Employee’s Dismissal While Entitled To Long-Term Disability Benefit Ruled A Breach Of Implied Term.
In Awan v ICTS UK Ltd UKEAT/0087/18, the Employment Appeal Tribunal (AT) held that the Employment Tribunal (ET) erred in deciding an employer had not breached an implied contractual term when dismissing an employee while he was entitled to long-term disability benefit.
The Appellant, Mr Awan, was employed as a security agent for American Airlines at Heathrow airport. His employment contract provided that he was entitled to six months full sick pay and if still on sick leave after that time, would benefit from a long-term disability benefit plan which would pay two-thirds of his base annual salary (less any State disability benefits) until the earlier of his return to work, retirement, or death. The contract also contained a clause entitling his employer to dismiss on notice.
American Airlines had an insurance policy which provided long-term disability benefits to its employees. The policy provided that the insured member would be entitled to benefits under the policy only if they stayed employed by the company. Mr Awan was subsequently signed off sick for depression in 2012 and did not return to work. His employment was transferred under TUPE to ICTS UK Ltd when American Airlines outsourced its security department to them. ICTS used a new insurer, which refused to cover Mr Awan. Legal & General, the previous insurer also refused to provide cover to Mr Awan, but later agreed to cover him until September 2014 as a gesture of goodwill. ICTS wrote to Mr Awan, stating it believed the original insurer was obliged to continue making payments. They stated they would, without prejudice or an admission of liability, continue to pay the benefit until the matter was sorted.
On 28 November 2014, Mr Awan’s employment was terminated. He brought employment tribunal proceedings claiming that his dismissal while he was entitled to long-term disability benefits was unfair and discrimination arising from disability.
The ET held there was no implied term in Mr Awan’s contract which prevented ICTS from dismissing him for incapability. This was despite the fact the company was obliged to pay him benefits whilst he was employed. In addition, Mr Awan’s dismissal was a proportionate means of achieving a legitimate aim so there was no unlawful discrimination arising from disability.
The EAT disagreed with the ET, stating the dismissal did in fact breach an implied term in Mr Awan’s contract. The reasoning was that Mr Awan was contractually entitled to receive two-thirds of his salary after 26 weeks of sick leave. His contract did not refer to an insurance policy or state that his entitlement to disability benefits was dependent on the rules of an insurance policy or the rules of a particular insurance provider. Therefore, the ET’s findings that the dismissal was fair and proportionate could not stand. The findings were duly set aside and the questions remitted back to the ET.
This case confirms the position in the previous authorities that an employer cannot dismiss an employee for incapacity where they are contractually entitled to long-term disability benefits or income protection insurance (PHI). Employers are advised to review contracts to ensure that any offer of continued payments in the event of ill-health is suitably caveated, which will generally mean offering access to an appropriate insurance product, rather than a guarantee of continuing payments. Employers gaining new employees through a TUPE process should ensure visibility of an incoming employees who may be in this position and, where possible, ensure that appropriate commitments are undertaken by the transferring employer with regard to any on-going costs.