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The impact of avoiding sick pay obligations

2nd Nov 2016
Absence Management, Employee Benefits, Employment Law, Human Resources, Payroll

In September 2016 there were media reports about a tribunal’s compensatory award to Donald McKenzie (M). The tribunal awarded an employee who was denied sick pay over £75,000.

As an employer how can you avoid this risk?

In 2015 M was signed off work with stress from his job as a manager at Pentland Motor Company (PMC) where he had worked for nearly 50 years. M’s employment contract clearly stated that he was entitled to receive full pay for the duration of his sickness absence. However, he was subsequently told by PMC that he would only receive two months’ full pay and thereafter would be paid statutory sick pay (SSP).

Breach of contract

When he was told this, M resigned on the basis that the company had breached his employment contract; he then brought a claim for constructive dismissal against PMC. His contract of employment clearly entitled him to sick pay for the whole period and the tribunal had “no hesitation” in accepting this and further noted that “there was nothing whatsoever to cast any doubt on the clear terms”. As the employee, PMC had refused to honour the terms of his employment contract, it was ordered to pay M £73,482 for unfair dismissal and a further £1,855 for unpaid sick pay.

Clear message

By refusing to honour the terms of the contract and pay full pay during the period of sick leave, the employer was in breach of contract which resulted in the successful constructive dismissal claim. Had PMC paid M sick pay in accordance with the terms of his employment contract, he would not have been entitled to claim anything at all.  The message is very clear for all employers – where an employee has a contractual right to receive sick pay, it cannot be ignored.

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