The recent announcement of new measures to reform the welfare system was accompanied by the statistic that 2.8 million people are currently economically inactive due to long-term sickness (one of the highest rates in the G7).
While many firms will have experience of managing the sickness absence of employees, they may be in uncharted territory where a member of the LLP (or partner in the case of a traditional partnership) is incapacitated because of illness or injury. Such long-term incapacity (often when there is an unexpected diagnosis) can destabilise a firm and expose it to significant risk, particularly where the member is responsible for a department, has strong relationships with key clients, supervises fee-earners and/or is in a management position.
When sickness absence continues over an extended period, a firm should consider the likely impact of the absence, assess whether further information is required from the member as to the diagnosis and what measures can be put in place to support the member. The firm should find out the reason for the absence, including whether the absence has a work-related cause.
If it becomes clear that the member will not be able to return to work in the foreseeable future, a firm will want to ensure stability and business continuity. Fee-earners and clients will be looking for reassurance and guidance as to what happens next. Senior management should communicate a plan of action promptly, and steps should be taken to stabilise relationships by, for example, reassuring clients that their matters will continue to be serviced and determining who will be involved. Firms should consider early whether the member could meet the statutory definition of disability under the Equality Act 2010. A member who is absent over an extended period or who is diagnosed with a progressive condition will often (although not always) be disabled. Some conditions, such as cancer and multiple sclerosis, are automatically deemed a disability. A particular difficulty for a firm is where a member’s disability is not obvious and may only have an impact or become evident in particular situations. This is often the case where the member is suffering from a mental health condition.
When deciding what steps to take, there will often be competing interests within a firm. On the one hand, there may be a desire to provide support to the member for as long as possible, having regard to the bonds forged between partners and values of the firm. On the other hand, preserving someone’s membership indefinitely in the face of medical evidence suggesting there is little prospect of them returning to work is unlikely to be feasible. Any continuing members will have fiduciary duties and will need to act in the firm’s best interests.
A good starting point is for a firm to consider any relevant provisions in the Members’ Agreement. For example, the agreement may deal expressly with what happens to a member’s profit share on incapacity. There may also be an expulsion clause which is tied to a particular period of long-term absence (‘illness clause’). However, firms should tread carefully before taking any steps because a disgruntled member could potentially bring a discrimination claim. A member should not be treated unfavourably for reasons arising in consequence of a disability, save where the firm can show that the action taken is a proportionate means of achieving a legitimate aim. Reasonable adjustments should also be made to remove or reduce disadvantages and any discriminatory language should be avoided, as that could give rise to harassment allegations.
With an illness clause (that is, a seemingly neutral provision which applies to everyone), the member could argue it places people with the disability at a particular disadvantage compared with those without that disability and it puts the member at that disadvantage. There will be a defence if the firm can demonstrate that the policy is a proportionate means of achieving a legitimate aim. However, the burden will be on the firm to establish this. The legitimate aim must be a real business need – for example, consistent attendance from members to run the firm efficiently, and to protect itself from having to pay a share of the profits to a member who is not generating any revenue. The firm will also need to show the steps it takes are proportionate – that is, they are reasonably necessary to achieve the legitimate aim and there are no less discriminatory means available.
A discrimination claim will often be high-stakes: the claim must be brought in the public forum of an employment tribunal, unlimited damages can be awarded (including the potential for an injury to feelings and a personal injury award) and claims can be brought against individual members. In the case of direct discrimination, discrimination arising from a disability and failure to make reasonable adjustments, a firm will not be liable unless it knew (actual knowledge), or should have known (constructive knowledge), about the disability. The Equality and Human Rights Commission guidance states that an employer must do all it can reasonably be expected to do to find out whether a person has a disability. What is reasonable will depend on the circumstances.
A member could also attack any decisions taken by the firm on the basis that: (a) the ground relied on by the firm as the basis for any decisions has not been made out; (b) the procedure under the Members’ Agreement has not been followed; (c) there has been a failure to abide by principles of natural justice; (d) any decisions have been vitiated by bad faith; and/or (e) there has been an improper exercise of discretion (that is, a breach of an implied term that the discretion has to be exercised rationally and not capriciously or arbitrarily).
Key practical steps include: (a) updating the Members’ Agreement to ensure there are provisions which deal with the incapacity of a member; (b) obtaining medical evidence early (perhaps through a referral to occupational health); and (c) having a paper trail which demonstrates the firm’s legitimate aims and how any steps taken are proportionate.
Shiv Raja is a senior associate at Fox & Partners, London
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