Fixed term contracts: Employer did not discriminate when a fixed term employee did not qualify for PHI - DAC Beachcroft

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Fixed term contracts: Employer did not discriminate when a fixed term employee did not qualify for PHI

Published On: 22 October 2014


The employer, Xerox, provided its permanent and fixed term employees with the benefit of PHI. This was provided under the terms of a policy offered by an insurer. The PHI policy provided cover if an employee had been off work for 26 weeks as a result of a qualifying injury, but fixed-term employees could not receive the benefit if their fixed-term contracts expired before the end of the 26 week qualifying period. Xerox's employment contracts provided, among other things, that this benefit was subject to acceptance by the insurer and Xerox was only liable to make payment to the employee if it had been paid by the insurer. Further, Xerox was not obliged to provide any replacement benefit if no payment was made by the insurer.

Mr Hall worked for Xerox under a succession of fixed-term contracts from August 2010. On 12 April 2012, he suffered a work-related hernia. The fixed-term contract he was working under was due to expire on 20 July 2012. Consequently, the insurer refused his claim for PHI. When Mr Hall's fixed term contract was subsequently extended to July 2013 PHI cover was still refused. Mr Hall claimed less favourable treatment under the Fixed-term Employees Regulations 2002 against Xerox.

The tribunal dismissed Mr Hall's claim (by majority decision, the employment judge using his casting vote against the dissenting decision of the lay member). It found that while Mr Hall had been treated less favourably than a comparable permanent employee the less favourable treatment was not caused by an act or omission of Xerox. Rather, it was caused by the insurer who was not acting as Xerox's agent. The lay member of the tribunal disagreed, holding that Xerox had caused the less favourable treatment by failing to take steps to ensure that the policy did not contain terms which might potentially disadvantage fixed-term employees. The employment judge held that, had there been less favourable treatment, it would have been justified as there was no realistic alternative policy available. Xerox was bound by the "apparently universal approach" of insurance providers in relation to fixed-term contracts. The lay member disagreed. Mr Hall appealed against the decision.

The EAT dismissed the appeal and upheld the tribunal's decision. It held that the tribunal had been entitled to conclude that the less favourable treatment was not caused by Xerox. The EAT went on to find that had Xerox caused the less favourable treatment its actions were justified. The judgment suggests Xerox were seeking "to provide employees with PHI at no greater expense than the costs of an annual premium" and the only way this aim could be achieved was through one of the policies on the market, all of which treated fixed term employees in the same way. The EAT also agreed that the insurer could not be regarded as the agent of Xerox.

What this means for employers:

It is important to remember that the PHI policy here did not exclude all fixed term employees. Had it done so it would have been unenforceable. Instead the provisions of the agreement with the insurer meant some fixed term workers were excluded. Employers who offer their employees benefits can take comfort from the fact that they are not necessarily responsible for potentially discriminatory terms in the underlying insurance policies. The tribunal had referred to the employer as "simply the messenger". The decision is also helpful in that it shows that, provided an employer can show there are no more suitable alternatives, the threshold for justifying any less favourable treatment is fairly low.