The Practical Lawyer


Disability payments – no right to dismiss

There is an implied term in a contract of employment that an employee will not be dismissed for incapacity while on long-term disability benefit.

An employee was signed off with depression and continued to receive two-thirds of his salary under his employer’s disability benefit plan. Following a TUPE transfer, the existing insurer refused to provide ongoing cover to new employees and the new insurer would not cover employees who were already off sick. The employee was dismissed when the original insurer refused to provide further benefits.

The ET rejected his claim that his dismissal was unfair. However, the EAT overturned this. They found that the employee was contractually entitled to long-term disability benefits until his return to work, death or retirement. His contract of employment did not state that his eligibility to disability benefits was subject to the policy provisions or to payment by the insurer.

The fact that the insurer had withdrawn cover did not alter the employee’s ongoing entitlement under his contract of employment. The point of providing a disability benefit would be defeated if an employer dismissed an employee as soon as they became unfit to work.

Employers should review employment contracts if they wish them to be in line with any insurance benefits offered to employees. See article in [2019] 197 Employment Law Journal 3 and Awan v ICTS UK Ltd [2018] UKEAT/0087/18/2311.


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