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Occupational sick pay
[ch 8: pages 294-295]An employer can provide an occupational sick pay scheme. This must pay at least the SSP rate. In workplaces where a union is recognised, occupational sick pay is likely to significantly exceed the SSP rate.
To the extent that occupational sick pay exceeds SSP, an employer can set its own rules. For example, sick pay exceeding SSP can be conditional on the member consenting to a medical examination by a company doctor (Stirling & Mair v Meikle EAT/27/02), as long as the written employment contract makes this clear.
An employer’s failure to follow its own rules on sick pay is likely to be a breach of contract and an unlawful deduction from wages (see Chapter 4). Here is a good example, in which organised action by UNISON members defeated an attempted sickness-related pay cut by an NHS Trust:
In February 2012, health workers’ union UNISON defeated a move by Central Manchester University Foundation Trust to cut staff pay if they took too much sick leave, by supporting multiple individual employment tribunal claims.
The Trust had introduced a new rule whereby employees who were sick on four or more separate occasions a year or 18 days in total would be penalised by losing their incremental pay rise. As UNISON pointed out, “the nature of working in a hospital, surrounded by ill people, means you are more likely than in other jobs to become unwell”. The tribunal agreed that the new Incremental Pay Progression Policy was a breach of contract and the Trust withdrew it.
Bent and others v Central Manchester University Hospitals NHS Foundation Trust ET/2400833/11
In another good example, the Public and Commercial Services (PCS) union overturned cuts to sick pay and annual leave imposed on staff at the National Audit Office (NAO), in a test case brought after negotiations broke down:
In late 2012, the Cabinet Office began to pressurise different divisions of the civil service to cut civil service terms and conditions, including sick pay. They wrote to all government departments asking them to ensure civil service terms and conditions matched those of a “good modern employer”. The NAO is independent of government and not a government department. Even so, it decided to cut the terms and conditions of its workforce.
PCS organised a national response, with a campaign under the umbrella slogan “Don’t rip up our rights”. The union also coordinated a joint grievance by 84 PCS members (10% of the NAO workforce), a motion from the PCS group of MPs and industrial action. When the NAO continued to refuse to negotiate, the union supported test litigation.
The NAO won its case before the tribunal, but the employees appealed and the EAT ruled that the NAO was not entitled to change the contract terms of its staff without their agreement. The EAT made a declaration under section 12 of the ERA 96 confirming that the claimants’ particulars of employment still included their original contract terms, including contractual sick pay rights (six months’ full pay and six months’ half pay).
(1) Norman and (2) Douglas v National Audit Office [2014] UKEAT 0276
It is a fundamental breach of contract not to pay contractual sick pay when due, even if non-payment is due to a mistake. This is because contractual sick pay is “wages”, and there is an implied duty in every employment contract to pay wages to any employee who is ready, willing and able to work, which can only be overridden by a clear express contract term:
A governing body committed a fundamental breach of contract when it paid only half pay sick pay instead of the full pay to which the claimant, a teacher off sick with work-related stress, was entitled. It made no difference that the school’s actions were due to an honest mistake, based on wrong advice about the contractual sick pay entitlement under the relevant collective agreement, the Burgundy Book.
Roberts v the Governing Body of Whitecross School [2012] UKEAT/0070/12/ZT
LRD has many examples of collectively agreed occupational sick pay schemes on its Payline database at www.lrd.org.uk/index.php?pagid=18.
Most contractual sick pay schemes set out a fixed period of entitlement to full pay, followed by a fixed period of entitlement to half pay. The contract terms usually state that contractual sick pay is inclusive of the employee’s statutory sick pay entitlement.
Sometimes, there is no clear contractual right to sick pay and any sick pay beyond SSP is in the discretion of the employer. The employer must not exercise that discretion arbitrarily or inconsistently, or be “irrational or perverse” (Commerzbank v Keen [2007] IRLR 132 CA).
When exercising discretion, an employer must not withhold sick pay to victimise a worker, or engage in discrimination (see Chapter 7). Finally, the employer must comply with the implied term of trust and confidence and not breach its duty of good faith owed to the employee (see page 87). For all these reasons, large employers, especially where unions are recognised, usually prefer to negotiate clear rules that state when sick pay is and is not payable.
An employer is not obliged to consider an employee’s financial position when deciding whether to pay discretionary sick pay (West Yorkshire Fire and Civil Defence Authority v King [2004] UKEAT/0960/03/2906).