When is it permissible for an employer to terminate the contract of an employee on the grounds of ill health?

Lack of capability, including when assessed with reference to health, is a potentially fair reason for dismissal under s.98 of the Employment Rights Act 1996. The employer must show that it acted reasonably both in treating the long-term ill health as a sufficient reason for dismissing the employee and in the procedure adopted to effect the dismissal. When an employer is considering dismissing an employee on grounds of long-term ill health, it should investigate the prospects of the employee being able to return to work within a reasonable time. A fair procedure should include:

  • consultation with the employee;
  • a medical investigation;
  • consideration of alternative employment; and
  • possible ill-health early retirement if there is provision for this.

The decision to dismiss is not a medical question but one for the employer to take in the light of the medical evidence available. However, the fact that an employer has obtained medical evidence does not absolve it of the requirement to consult personally with the employee.

An employer that dismisses an employee on the ground of ill health without considering any reasonable steps that it could take to enable the employee to return to work may be liable for disability discrimination as well as unfair dismissal, if the employee is disabled within the meaning of the Equality Act 2010.