Articles | Employment bulletin April 2016

This month we report on contrasting cases on managing sickness absence, plus uncertainty surrounding childcare vouchers and an important change to company law.


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David Clay

David Clay

If an employee is faking or exaggerating an illness… 

Can they get away with “pulling a sickie”?

Can they get away with “pulling a sickie”?


If an employer suspects that an employee is faking or exaggerating an illness or injury, this should be dealt with as potential misconduct via a disciplinary procedure. A recent case in the Employment Appeal Tribunal (EAT) focused on whether an employer was ultimately entitled to dismiss an employee who it believed was exaggerating his condition.


The case concerned Mr Ajaj, a bus driver for Metroline. Mr Ajaj claimed to have suffered a fall at work which affected his mobility, resulting in a lengthy period of absence. Metroline initially applied its capability procedure and sent Mr Ajaj for occupational health assessments, but over time developed doubts about Mr Ajaj’s condition. It arranged ongoing covert surveillance which appeared to contradict Mr Ajaj’s accounts of the extent of his immobility. Metroline subsequently initiated a disciplinary procedure and dismissed Mr Ajaj for gross misconduct on the basis that he had claimed sick pay by fraudulently representing to be sick and had misrepresented his ability to attend work. Mr Ajaj brought a claim for unfair dismissal.


The EAT held that Metroline had satisfied the key conditions for a fair misconduct dismissal. Metroline had a genuine belief in Mr Ajaj’s misconduct, it had reasonable grounds for holding that belief, and it had carried out a reasonable investigation. The EAT added that an employee who “pulls a sickie” by claiming to be sick when they are not commits a breach of contract going to the heart of the employment relationship. Accordingly Metroline’s decision to dismiss summarily was reasonable in the circumstances.


The EAT’s decision will be welcome news for employers, but it is not carte blanche to dismiss at the first inkling of dishonesty. Before issuing any disciplinary sanctions or suspending company sick pay, employers will need strong evidence that sickness has been fabricated or exaggerated. In practice, this could be difficult to obtain and employers should take advice before relying on covert monitoring or social media entries. Preparing (and consistently applying) appropriately drafted data protection, social media, disciplinary and managing sickness absence policies will leave employers best placed to tackle false claims of sickness.

If an employee is genuinely unwell…

What’s appropriate contact during sick leave?

What’s appropriate contact during sick leave?


When an employee is off work due to genuine sickness, one tricky issues for employers is whether it is appropriate to instigate or continue discussions about non-medical matters such as grievances or performance issues. A recent case in the Employment Appeal Tribunal (EAT) which touched on this topic shows that employers must be especially careful when an employee is known to be vulnerable.


This case concerned Miss Hodkinson, a director of sales at PMI (a medical company). Shortly after returning from a period of disability-related sick leave, Miss Hodkinson went on sick leave again with work-related depression and anxiety, alleging that she had been bullied at work. PMI invited Miss Hodkinson to raise a grievance but she indicated she was distraught and in no fit state to communicate. PMI later sent a letter to Miss Hodkinson setting out various areas of concern they wanted to discuss. Miss Hodkinson resigned in response to the timing and content of the letter and brought a claim for constructive dismissal.


To succeed in her claim, Miss Hodkinson needed to demonstrate a fundamental breach of her employment contract and that she had resigned in response to that breach without undue delay. Although it acknowledged that Miss Hodkinson was not a credible witness, was inclined to be over-sensitive and exaggerate, and that the concerns raised by PMI had all been genuine, the EAT nevertheless upheld Miss Hodkinson’s constructive dismissal claim. It emphasised that PMI knew Miss Hodkinson was very ill at the time the letter was sent and that the issues raised in its letter were not serious or pressing. In these circumstances the letter amounted to a fundamental breach of the implied term of trust and confidence between the parties justifying a constructive dismissal claim.


The EAT’s judgment indicates that employers must be prepared to adapt the way they manage employees on sick leave depending on the underlying cause of absence and their knowledge of the employee’s mental health. Where an employee appears to be suffering with depression, stress or anxiety (especially if work-related), the cautious approach will be to delay addressing non-urgent issues until such time as the employee has returned to work or has recovered sufficiently well to handle a discussion of potentially difficult or emotive matters.

Childcare Vouchers

Is it discriminatory to stop them during maternity leave?

Childcare vouchers


Childcare vouchers are designed to help parents cover childcare costs. They are often offered by employers on a tax-efficient basis through a salary sacrifice scheme, whereby an employee agrees to a reduced salary in exchange for receiving the vouchers.


A case before the Employment Appeal Tribunal (EAT) has focused on whether childcare vouchers should be classified as remuneration or a benefit. The distinction is crucial because during a period of maternity leave a mother is entitled to receive all benefits provided under her contract, but not sums which qualify as remuneration (which can be replaced with statutory maternity pay).


In this case the employer, Peninsula, operated a childcare voucher scheme via salary sacrifice. To join the scheme, employees had to agree to the suspension of vouchers during maternity leave. One employee, Ms Donaldson, refused to join on these terms, considering them discriminatory. She brought claims alleging that Peninsula’s failure to continue the scheme during maternity leave amounted to sex discrimination, less favourable treatment and/or a detriment because of her assertion of her maternity rights.


The EAT dismissed Ms Donaldson’s claims. It held that childcare vouchers provided under a salary sacrifice scheme are a “diversion of salary” that has already been earned. Accordingly they should be regarded as part of an employee’s remuneration and not a benefit. It rejected guidance from HMRC to the contrary as having no legal basis.


In reaching its decision the EAT was influenced by policy factors. It noted that if employers were required to continue providing childcare vouchers this would represent a windfall for employees and would discourage employers from offering childcare vouchers at all.


The EAT distinguished Peninsula’s salary sacrifice scheme from a scenario where childcare vouchers are provided in addition to (and not in place of) salary. In that case childcare vouchers must be continued during maternity leave as they would not then be making up part of an employee’s remuneration.


The decision of the EAT is unlikely to be the final word on childcare vouchers or other schemes involving salary sacrifice and should be treated with caution. In any case, childcare voucher schemes could be on their way out; the government has announced they will be closed to new members from April 2018 onwards.


Have you got a ‘PSC’ register?

If not, you could face criminal sanctions

PSC Register


While employment law is renowned as one of the fastest moving areas of the law, notable developments in company law are comparatively few and far between. However, one such change has recently occurred which we wanted to make all of our readers aware of.


At present, companies record only the immediate legal owners of their shares, but now they must maintain a register of anybody who has “significant control” over the company. Companies should be aware that non-compliance with the new regulations can lead to criminal sanctions against the company itself and/or its directors.


The PSC or “persons with significant control” register is a new statutory register which companies and limited liability partnerships (“LLPs”) are required to keep. Anyone, whether a holding company or an individual, who ultimately owns or controls more than 25% of a company’s shares or voting rights, or who otherwise exercises control over a company or its management, must be listed on that company’s register. A copy of the register must be filed at Companies House.


Under the new regime there will be an obligation on companies to look through the legal owners and to identify relevant persons who ultimately have significant control of the company. The requirement is to ‘take reasonable steps to identify’ every person who has, directly or indirectly, significant control over the company. Although not exhaustive, reasonable steps will include considering all documents and information already available to the company and any interests in the company’s shares held by individuals, legal entities, trusts or firms. Companies should also consider whether there is evidence of any rights that might ultimately be controlled by the same person or connected persons, such as a husband and wife.


The PSC register will be available for public inspection and will be searchable online via Companies House. The key implementation dates are:

  • a PSC register must be kept by the company or the LLP from 6 April 2016 on its statutory books; and 
  • the PSC information must be filed with Companies House from 30 June 2016.


If you would like further information about the PSC register please contact our corporate solicitor Rachael Maunder at