Mental health absences now account for one of the largest categories of long-term sickness in the UK, and the issue is hitting small and owner-managed businesses particularly hard. Cover costs mount, workloads shift onto already stretched colleagues, and difficult decisions about an individual’s future eventually have to be made. Terminating an employee with mental health issues is one of the most legally sensitive areas of HR, and one of the most frequently mishandled.
At GAP HR, we work with small and owner-managed businesses across the UK on situations exactly like these. This guide sets out what employers need to consider before contemplating termination, and how our consultants help clients approach the process lawfully and fairly.
Call us now on 01491 598 600 or Click Here to Make An Enquiry and we will be delighted to help you.
What Are An Employer’s Duties To Employees With Mental Health Issues?
Many mental health conditions meet the legal definition of a disability under the Equality Act 2010. The statutory test is whether the condition has a substantial and long-term adverse effect on a person’s ability to carry out normal day-to-day activities.
Mental health conditions that can meet the test include depression, generalised anxiety disorder, bipolar disorder, post-traumatic stress disorder, obsessive-compulsive disorder and eating disorders, although each case will turn on its own facts. Our consultants regularly advise employers on whether a particular condition is likely to fall within the scope of the Act.
Where the condition amounts to a disability, the employee is protected from:
- Direct and indirect discrimination
- Discrimination arising from disability
- Harassment and victimisation
- A failure to make reasonable adjustments
There is no minimum service requirement for a discrimination claim, and compensation is uncapped. A dismissal found to be discriminatory can therefore prove considerably more costly than an ordinary unfair dismissal claim, where compensation is subject to a statutory cap.
What Is The Duty To Make Reasonable Adjustments?
Before dismissal is considered, employers have a positive legal duty to identify and, where appropriate, implement reasonable adjustments to place the employee on an even footing with their colleagues. The duty arises whether or not the employee has explicitly requested support.
Adjustments that may be reasonable in mental health cases include:
- A phased return to work following a period of absence
- Reduced, flexible, or staggered working hours
- Adjustments to duties, workload, or reporting arrangements
- Paid time off for therapy, counselling, or medical appointments
- Modifications to the working environment
- Structured support from a line manager or designated workplace contact
What counts as ‘reasonable’ depends on the size and resources of the business, the cost and disruption involved, and the likely effectiveness of the adjustment. We help our clients to assess what is genuinely workable in their specific business, document the options considered, and have constructive conversations with the employee about which measures are most likely to support a return to full duties.
What Should Employers Do When Terminating An Employee With Mental Health Issues?
Where dismissal is being considered because of long-term ill-health, the correct route is a capability dismissal on the grounds of ill-health, not a conduct dismissal. This distinction is critical. The employee has not done anything wrong, and treating the situation as misconduct is likely to result in a finding of unfair dismissal.
The following steps give a general overview of how a fair capability process should be approached. However, each case is unique, and seeking expert advice is by far the best way to ensure legal compliance.
• Obtain Up-To-Date Medical Evidence
Decisions about an employee’s future must be informed by current professional medical evidence. In most cases this means an Occupational Health referral, although a report from the employee’s GP or specialist may be appropriate in some circumstances.
A useful Occupational Health report should address the nature and likely duration of the condition, whether the employee is fit to return to work and on what timescale, what adjustments might support a return, whether the condition is likely to amount to a disability under the Equality Act 2010, and the prognosis for sustained future attendance. Our consultants can prepare appropriately worded referral letters and help to interpret the advice received.
• Implement The Recommended Reasonable Adjustments
Once the medical advice has been received, you should identify and implement any reasonable adjustments that have been recommended or that are otherwise appropriate. These adjustments must be given a fair opportunity to take effect before any dismissal is considered. You should document each adjustment offered and the employee’s response to it.
• Explore All Reasonable Alternatives
Before progressing to a formal capability process, you should consider whether there are alternatives that could allow the employee to remain in employment. Redeployment to a different role, a further period of paid or unpaid absence, or additional adjustments may all be appropriate depending on the circumstances. Each option should be discussed with the employee and recorded in writing.
• Invite The Employee To A Formal Capability Meeting
If, despite your reasonable efforts, the situation cannot be resolved, the employee should be invited in writing to a formal capability meeting. The invitation must explain that the meeting concerns their continuing ability to carry out the role, enclose or refer to the medical evidence to be discussed, and confirm the right to be accompanied by a colleague or trade union representative.
The meeting should be arranged with reasonable notice, held in a private and non-intimidating setting, and conducted with empathy. Particular care should be taken with employees experiencing mental ill-health, who are likely to find work-related discussions stressful. We often coach managers in advance on how to structure these conversations.
• Review The Medical Evidence Openly With The Employee
At the meeting, walk through the medical evidence and the prognosis with the employee. Give them the opportunity to comment on the report, raise any factors they feel have not been fully considered, and put forward suggestions of their own. The aim at this stage is informed dialogue, not a pre-determined outcome.
• Issue A Written Warning
If the meeting does not produce a workable way forward, the employee should be informed in writing that dismissal on the grounds of capability is being considered. They should be given a further period in which to respond, propose alternatives, or provide additional medical evidence.
• Hold A Final Meeting Before Reaching A Decision
A second formal meeting should be held before any final decision is taken. This gives the employee a final opportunity to address the points raised and demonstrates that the decision has not been pre-determined. The right to be accompanied applies again.
• Confirm The Outcome In Writing And Offer The Right Of Appeal
If you decide to dismiss the employee, the outcome should be set out in a written letter that explains the reasons, the date of termination, the notice arrangements, and the right to appeal. Appeals should, wherever possible, be heard by someone who has not previously been involved in the process.
The importance of documenting everything that happens during the process cannot be overestimated. You should maintain a clear written record of every meeting, decision and adjustment offered, together with the rationale for each step. Documentation can be crucial for your defence if a claim is later brought, and the absence of records is one of the most common reasons employers struggle to defend ill-health dismissals at Tribunal. We guide our clients through each stage, draft the relevant correspondence, and where helpful attend meetings alongside business owners or managers to keep the process on a proper footing and legally compliant.
At any point during the process, a settlement agreement may offer a more constructive route forward. A settlement agreement enables both parties to bring the employment to an end on agreed financial terms, in exchange for the employee waiving the right to bring future claims. This can be particularly appropriate in mental health cases, where a prolonged formal process may be detrimental to the employee’s recovery and disruptive to the business. To be legally binding, the employee must receive independent legal advice, and the employer typically contributes to that cost. Our consultants frequently prepare settlement agreements, advise on appropriate financial terms, and manage negotiations on behalf of our clients.
How GAP HR Can Help
Terminating an employee with mental health issues can be lawful in the right circumstances, but it must be approached with extreme caution. Employers should be guided by current medical evidence, take the duty of reasonable adjustment seriously, follow a fair capability procedure, and document each stage.
GAP HR has specialised in supporting small and owner-managed UK businesses since 2003. Our consultants advise on every aspect of managing mental health absence, from early intervention and reasonable adjustments through to capability dismissals and settlement agreements. We work with clients on a retainer or ad-hoc basis, helping decisions to be taken on a sound legal footing and with the wellbeing of all parties in mind.
Call us now on 01491 598 600 or Click Here to Make An Enquiry and we will be delighted to help you.
