Capability dismissal explained (2026): Poor performance vs ill health

Capability dismissal ends employment when you can’t do your job, either through poor performance or ill health. Under the Employment Rights Act 1996 s.98(2)(a), it’s a potentially fair reason, but fairness hinges entirely on procedure. Medical dismissals collapse without occupational health evidence; performance dismissals require documented support and opportunity to improve. Procedural gaps are frequently decisive at tribunal. Consult an employment solicitor specialising in unfair dismissal within 3 months of dismissal to protect your statutory rights and identify procedural vulnerabilities.

Read on to understand your rights.

Medical vs. performance capability dismissal: Main differences

Distinguishing between medical capability dismissal (based on occupational health evidence) and performance-based dismissal (based on competence or productivity) determines your procedural protections and grounds for challenge.

 For performance-based capability dismissals, see ACAS guidance on performance management; the remainder of this article focuses on medical capability dismissal, which carries distinct procedural and discrimination risks.

Occupational health assessment before medical dismissal

Failure to commission occupational health assessment before medical capability dismissal constitutes material procedural unfairness, as established in East Lindsey District Council v G E Daubney [1977] IRLR 181, EAT, a precedent directly cited in tribunal determinations of fairness.

• Report must address current diagnosis, treatment plans, and realistic return-to-work date or permanent incapacity confirmation.
• Assessment must be obtained before dismissal decision, not retrospectively or as post-hoc justification.
• Employer must form independent reasoned judgment and cannot rubber-stamp OH findings (BS v Dundee City Council [2014] IRLR 131).
• Employee must be given opportunity to discuss findings and obtain alternative medical opinion.
• If OH report is inconclusive, further expert opinion may be necessary before dismissal can be fair.
• Medical confidentiality applies; employer receives only job-capability-relevant information.

Reasonable adjustments before medical capability dismissal

Reasonable adjustments under Equality Act 2010 s.20 and s.21 must be explored and documented before dismissal on medical grounds. Failure to do so often supports disability discrimination claims which carry higher tribunal awards.

• Employer must identify, assess in writing, and specifically explain rejection of each proposed adjustment.
• Adjustments (flexible hours, home working, redeployment, phased return, modified duties) must be proportionate to disability impact.
• Cost and practicability are relevant; employer inconvenience alone is insufficient justification for refusal.
• Temporary redeployment and reduced-hours options are often feasible and relatively low-cost.
• Joint exploration between employer and employee must be documented; unilateral employer decisions are tribunal vulnerable.
• If adjustment would enable continued employment, dismissal before offering it is often found procedurally unfair.

Fair process for medical capability dismissal

Common law fairness requires investigation, consultation, and documented decision-making for medical capability dismissal, even though medical cases are exempt from ACAS Code procedure (Employment Rights Act 1996 s.98(4)).

• At least one formal meeting must be held to discuss medical evidence and capability concerns with employee present.
• Employee has statutory right to be accompanied by colleague or trade union representative (good practice in medical cases).
• Employer must clearly communicate why medical condition prevents role performance or alternative work within realistic timeframe.
• Dismissal decision must be documented in writing, explaining investigation, adjustments considered, and proportionate conclusion.
• <2 years’ service does not exempt employer from common law fairness; manifestly unreasonable or absent process is still tribunal-vulnerable.
• Consultation cannot be token; employee must have genuine opportunity to respond and present counter-evidence.

Notice pay and tribunal compensation for capability dismissal

Statutory notice is owed on capability dismissal (1 week minimum, escalating to 12 weeks at 12+ years service), and tribunal compensation for unfair dismissal comprises basic award (capped £21,570) plus compensatory award (capped £118,223 or 52 weeks’ pay).

• Pay in lieu of notice (PILON) is permissible if contract allows or employer chooses summary dismissal.
• Statutory redundancy is not automatic unless the role itself, not the employee’s incapacity, is redundant
• Accrued holiday pay must be paid in full under Working Time Regulations 1998; failure is additional breach.
• Basic award = 0.5 × weekly pay × years of service (ages 22–40); example: 0.5 × £600 × 8 years = £2,400.
• Compensatory award depends on loss of earnings, re-employment difficulty, and procedural breach; procedural unfairness has supported awards in that range in reported cases, depending on circumstances.
• Tribunal may reduce compensation if employee failed to mitigate loss; reductions for procedural unfairness may be limited depending on the facts.

Tribunal assessment of capability dismissal fairness

Employment tribunals assess fairness under Employment Rights Act 1996 s.98(4) by examining whether procedural and substantive requirements were met: occupational health evidence, consultation, adjustment exploration, and proportionate reasoning.

Tribunals will also examine specific failings in procedure and substance, as well as whether discrimination law was breached.

• Procedural failings: absent OH assessment, no meeting, no adjustment consideration, unilateral decisions
• Substantive failings: no causal link between health and role performance, cherry-picked OH findings, speculative prognosis
• Equality Act 2010 s.39 triggers automatic unfairness if disability was the reason; discrimination claims often reach higher awards
• Constructive dismissal may arise if workplace became hostile during illness and employee resigned

FAQs

Is the ACAS Code of Practice binding in medical capability dismissals? No. Medical capability dismissals are exempt from ACAS Code procedure. However, common law fairness, investigation, consultation, documented decision-making, remains mandatory and is assessed rigorously by tribunals.

What if my employer dismissed me without occupational health assessment? Absence of OH assessment is material procedural unfairness. At tribunal, the employer cannot demonstrate it acted reasonably. Compensation depends on loss of earnings and re-employment difficulty; procedural breach has supported awards in many cases.

Can I be dismissed if I refuse occupational health assessment? Refusal creates procedural complexity. Tribunals examine whether refusal was unreasonable and whether employer could reach fair conclusions without assessment. Obstruction can weaken employee position but does not fully excuse employer failure to investigate independently or commission alternative expert opinion.

Am I entitled to notice pay if dismissed for medical capability? Yes, unless dismissed summarily for gross misconduct (separate from capability). Statutory notice periods apply: 1 week minimum, escalating with service length to 12 weeks at 12+ years.

What counts as a reasonable adjustment my employer must offer? Adjustments might include flexible hours, home working, role modification, temporary redeployment, phased return, or equipment provision. Cost and practicability are relevant; minor inconvenience to employer is often insufficient justification for refusal. Adjustments that can enable continued employment should be offered before dismissal.

Can I claim disability discrimination if dismissed for capability? Yes, if disability was the reason (direct discrimination) or you were treated less favourably because of disability (indirect). Disability discrimination claims often carry higher tribunal awards than unfair dismissal alone. Seek solicitor advice immediately if disability is involved.

Medical capability dismissal must rest on occupational health evidence, fair consultation, and reasonable adjustment consideration. Procedural failures, particularly absent OH assessment or undocumented adjustment discussion, often result in unfair dismissal liability. Early solicitor engagement can materially improve risk assessment and settlement outcomes.

This article provides general legal information only and does not constitute legal advice; consult a qualified solicitor regarding your specific circumstances.

Qredible: Solicitor support for dismissal disputes

Qredible connects individuals with verified employment solicitors for capability dismissal, unfair dismissal, and disability discrimination disputes.

KEY TAKEAWAYS:

• Medical capability dismissal requires occupational health assessment before dismissal and documented reasonable adjustment consideration under Equality Act 2010 s.20; absence of either is commonly treated as material procedural unfairness and grounds for tribunal claims.
• Medical capability dismissals are exempt from ACAS Code procedure but remain subject to common law fairness (Employment Rights Act 1996 s.98(4)); procedural gaps are rigorously examined by tribunals and often result in unfairness findings.
• Early solicitor engagement can materially improve procedural assessment, settlement negotiation, and compensation evaluation; disability discrimination claims often carry higher tribunal awards than unfair dismissal alone.