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Long-term disability

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Is there an implied term that an employer will not dismiss an employee for incapability if that would thwart entitlement to long-term disability benefits?

Yes, on the facts, held the EAT in Awan v ICTS.

Mr Awan commenced employment with American Airlines as a security agent at Heathrow Airport. His employment contract entitled him to the benefit of an insured long term disability benefit plan. The terms of the plan stated that benefits would terminate in the event the employee was no longer in employment. Mr Awan suffered from depression and went on sick leave. AA then outsourced the security department to ICTS and the employer's obligations under the plan transferred under TUPE.

Mr Awan was then dismissed on account of capability. A tribunal found that there was no impediment to the employer dismissing him while he was entitled to receive benefits. It held ICTS acted reasonably and the dismissal was fair. Finally, the dismissal was a proportionate means of achieving a legitimate aim so that there was no unlawful disability discrimination under the Equality Act 2010.

The EAT disagreed. On a proper construction of the contract, a term should be implied 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." That term operated to limit the express contractual right to terminate on notice if it would frustrate the contractual entitlement to long term disability benefits.

As to unfair dismissal, dismissal in breach of contract is not necessarily unfair. But here the contractual position was "very relevant indeed" as part of the circumstances against which the reasonableness of the employer's actions were to be judged.

Therefore the tribunal's conclusion that the employee's dismissal was fair, and that it was a proportionate means of achieving a legitimate aim, could not stand. These questions were remitted to a fresh tribunal for reconsideration.

Thanks to Dr John McMullen of Wrigleys Solicitors LLP for preparing this case summary.