Case law: Employer cannot dismiss employee if the employee then loses benefits under long-term disability benefits plan

Employers should beware dismissing an employee who would then lose their rights under a long-term disability benefits plan on dismissal, following a recent ruling that a dismissal in those circumstances was unfair.

An airline employee at an airport benefited from an insured, long-term disability benefit plan (a PHI scheme), under which he was entitled to receive a proportion of his salary while unable to work due to injury or ill health, on a long-term basis. Under the plan these benefits would end if the employee’s employment ended.

The employee suffered from depression (a disability) and went on sick leave. In 2012, the airline outsourced the employee’s department to a third party in circumstances where the TUPE rules applied. The TUPE rules are designed to protect employees in certain circumstances – by preserving their jobs and their terms and conditions of employment - when a business or undertaking they work for is transferred from their current employer to a new one. The employee’s benefits under his disability benefit plan therefore continued to apply after the transfer. The employee remained on sick leave and continued to receive payments under the plan.

The new employer then dismissed him on grounds of capability, and he claimed unfair dismissal.

An employer can dismiss a disabled employee for capability if:

• they have been on long-term sick leave;
• the employer has medical advice saying there is no realistic prospect that they will return to work in the medium term;
• a fair process is followed; and
• either the employer does not treat them less favourably because of their disability or, if the employer does, the treatment is justified because it is a proportionate means of achieving a legitimate aim.

The Employment Appeal Tribunal (EAT) ruled that in addition to the above, a term should also be implied into the employment contract of a disabled employee with a long-term disability benefit plan that ‘once the employee has become entitled to payment of disability income due under the long-term disability plan, the employer will not dismiss him on the grounds of his continuing incapacity to work'.

Employers should therefore take that additional factor into account when deciding whether to dismiss a disabled employee for capability, when the employee is entitled under such a plan.

Operative date

• Now

Recommendation

• Employers should beware dismissing an employee who will lose their rights under a long-term disability benefits plan on dismissal, as this may make the dismissal unfair

Case ref: Awan v ICTS UKEAT/0087/18/RN