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Ill health retirement: ending of employment

In 2002, a number of legal cases were brought to court concerning the ending of employment when a teacher takes ill-health retirement.


Introduction

NEOST advice is that when a teacher is awarded an ill health pension, the teacher should agree a mutually acceptable date for their last day of employment with their employer - an employer is not required to dismiss and give paid notice when a teacher’s application for an ill-health retirement pension is successful.

NEOST relies on a Court of Appeal case Healey-v-Bridgend County Borough Council.

The unions take a different view, relying on a judicial review of an earlier case, Dorling-v-Sheffield City Council, which ruled in favour of the teacher and the employer had to issue notice.

Healey –v- Bridgend County Borough Council

A summary of this case is attached at Appendix A.

The main point of law in this case was whether the action taken by Mrs. Healey amounted to a resignation. Mrs. Healey applied for ill health retirement when she completed Form 18 of the Teachers’ Pension Scheme and entered her last day of active employment as her last day of employment on the form. In the judgment of Lord Justice Ward, Mrs. Healey’s employment terminated by reason of her decision to retire.

NEOST advice

NEOST’s view is that the Healey v Bridgend County Borough Council case establishes a number of important points of principle:

  • A teacher’s decision to want to retire on the grounds of ill-health, as evidenced by making an appropriate submission to Teachers’ Pensions, is a decision to cease his/her employment on those grounds. This is clear from the declaration which a teacher has to make when completing Teachers’ Pensions Form 18;
  • The teacher is giving notice, in these circumstances, to retire from his/her employment upon becoming entitled to the payment of ill-health retirement benefits;
  • A successful application for ill-health retirement benefits means that the teacher is permanently unfit for teaching and retirement must take place at the earliest possible date;
  • Following a successful application, the employer is not under any contractual obligation to serve notice to terminate the teacher’s contract.

The judgment in this case is more persuasive than the outcome of the judicial review in the case of Dorling v Sheffield. Our conclusions, therefore, are that, when a teacher has applied to Teachers’ Pensions on the grounds of their “permanent incapacity” and has subsequently been granted an ill-health pension, their retirement must take place as soon as possible and there is no requirement in these circumstances for the authority to dismiss or to issue notice.

In order to clarify the implications for a teacher of making an application to Teachers’ Pensions for ill-health retirement benefits, we would recommend that when a teacher makes such an application the authority should write to the individual concerned to advise them that the last day of pensionable service* will be regarded as the last day of employment. This would not, of course, prevent the authority and the teacher agreeing an earlier date as the last day of employment in order for the teacher to access their lump sum and pension earlier.

There is nothing in the Healey or Dorling judgments to suggest that an authority or school is prevented from dismissing a teacher on the grounds of ill health during the teacher’s period of sickness absence. It is clear, however, that in these circumstances the teacher would be entitled to receive notice and be entitled to full pay during the notice period in accordance with the provisions set out in the Conditions of Service for School Teachers in England and Wales (the Burgundy Book).

*Note: Pensionable employment is defined in the Teachers’ Pensions Regulations as employment where a teacher is entitled to be paid his/her salary in full, or is on sick leave and entitled to be paid not less than half his/her salary, or on maternity leave and entitled to be paid any contractual remuneration or statutory maternity pay.

Dorling –v- Sheffield City Council

A summary of this case is attached for your information, at Appendix B.

Mr Justice Goldring ruled in favour of Mr Dorling and said that Sheffield City Council were under an obligation to terminate his contract of employment, in accordance with Regulation 7 of the Education (Teachers’ Qualifications and Health Standards) (England) Regulations 1999. This ruling meant that Mr Dorling should receive notice with full pay for the notice period, as provided for in the Conditions of Service for School Teachers in England and Wales (the “Burgundy Book”). In reaching this conclusion, Mr Justice Goldring confirmed the earlier decision of Mr Justice Patten in the High Court.

Edwards –v– Governing Body of Dyson Perrins CE High School and Worcester County Council

A summary of this case is attached at Appendix C.

The Employment Tribunal decided that the teacher had resigned from his employment with the authority following his successful application to Teachers’ Pensions and the expiry of his half sick pay. The decision in this case took into account the judgments in both the Dorling case and the Healey Case.

Verner –v- Derby City Council

The judgment in this judicial review was published in November 2003. The appellant (and two other associated appellants) lost their claim that they should have been dismissed by their employers. The judge took into account the Dorling and Healey judgments.

Appendix A

Court of Appeal 14 November 2002: Healey - V - Bridgend County Borough Council

The facts

1. Mrs. Healey was employed as head teacher of Ysgol Gymraeg Bro Ogwr primary school by Bridgend County Borough Council from 1 January 1996.

2. Early in July 1999 Mrs. Healey began a period of long-term sick leave due to stress and depression. She was paid 6-months’ full pay until 31 December 1999. She would then have been due half pay under the sick pay scheme until 30 June 2000.

3. At a meeting between Mrs. Healey, her union representative and the Director of Education in the summer or early autumn of 1999 it was agreed that she would apply for ill-health retirement benefits. Mrs. Healey applied in January 2000 by completing Form 18 of the Teachers’ Pension Scheme. Mrs. Healey entered her last day of employment on the form as “02.07.99”, this being her last day of active employment. Mrs. Healey then sent the form to Mr Davies, the authority’s personnel officer, asking that the application be kept confidential because “at the moment it is the Director only that is aware of any decision”. Mrs. Healey confirmed in her evidence that the “decision” to which she referred was her decision to retire on the grounds of ill health. Mr. Davies completed the relevant part of the form on behalf of the authority and sent it to Teachers Pensions.

4. On 13 June, Teachers’ Pensions wrote to the authority to notify them that Mrs. Healey’s application had been accepted. The letter stated that pension benefits would be “payable on the day following the last day of pensionable service”, which was defined, in Mrs. Healey’s case, as the day following the last day of paid sick leave.

Decision of the County Court

7. At the earlier hearing in the County Court, Mrs. Healey said that she had not agreed a retirement date; she had not been asked to retire; she had not resigned from her employment or consented to its termination. Accordingly, she treated Mr. Davies’ letter as a notice of termination of employment and claimed damages to recover salary for the period up to 31 December 2000.

8. The Recorder of the County Court dismissed Mrs. Healey’s claim for the following reasons:

1) Mrs. Healey’s decision to retire on the grounds of ill health was a decision to cease or give up her employment on those grounds and “ill health retirement benefits” are benefits paid to a person who ceases or gives up employment on the grounds of ill health;

2) Accordingly, in informing Bridgend of her decision to retire and to apply for ill health retirement benefits, Mrs. Healey was impliedly agreeing to retire from her employment upon becoming entitled to payment of such benefits;

3) Because a successful application for ill health retirement benefits involves a determination that the applicant has been found to be permanently unfit for teaching on the grounds of ill health, it follows that retirement should take place on the earliest possible date;

4) The medical evidence obtained by Teachers’ Pensions showed that Mrs. Healey was unfit to teach through illness. Accordingly, on receipt of the notification to this effect from Teachers’ Pensions, Bridgend were under no contractual obligation to serve a notice of termination of employment upon Mrs. Healey. Mr. Davies’ letter of 7 July 2000 did not constitute the giving of notice on behalf of the authority;

5) Therefore, there was an implied agreement between Mrs. Healey and Bridgend that Mrs. Healey’s employment would end through retirement when she became entitled to the payment of ill health retirement benefits.

9. Mrs. Healey disagreed with the County Court decision and therefore took her case to the Court of Appeal.

Proceedings at the Court of Appeal

10. Mr. Kempster, Mrs. Healey’s representative, submitted that the Recorder was wrong in finding that there was an implied agreement to retirement. Mr. Kempster said that, in his view, there was no such thing as an implied agreement; there is either an agreement or there is not. The Court accepted this argument.

11. However, Mr. Oldham, representing Bridgend, said that Mrs. Healey should be judged to have resigned. He argued that resignation is a unilateral act. It takes effect to terminate the contract of employment in a manner similar to giving notice to terminate.

The Judgment

12. Lord Justice Ward says in his judgment that it is plain that at the meeting with the Director it was not only agreed that Mrs. Healey would be applying for ill health retirement, but that she must at that meeting have conveyed to the Director a decision to retire on the grounds of ill health. Lord Justice Ward says this must amount to a notice of resignation.

13. Lord Justice Ward then goes on to consider whether or not this notice of resignation is unconditional. In other words, whether, as Mr. Kempster contends, Mrs. Healey’s notice was no more than a statement of future intention to retire, which is too vague and not specific enough as to the timing and mechanics of termination to have legal effect. Or whether, as Mr Oldham contends, the notice given by Mrs. Healey has to be interpreted as meaning that she agreed to retire if and when her retirement benefits became payable.

14. The judge says that the Dorling –v- Sheffield case has no relevance for the consideration of the Healey case. He returns to the main question of whether the action taken by Mrs. Healey amounted to a resignation. He rejects Mr. Kempster’s submission that Mrs. Healey merely expressed a future intention to retire. He says:

“It was much more than that. Mrs. Healey knew that she would not be returning to work. That was implicit in her assertion that she was permanently incapacitated. She knew that she would cease to be paid sick pay on 30 June. She would be without income thereafter. If successful in her claim for retirement on health grounds, she would receive about the same amount, we are told, as the half pay sick pay that she was receiving, in addition, of course, to a lump sum of about £49,000. An objective consideration of the communicated decision to retire, treated as a notice to retire, would carry with it the implication that it was to be effective only if the application for benefit was successful. That condition has been fulfilled.”

15. Lord Justice Ward goes on to say:

“In my judgment the other implication which ineluctably arises from the facts is that her retirement would become effective from the earliest moment that benefits become payable. She was doing two things: first, she was applying to a third party for these retirement benefits; but secondly, she was giving her employers notice of a decision to retire. If the officious bystander were to determine when that retirement would become effective, he would say, “When the benefits become available to her.” He would not countenance a position that Mrs. Healey was playing the Dorling waiting game of forcing the employer to dismiss her.”

16. The judge says that the proper construction to place upon Mrs. Healey’s communications with her employer was that she was willing to retire if and when she received her benefits. In his judgment, Mrs. Healey’s employment terminated on 30 June by reason of that decision to retire.

17. Lord Justice Ward dismissed Mrs. Healey’s appeal. He was supported in this judgment by Lord Justice Schiemann and Lord Justice Longmore.

Appendix B

High Court Judgement in the case of Eric Dorling - V - Sheffield City Council and the Governing Body of Woodthorpe Primary School

14 December 2001

Facts

1. In 1999 Eric Dorling became ill and was absent from work on sick pay. He was entitled to the maximum of 100 days’ full pay followed by 100 days’ half pay.

2. His half pay expired on 19 October 2000 and he applied to Teachers’ Pensions for an ill-health pension on 6 October 2000. On 19 February 2001 Teachers’ Pensions wrote to Mr Dorling to confirm that the conditions set out in Regulation F4(4) of the Teachers’ Pensions Regulations 1997 were satisfied and that his last date of reckonable service for the purposes of calculating his pension was 19 October 2000. His pension therefore became payable and was paid from 20 October 2000.

Pensionable employment and notice

3. The judge said it was clear that under the Pensions Regulations a cessation of pensionable employment does not necessarily involve the termination – whether by resignation or dismissal – of the contract of employment. The test is whether the teacher concerned ceases to receive either his salary or sick pay.

4. In a case in which a teacher is incapacitated through illness from continuing to teach, however, the judge said that the continuation of their employment is likely in practice to cause real difficulties in relation to the determination of entitlement to a pension and the calculation of the amount.

5. There is clearly no problem if the teacher resigns following the expiry of their sick pay since a resignation date can then be agreed and the pension will become payable on the following day. But if the teacher refuses to resign and seeks to be dismissed by the local education authority there will be, in the judge’s view, a significant doubt as to whether their pensionable employment can be said to have ceased. This is because the dismissal of a teacher for unfitness due to illness can only be effected by notice under paragraph 4.4 of Section 3 of the Burgundy Book.

6. In a case like Mr Dorling’s the combined effect of paragraph 4 and the Employment Rights Act 1996 would give an entitlement to 3 months’ paid notice. This period of paid notice would then be taken into account in calculating Mr Dorling’s pension entitlement at the end of the notice period and would, during the period of notice, mean that Mr Dorling continued in pensionable employment under the Pensions Regulations.

The issue of difference between Mr Dorling and Sheffield City Council

7. The judge went on to discuss the legal effect of the arrangements made for Mr Dorling to be paid his pension from 20 October 2000.

8. The authority said that in applying and obtaining payment of his pension from October 2000 Mr Dorling in effect retired from his employment and must be treated as having resigned. No notice was given to him and he was not dismissed. He is not therefore entitled to any further payment.

9. Mr Dorling denied that he resigned. His argument was that the authority were under a contractual obligation to dismiss him once he had established that he was permanently incapacitated through ill-health. In breach of this obligation the authority had refused to dismiss him. The measure of his loss was the amount of salary he should have received in respect of the 3-month period plus compensation for the lost enhancement in the value of his pension which would have come from the payment of 3 additional months’ salary.

The judge’s arguments

10. The judge’s remit was to determine whether the Council were under a contractual obligation to dismiss Mr Dorling. The contractual basis for the alleged obligation on the authority was paragraph 6.1 of Section 4 of the Burgundy Book:

“In the event of a teacher exhausting in part or full his/her entitlements under paragraph 2.1 above and being given notice of the termination of his/her contract without returning to work on the grounds of permanent incapacity or for some other reason related to the sickness absence, he/she shall be paid full salary for the notice period with normal deductions only.”

11. The judge said it was clear that the Burgundy Book makes provision for dismissal by notice in cases of ill-health but he asked whether the provisions required an act of dismissal. Mr Dorling’s representative argued that dismissal was required by Regulation 7 of the Education (Teachers’ Qualifications and Health Standards)(England) Regulations 1999:

“7(

1) A person in relevant employment shall not continue in that employment if, having regard to any duty of the employer under Part II of the Disability Discrimination Act 1995, he does not have the health and mental and physical capacity for that employment.



(2) For the purposes of this regulation, where it appears to his employers that a person may no longer have the health or mental or physical capacity for his employment –

(a)

they shall afford him an opportunity to submit medical evidence and made representations to them;

(b)

they shall consider such evidence and representations and any other medical evidence available to them, including such evidence which has been furnished in confidence on the grounds that it would not be in the best interests of the person concerned to see it;

(c)

they may require him, or at his request shall arrange for him, to submit himself for examination by a duly qualified medical practitioner appointed by them and, if without good cause he fails to submit himself for such examination or refuses to make available medical evidence or information sought by the medical practitioner, they may reach a conclusion in the matter, including a conclusion that he no longer has the health or mental or physical capacity for his employment, on such evidence and information as is available to them, notwithstanding that further medical evidence may be desirable.

(3) At any time before such medical examination as is referred to in paragraph 2(c) the employers, or the person himself, may submit to the appointed medical practitioner a statement containing evidence or other

matter relevant to the examination and the examination may be attended by any duly qualified medical practitioner appointed for the purpose by the person being examined.”

12. Mr Dorling’s representative said that in cases of permanent incapacity this Regulation meant that Council was under a duty to ensure the employment did not continue and therefore had to dismiss.

13. The authority’s view was that the Regulation itself effected an automatic termination of the employment and there was therefore no requirement on the authority to dismiss.

14. The judge then refers to Regulation 10 of the Education (Teachers) Regulations 1993 which outlines the Secretary of State’s powers relating to the continued employment of teachers who become incapacitated. Regulation 10 provides that: “10.

(1) The powers conferred on the Secretary of State by

paragraph (2) shall only be exercisable –

(a) on medical grounds;

(b) on grounds of a person’s misconduct (whether or not evidenced by his conviction of a criminal offence); or

(c) in relation only to employment as a teacher, on educational grounds.

(2)

On such grounds as aforesaid the Secretary of State may, subject to such qualifications (if any) as he may specify –

(a) in the case of a person in relevant employment, direct his employers –

(i)

to suspend or terminate his employment, or

(ii)

to make his continued employment subject to specified conditions;

(b) in the case of such a person in respect of whom a direction is given under sub-paragraph (a) or of a person not in relevant employment, direct that –

(i)

he be not subsequently appointed to or employed in relevant employment or

(ii)

he be only subsequently so appointed or employed in relevant employment subject to specified conditions, including conditions relating to the employment in question.

(3)

In the case of a person in relevant employment, the Secretary of State shall not exercise his powers under paragraph (2) without first consulting his employers.”

15. The judge’s view is that Regulation 7 cannot be construed as automatically ending employment, as suggested by the authority, because in these circumstances Regulation 10 – which gives the Secretary of State the power to suspend or terminate a teacher’s employment on medical (among other) grounds – would be unnecessary. However, the judge goes on to say, the enforcement by the Secretary of State of Regulation 7 has to be done in consultation with the employer.

16. The first issue under these Regulations is whether, in the absence of a direction from the Secretary of State, the authority has complete discretion on whether or not to terminate the teacher’s employment. The judge says that the authority does not have this complete discretion, for the following reasons.

(a) by virtue of Regulation 7 the employment of a teacher who is incapacitated cannot continue and must be terminated;

(b) this can only be achieved by resignation or by dismissal;

(c) if the teacher is unwilling to resign then the AUTHORITY can only comply with Regulation 7 by serving notice of dismissal.

17. The judge says this view is confirmed by Regulation 7(2) which obliges the employers to provide the teacher with an opportunity to submit medical evidence and to make representations and empowers the authority to require the teacher, when necessary, to undergo a medical examination.

18. The judge says there can be no real doubt that the authority must in these circumstances adopt a pro-active stance. But he says that the method of resolving the matter is within these confines a matter for their judgment and discretion having regard to the overall objective of achieving the discontinuance of the relevant employment.

19. The judge then goes on to address Mr Dorling’s claim and says that this runs into difficulties because the claim equates the carrying out of the authority’s statutory functions with the contractual position. The judge says that if paragraph 6.1 of Section 4 of the Burgundy Book imposes an unqualified duty to dismiss a teacher on grounds of permanent incapacity then it would necessarily impact on the statutory functions of the authority under Regulation 7. The procedures under Regulation 7 are clearly intended to govern cases where the initiative is taken by the authority. If the authority decides on the basis of the evidence that the teacher is unfit and can no longer continue in employment, then the options are to agree a resignation date with the teacher or, if necessary, to dismiss him or her. If the authority fails to take proper steps to terminate the employment in a case of proven incapacity then the Secretary of State will be entitled to give a direction.

The judgment

20. The judge’s conclusion is that there is no reason why the parties to a contract embodying the Burgundy Book terms and conditions should be considered to have supplemented the statutory procedures under the Teachers’ Regulations with a contractual obligation to dismiss. His view is that it is more likely that those who negotiated and agreed these terms would have assumed that in a case of permanent incapacity the authority concerned would carry out its statutory functions in accordance with the provisions of the Regulations. That would necessarily result in either resignation or dismissal. The judge expresses the view that the authority could not simply do nothing.

21. In these circumstances the judge’s view is that there would be no reason to have superimposed a positive contractual duty as suggested by Mr Dorling and the judge is not convinced that any such duty can be inferred from the wording of paragraph 6.1.

22. In reaching this judgment, the judge says that in his view it is for the school to determine whether, based on the medical evidence, the teacher should be dismissed. The judge does not think the authority can dismiss unless the school issues the appropriate notification under Schedule 16 of the School Standards and Framework Act 1998.

Appendix C

Employment Tribunal: Mr D Edwards - V - Governing Body of Dyson Perrins CE High School and Worcester County Council

The facts

1. On 25 May 2001 Mr Edwards started a period of sickness absence. He applied for an ill-health retirement pension on 30 May, stating his intended date of retirement as 31 August 2001. On 11 July 2001 Teachers’ Pensions accepted his application and advised him to agree a retirement date with his employers.

2. Mr Edwards received full sick pay until December 2001 and half sick pay until 31 May 2002.

3. The ATL advised Mr Edwards not to resign but to wait for Worcester County Council to dismiss him. The date of Mr Edwards’ retirement was postponed with neither side prepared to terminate the contract.

4. On 8 May 2002 Mr Edwards wrote to Worcester stating that he wished to access his pension and lump sum on 31 May 2002. Arrangements were made to pay his pension and he was sent a P45 notifying him that his last day of service was 30 May 2002.

5. On 17 July the ATL wrote to Worcester asking for their decision on the termination of Mr Edwards’ employment. Worcester replied on 25 July that they regarded the request of 8 May as evidence of a mutually agreeable date for the termination of the contract of employment.

Proceedings at the tribunal

6. The proceedings started on 7 November 2002, but due to lack of time, were adjourned. The tribunal reconvened on 10 February 2003. This is significant because by the time the tribunal reconvened all parties involved were able to take into account decisions in the Dorling and Healey cases.

7. Based on the Healey judgment, Mr Elliott (acting for Worcester) contended that Mr Edwards had resigned and that his contract of employment had terminated on 30 May 2002.

8. Miss Gollop (on behalf of Mr Edwards) argued that Worcester’s letter of 25 July 2002 amounted to a repudiation of Mr Edwards’ contract of employment. She argued that there was a fundamental difference between the facts in the present case and the facts in the Healey case – Mr Healey apparently communicated a decision to retire yet Mr Edwards had not.

The tribunal’s decision

9. Having reviewed all the facts of the case, the tribunal’s decision was:

“We have come to the unanimous conclusion that the applicant’s contract of employment with the respondents ended on the 30 May 2002 by reason of his retirement on the grounds of ill health. We find that in May 2001 he gave notice to the respondents’ head master that he intended to retire if his application for benefits was successful. He confirmed that notice in his application form which was passed to the respondents, and subsequently accepted by TP. Thereafter the applicant’s retirement was never in doubt. All that remained to agree was the date and this was later extended by mutual agreement until the applicant’s sick pay finally ceased on the 30 May 2002. We find that in using the word “retirement” all parties reasonably understood and accepted that it meant and was intended to mean resignation from the contract of employment. We unanimously conclude that the applicant was not dismissed. He resigned with effect from the 30 May 2002. It follows that this complaint must be dismissed”.