An employee is claiming sick pay but is running their own business on the side: what should the HR manager do? Layla Bunni lays down the law.

An employee has been on long term sick leave for over six months due to a bad back. She claims that her back condition prevents her from driving and travelling long distances. She qualifies for PHI monthly payments. It has come to the attention of the HR manager however that the employee in question is operating a website advertising her services for the provision of beauty treatments to customers in the luxury of the customer’s own home. The contact details that she has provided on the website also include her mobile number – which the company pays for. How should this be handled?

The investigation process
It is important that the matter is fully investigated to establish whether or not the employee herself is carrying out the work, or if she is simply running the business but getting another person to carry out the beauty treatment work. If it is the latter, then the situation is less complicated in so far as there will only be an issue if the employee’s contract of employment prevents her from being interested in other businesses whilst she remains in her employment in the company. If it is the former however, then there are a number of issues involved which could potentially lead to the employee’s dismissal.

Hiring a private investigator
One way to establish exactly what involvement the employee has with the provision of the beauty treatments is to hire a private investigator to carry out surveillance on the employee. The private investigator will be able to provide the company with definitive evidence if the employee is leaving the house and travelling to various locations to carry out the beautician treatments at customers’ homes. If she is doing this during working hours, then this is a clear disciplinary matter given that she is carrying out work for another company/business whilst she would ordinarily be required to carry out her role with the company. There is also the further issue that the employee appears to be carrying out activities which she claims she is unable to carry out because of her back condition which is currently preventing her from attending work with the company. This alone leads the company to question whether or not the employee is genuinely ill and unable to attend work. If the company is able to gather all of the relevant evidence from the private investigator, it will be in a better position to take the necessary action against the employee.

Disciplinary action
If the evidence obtained from the private investigator shows that the employee has been carrying out the beauty treatment work, the employee should be invited to attend a disciplinary meeting to discuss the matter. Even though the company already has concrete evidence proving the employee’s misconduct, it is still important that these allegations are put to the employee at a disciplinary meeting. This is to ensure that she has an opportunity to fully respond to the allegations. Unless the employee can fully explain and justify her actions, the company could fairly and reasonably terminate the employee’s employment.

Reporting matter to the PHI provider
One thing that is important to consider is whether or not the PHI policy states that the company has an obligation to disclose to the PHI provider any findings of fraudulent or dishonest activity by any employee who is receiving a benefit under the policy. Even if such an obligation is not set out in writing under the terms of the policy however, it might still be advisable to notify the PHI policy provider of the company’s findings as soon as they come to light- even before the company carries out its own investigations. This is to avoid the risk that the PHI policy provider will claim that the policy is void as a result of the company’s failure to notify it of the suspected fraudulent activity, which could then result in the provider refusing to pay out any PHI payments to other employees who are eligible for such payments under the policy. 
 

Layla Bunni is a senior associate, specialising in employment law at Starr & Partners LLP. She advises on a wide range of both contentious and non-contentious employment issues.