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Don’t Replace Fair Procedures With Settlement Agreements For Staff On Long-term Sick Leave

Settlement Agreements have largely been welcomed by employers seeking to amicably end unfruitful employment relationships, but since their introduction in 2013, some have found themselves in trouble when bypassing standard procedures regarding staff on long-term sick leave.

Although clearly tempting to offer a Settlement Agreement to employees who have been off work for a lengthy period of time, and might still be, such a move could backfire. Settlement Agreements are certainly a useful tool for agreeing severance terms with an employee, but not when they are used to replace fair processes.

A period of long-term sickness is a strong indicator that an employee may be disabled for the purposes of the Equality Act. Indeed, a number of very common conditions are now deemed to be disabilities such as cancer and multiple sclerosis at the point of diagnosis. Otherwise, the definition relates to the ability to carry out normal day to day activities. If the effects of an employee’s illness are substantial and adverse and have lasted, or are likely to last, for at least a year, then that would constitute a disability for the purposes of the Equality Act.

When Settlement Agreements replaced Compromise Agreements in July 2013 the concept of protected conversations was introduced.  The idea was to enable employers and potential employees to start pre-termination negotiations before any management time and resources were invested into a dismissal process. These talks are generally inadmissible in ordinary unfair dismissal claims but not when it comes to claims for workplace discrimination.

As a specialist Settlement Agreement solicitor, I have been contacted by a number of employers who have suggested a Settlement Agreement only to find themselves at the end of a discrimination claim – even when the member of staff remained employed. Claiming to be unaware of the disability is not always a defence since ‘ought to have known’ is the requirement. The fact the employee is on long-term sick leave for a health reason that may last more than a year is likely to be sufficient to meet this test.

The main stumbling block to offering an employee who has been on long-term sick leave a Settlement Agreement is the requirement to make reasonable adjustments under the Equality Act. Proceeding directly with an offer to terminate alongside a Settlement Agreement could provide conclusive evidence of an employer’s failure to consider and make those adjustments. The employee could make a claim without having to resign in order to claim an Injury to Feelings Award, regardless of whether there has been any loss of earnings.

Even if an employee indicates that severance is what they want, reasonable adjustments should still be made to the Settlement Agreement process. For example, this could mean allowing the employee more than the 10 calendar days, suggested by Acas, to consider any offer.

Any offer should always be accompanied with clear advice about alternative steps to be taken if severance is not an option the employee wishes to take. There should be no ambiguous impropriety or undue pressure such as threatening to proceed with an ill-health dismissal.

To avoid potential claims, in cases of long-term sickness, employers should always seek medical advice – not just for an opinion as to whether someone is disabled but also whether there are adjustments that could be made that would enable them to continue working. With the introduction of the Government’s new Fit for Work service, which will provide occupational health assessments as well as free health and work advice, there is simply no excuse for failing to do this.

While Settlement Agreements can be of use to protect the business on an employer’s departure, they should never be used to circumvent fair procedures. Consider whether you would be happy for a tribunal to scrutinise any proposals set out should the employee decide to decline a Settlement Agreement. This would include exploring reasonable adjustments, following all steps and timescales in company policies regarding ill health, and the options made available to the employee. Doing so will enable the employee to make an informed decision about whether to stay or leave, and to decide whether the amount offered in the severance package is adequate and fair.

This article was written by Fiona Martin, head of Employment Law at Martin Searle Solicitors, for People Management magazine.

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