The Employee on Long-Term Sick Leave Who Was Running a Rival Business

The Employee on Long-Term Sick Leave Who Was Running a Rival Business

The outcome: A logistics company in the West Midlands discovered that a warehouse manager on long-term sick leave for a reported back injury was operating a competing delivery service using contacts and clients he had taken from his employer. Surveillance and open-source intelligence confirmed the fraud, leading to summary dismissal, successful defence of an unfair dismissal claim, and recovery of losses through civil proceedings.

The Situation

The client employed around 120 staff across three distribution centres. One of their senior warehouse managers had been on sick leave for nine months, citing a back injury sustained at work. The employee had provided regular GP fit notes confirming he was unfit for any work involving lifting, standing for long periods, or driving.

The company had been supportive throughout the absence. They continued paying statutory sick pay, kept the employee’s role open, and offered phased return options that were repeatedly declined. The occupational health referral suggested the employee was genuinely incapacitated and unlikely to return to full duties within the next six months.

Suspicion arose when a sales manager mentioned that two former clients had moved their business to a small delivery operation that appeared to have started up around the time the warehouse manager went on leave. The company name was different, but when the managing director looked at the new competitor’s website, the phone number listed was a mobile he recognised as belonging to the absent employee’s wife.

The Challenge

Sick leave fraud investigations require careful handling. Employment law in the UK protects employees who are genuinely ill, and an employer who acts on suspicion alone risks unfair dismissal claims, disability discrimination allegations, and reputational damage. The company needed clear, documented evidence that the employee was physically capable of working and was actively running a competing business during the period he claimed to be incapacitated.

The evidence also needed to be gathered lawfully. Surveillance of an employee on sick leave is permitted under UK law provided it is proportionate, necessary, and conducted in accordance with data protection requirements. But it must be targeted and justified, not speculative or invasive.

Additionally, the company needed to establish whether the employee had breached his contractual non-compete clause and whether client data or proprietary information had been misused to set up the rival operation.

The Approach

UKPI designed a two-track investigation combining physical surveillance with open-source intelligence gathering.

Open-source intelligence. Before any surveillance was deployed, our team conducted a thorough open-source investigation into the competing delivery business. Companies House records showed it had been incorporated eight weeks before the employee’s sick leave began, with the employee’s wife listed as sole director. The registered address was the family home. Social media accounts for the business showed photographs of delivery vehicles, warehouse activity, and the employee himself loading pallets, carrying boxes, and driving a transit van. Several of these posts were dated during months when his GP had certified him as unable to work.

LinkedIn showed the employee had updated his profile to describe himself as “Director” of the new company, though he had set the start date to a future month, presumably to provide cover if challenged.

Physical surveillance. Over three separate days across two weeks, UKPI operatives observed the employee at the competing business premises, a small industrial unit roughly four miles from one of the client’s distribution centres. On the first day, the employee was seen arriving at 7:15 am, loading a vehicle, and driving to make deliveries until mid-afternoon. On the second day, he was observed carrying heavy boxes without apparent difficulty, supervising two other workers, and meeting with what appeared to be a client at a cafe near the unit. On the third day, the operative documented him unloading a pallet from a tail-lift vehicle, an activity directly contradicting his claimed inability to lift or stand for extended periods.

All observations were documented with timestamped video footage and photographs, with a detailed log of locations, times, activities, and vehicle registration numbers.

Client crossover analysis. Working with the sales team, UKPI mapped the clients who had left the company around the time the employee went on leave. Five of the seven clients who had moved their business were accounts the warehouse manager had managed directly. One former client, when contacted by the sales team as part of a routine retention exercise, mentioned that the warehouse manager had called them personally to recommend the new service, telling them he had “left the company to set up on his own.”

The Outcome

The evidence pack was presented to the company’s employment solicitor, who confirmed it was sufficient to support summary dismissal for gross misconduct. The employee was invited to a disciplinary hearing with full disclosure of the evidence. He attended with a union representative, denied everything initially, then changed his position when shown the surveillance footage and his own social media posts.

He was dismissed for gross misconduct on three grounds: fraudulent misrepresentation of his medical condition, breach of contract by operating a competing business while employed, and misuse of confidential client information.

The former employee filed an unfair dismissal claim with the employment tribunal. The company’s solicitor used the UKPI evidence pack to defend the claim. The tribunal found the dismissal was fair, the investigation was proportionate, and the evidence was convincing. The claim was dismissed.

The company then pursued a civil claim for breach of the restrictive covenant in the employee’s contract and for losses resulting from the diversion of clients. The matter settled out of court for an undisclosed sum.

The Lessons

This case highlights several points that UK employers should consider when dealing with suspected sick leave fraud:

Social media is often the first indicator. Employees who are running side businesses during sick leave frequently cannot resist promoting them online. In this case, the employee’s own posts provided some of the strongest evidence against him. Employers should include social media monitoring as part of any absence management review, conducted within GDPR guidelines.

Surveillance must be proportionate. UKPI deployed surveillance only after open-source evidence had established a reasonable basis for suspicion. Starting with social media and company records meant the surveillance phase was targeted and justified, which proved important when the evidence was tested at tribunal.

Contractual protections only work if enforced. The employee’s contract contained a non-compete clause and confidentiality obligations. Without investigation and enforcement, these clauses would have been meaningless. Businesses should review their contracts regularly and be prepared to enforce them when breaches occur.

Early intervention saves money. By the time the investigation concluded, the employee had been on sick leave for eleven months. Earlier investigation, triggered when the first client departed, would have shortened the period of fraudulent absence and reduced the losses from diverted business.

External investigation protects the employer. An internal investigation conducted by HR or a line manager would have lacked the professional surveillance capability, the forensic social media analysis, and the court-ready documentation that an external firm provides. At tribunal, the independence and professionalism of the investigation process was noted positively by the panel.

If you suspect an employee of sick leave fraud or believe a staff member is breaching their contract, call UKPI on 0800 043 1754 for a confidential consultation. Our employee investigation service is designed to gather evidence that stands up at tribunal and protects your position as an employer.