Would an employer be at risk if it terminated the contract of an employee on long-term sickness absence before the employee's entitlement to contractual sick pay had been exhausted?
Yes, an employee might have a valid claim for breach of contract/wrongful dismissal if he or she was dismissed before entitlement to contractual sick pay had been exhausted. If, for example, the employee's contract stated that the employee would be entitled to three months on full pay plus three months on half pay in the event of sickness absence, a dismissal that in effect curtailed the employee's entitlement to such payment would be in breach of contract. Whether or not such a claim would succeed in practice would depend on the precise wording of the employee's contract and/or the custom and practice within the organisation with regard to the payment of sick pay.
To play safe, the employer could consider, on terminating the employee's contract, paying the employee a sum of money representing the sick pay that he or she would have received had he or she continued in employment until expiry of the entitlement.
Should an employee who is dismissed while on long-term sickness absence claim unfair dismissal, the employment tribunal would consider whether or not the employer can establish that the reason for dismissal was one of the potentially fair reasons, whether or not the employer has acted reasonably in dismissing the employee for that reason, and whether or not the employer has followed a fair procedure. Long-term sickness absence as a reason for dismissal falls under the category of "capability", which is listed in law as a potentially fair reason for dismissal. The fact that the employee's entitlement to sick pay had not been exhausted could be relevant to the fairness of the procedure and whether or not, in the particular circumstances, the employer acted reasonably in dismissing the employee for capability.