Most employers recognise the need to treat employees who are on long-term sick leave fairly and with compassion. But this has to be balanced with the needs of the business, and sometimes it becomes clear that unfortunately an employee will never be able come back to work, and the employment relationship simply has to be brought to an end.

What can (and should) employers do in this situation? Does the recent case of Warner v Armfield Retail & Leisure Ltd change how an employer should react?  Here are some important steps that employers should take to minimise the risk of claims. 

Get a prognosis

Obtaining a prognosis is key to proper management of long-term sickness absence. Employers should proactively seek medical opinion not only on the employee’s diagnosis (what is he suffering from? What are the symptoms and effects of the condition? Is he likely to be disabled for the purposes of the Equality Act 2010?), but also on the prognosis. It is important to establish as early as possible how long the employee is likely to remain off work, but remember this may be an ever-changing estimate and so should be continually monitored.

If the prognosis shows that an employee is likely to return to work, albeit far into the future, then the employer will need to consider how to manage that return and indeed whether the business can support the absence for that long. Dismissing an employee who is likely to be able to return to work at some point in the future holds its own risks, and employers must be sure that they have considered all possible reasonable adjustments and followed a fair dismissal process to minimise risks of disability discrimination and unfair dismissal claims.

If the prognosis indicates that the employee will never be able to return to work, however, employers might have more options (although care is still required).

Consider all reasonable adjustments

When relying upon a prognosis which states that the employee can never return to work, it is important that the employer seeks to explore the issue further (including discussing it with the employee) to consider whether, despite the prognosis, there are any reasonable adjustments which would in fact enable a return to work. The reasonable adjustments must be to enable the employee’s return to work – continuing sick pay once expired would not be a reasonable adjustment, for example.

Considering all possible reasonable adjustments is essential to minimising the risk of a disability discrimination claim, especially if it ultimately becomes necessary to dismiss the employee. And it is particularly important in a case where the employee is unlikely to ever return to work, as it may give the employer an option to argue that the contract of employment has in fact been frustrated.

Has the contract been frustrated?

A contract which is ‘frustrated’ is automatically brought to an end, without the parties having to do anything. The contract will cease to be binding if, through no fault of the parties and in circumstances which cannot be provided for, it becomes impossible for the contract to be performed as originally envisaged.

This doctrine does apply to employment contracts and so, in theory at least, may be an argument for employers – if the employee cannot come to work (and will not be able to in the future) then why not claim that the contract is frustrated? The employer will not then need to dismiss the employee – the contract will merely come to an automatic end. There will be no dismissal process, and the employer will not need to even inform the employee his contract has terminated (although for practical purposes this is advised). There will be no risk of an unfair dismissal liability (as there can be no claim for unfair dismissal if there is no dismissal).

The recent case of Warner v Armfield Retail & Leisure Ltd is a rare example of an employment contract being found to have been frustrated, even where the reason for the employee’s inability to fulfil his part of the contract was his disability.

Mr Warner, a site manager whose job was a “fast and stressful” role which required a high level of mobility, suffered a severe stroke in February 2010. Whilst his employer was initially sympathetic (paying sick pay even though not contractually required, visiting Mr Warner in hospital, and keeping in touch), the parties gradually lost contact. Eleven and a half months after the stroke, in January 2011, the employer wrote to Mr Warner simply stating it was writing to “confirm the end of your contract of employment and enclose your P45”. 

Both the Tribunal and the EAT agreed that the doctrine of frustration must logically and justly apply in such circumstances, but that it is important to first consider whether there are any reasonable adjustments which can be made which would keep the employee in employment. If there are no such possible adjustments, as was the case here, only then can the doctrine of frustration be said to apply. 

Following this case, an employer who faces a claim of unfair dismissal from a disabled employee might be advised to argue at Tribunal that the contract was in fact frustrated, stating that, despite all reasonable adjustments having been considered and complied with, there was nothing more which could be done to enable a return to work. This case shows that such an argument could succeed, even if the employer had not considered the possibility of frustration at the time of dismissal (frustration being an automatic concept, independent of the will or expression of the parties). Further, employers who are sure that every possible reasonable adjustment has been considered and complied with, may consider referring to frustration of the contract in any dismissal letter, as an additional point, or even informing the employee that the contract is frustrated instead of dismissing (a more risky approach).

However, employers should not see this case as a ‘green light’ to use a technical legal definition to attempt to circumvent statutory disability protection of employees. Tribunals will not be sympathetic to such tactics – the doctrine of frustration takes away vital employee rights in relation to dismissal, and so it is only likely to be in exceptional circumstances that an employer will escape liability for essentially terminating an employee’s contract without any form of procedure. 

A full and fair dismissal process

An employer who chooses not to rely on the (often uncertain) principle of frustration must be sure to follow a full and fair dismissal process, including holding all necessary meetings (allowing the employee to be accompanied), allowing the employee to make representations, considering all reasonable adjustments (including during the dismissal process itself, such as holding meetings at the employee’s home), informing the employee of the decision in writing, and allowing a right of appeal.

Employers should also note that, even in cases where the contract may have been frustrated (meaning there is no liability for unfair dismissal), the question of whether the employer’s overall actions towards the employee constitute disability discrimination may be determined separately. Employers who do not follow a fair and thorough dismissal process may still find themselves liable in respect of disability discrimination therefore, even if there has been no technical dismissal.

Guidance for employers

Above all, employers must not be scared to tackle the issue head on as soon as it becomes clear that an employee is unlikely to ever return to work. Employers who are pro-active, responsive, fair and who listen to the needs of the employee are likely to find themselves being able to dismiss in such situations, with reduced risk of a disability discrimination or unfair dismissal claim. Such employers may even find themselves being able to successfully argue that the contract has been frustrated, but this possibility should not be seen as a possible ‘easy way out’ for employers.