Case law: Permanent Health Insurance benefits ending at a specified age can be age discrimination
Employers whose Permanent Health Insurance (PHI) schemes do not provide the same benefits to employees of all ages should consider reviewing them, or risk age discrimination claims, following a recent legal ruling.
This update was published in Legal Alert - November 2013
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An employee was off work on sick leave and received payments under a PHI scheme provided by his employer. When he reached 55 the payments stopped under the scheme rules. His employer had discussed moving him to another PHI scheme, set up later, that paid benefits until age 65. However, he had not been eligible as the new scheme required him to be in 'active service' - and being off sick meant he failed that test. He successfully claimed direct and indirect age discrimination.
The Employment Tribunal (ET) ruled the employer's failure to make payments was because the scheme's terms linked entitlement to payments to the employee's age. This was direct discrimination.
The employer argued that the less favourable treatment of older employees was a 'proportionate means of achieving a legitimate aim', and therefore the discrimination was legally justified, because it meant the employer could admit as many employees to the PHI scheme as possible, subject to the constraints in the policy.
This argument was rejected. While the ET agreed this could justify the discrimination if it was true, not all of the eligible employees had been offered PHI cover. The ET therefore decided the real reason for the scheme's age limits was to reduce costs, which is not a legitimate aim capable of justifying direct discrimination.
On the issue of indirect age discrimination, the employee successfully argued the terms of the new scheme requiring him to be on active service before he could benefit amounted to a provision, criterion or practice that placed him at a disadvantage compared to younger comparator employees aged 45 and under. He produced evidence showing that more than 92 per cent of those disadvantaged by the terms were over 45.
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