the dismissal was unfair, reduced compensation by 50% under Polkey and awarded compensation following a remedy hearing.
• The Bank appealed to the Employment Appeal Tribunal (UKEAT/0268/06/ZT) which allowed the Bank's appeal on 29 November 2006 and dismissed the appellant's claim.
• The Court of Appeal (this judgment) heard the appellant's appeal from the EAT decision; permission to appeal had been given.

Facts: The appellant had a long prior record of service and had elected a part-time post after treatment for breast cancer. A disputed temporary transfer and subsequent handling of the appellant's grievance by managers, particularly Mr Geerts and the Bank's grievance handlers, led to her developing a severe adjustment disorder. She was signed off on 10 September 2003 and remained absent. Medical evidence indicated little prospect of recovery absent a satisfactory resolution, which the appellant said she would not accept; she consistently stated she would not return to work.

Issues before the Court: (i) Whether a tribunal may treat an employer's responsibility for an employee's incapacity as precluding fair dismissal; (ii) whether the Employment Tribunal misdirected itself in law by concluding that no reasonable employer would have dismissed in those circumstances; and (iii) whether, applying the correct test (reasonableness of dismissal in the circumstances at the date of dismissal), the Bank's dismissal was unfair.

Reasoning and outcome: The Court agreed with the EAT that while an employer's responsibility for the incapacity is relevant and may require an employer to take extra steps, that responsibility does not automatically make any subsequent dismissal unfair. The proper focus is on whether the employer acted reasonably in the circumstances as they existed at the date of dismissal. On the facts, medical evidence and the appellant's clear unwillingness to return meant there was no realistic alternative to dismissal; therefore the dismissal was within the range of reasonable responses. The Court of Appeal dismissed the appellant's appeal, endorsing the EAT's analysis of prior authorities (Betty, Edwards and Frewin) and confirming the Tribunal had misdirected itself.

Appeal dismissed. The Court upheld the EAT's conclusion that an employer's culpability for an employee's incapacity does not automatically render a dismissal for capability unfair; the correct test is whether dismissal was reasonable in the circumstances as they existed at the time it was taken. On the facts (medical evidence and the employee's refusal or inability to return), dismissal was within the range of reasonable responses.

Employment Tribunal (Ashford) reserved decision promulgated 15 February 2006 (found unfair dismissal and fixed remedy hearing 4 April 2006 awarding compensation). Appeal to Employment Appeal Tribunal UKEAT/0268/06/ZT heard 5 October 2006; EAT delivered reserved judgment allowing Bank's appeal on 29 November 2006. Permission to appeal to the Court of Appeal granted on paper; Court of Appeal judgment [2007] EWCA Civ 806 31 July 2007 dismissed the appellant's appeal.