PHI: Dismissed employee was entitled to compensation for his PHI benefits until hes death or retirement age
Published 13 May 2019
The EAT has held that an employee would have been entitled to PHI benefits until death or retirement had he not been dismissed, on the basis that he would not have been able to return to the same work he had been doing before his sickness absence.
Mr Visram was originally employed by American Airlines. Under the terms of his contract, he was entitled to long term disability benefits under a disability plan. These benefits were funded by an insurance policy and were conditional on him remaining employed by the employer. The details of the plan were set out in an explanatory booklet that provided that he was entitled to two thirds of his salary if he was absent for work due to sickness for longer than 26 weeks and that the benefits would continue until the earlier of his return to work, his death or his retirement.
In October 2012, Mr Visram went on sick leave. Soon after, his employment transferred to ICTS (UK) Ltd under TUPE. After 26 weeks on sick leave, he expected to receive the long-term disability benefits. However, this did not happen, and he raised a grievance. ICTS and the insurer reached agreement that the insurer would pay those benefits for a finite amount of time. When this finite period expired, Mr Visram ceased to receive the benefits and was dismissed on the grounds of capability. He brought successful claims for unfair dismissal and disability discrimination.
At the remedy hearing, ICTS argued that his entitlement should cease when he was able to return to any full-time suitable work, but the tribunal rejected this argument. The tribunal held that Mr Visram was contractually entitled to the long-term disability benefits until his return to his original job with ICTS, death or retirement. As the medical evidence showed that Mr Visram would be unable to return to his job of security agent, the tribunal awarded compensation on the basis of loss of benefits until retirement or earlier death.
ICTS appealed to the EAT. It argued that the tribunal had misconstrued the relevant contractual documentation. It argued that the words in the explanatory booklet “return to work” meant return to any suitable work that Mr Visram was able to carry out, whether for ICTS or for another employer. The EAT however held that the words “return to work” mean “going back” to the original employer – i.e. to ICTS.
The EAT said, however, that it was not clear from the explanatory booklet what work Mr Visram had to return to in order to lose his entitlement to the benefits. Was this the work he was doing when his sick leave began, or did it mean a return to any suitable full-time remunerative work at ICTS? To resolve the ambiguity, the tribunal had referred to the wording of the insurance policy under which the benefits were funded. The wording of the insurance policy provide that insured members are only entitled to benefits as long as they are a “Disabled Member”. “Disabled Member” is defined as an insured member who is “incapacitated by an illness or injury which prevents him from performing his own occupation”, and “own occupation” is the occupation immediately before the employee goes on sickness absence.
Given this wording, the employment tribunal had been entitled to award compensation on the basis of loss of benefits until retirement or earlier death.
What does this mean for employers?
Employers who are considering the dismissal of employees who are receiving long term sickness related benefits should be aware of the risk that any compensation awarded for the dismissal may include compensation for the loss of such benefits. In assessing this risk and the possible level of compensation, employers should look closely at the wording of the employee’s contract of employment and any documents governing the provision of the benefits.
The facts of this case arose because there was a TUPE transfer and ICTS’ insurers did not accept the employee on to their permanent healthcare insurance leaving ICTS facing paying for the benefit themselves. It is important that clauses in employment contracts which give the benefit of permanent health insurance make it clear that the benefit is insurance backed, and there is no obligation on the employer to provide the benefit if the insurer declines to provide the cover.
ICTS (UK) Ltd v Visram (Rev 1)