Many employers provide employees with the valuable benefits offered by permanent health insurance (PHI).
However, a recent case tested the question of whether or not there is an implied term in a contract of employment that an employee would not have their employment terminated as a means to remove entitlement to payments under a PHI scheme.
The brief facts of the case were that an employee had suffered a back injury in an accident at work. As a result, he was absent from work on long-term sick leave for a period of around 4 years until he was finally dismissed. The employee enjoyed the benefit of PHI but this was not a term of his employment contract which contained an “entire agreement” clause (the effect of which was to limit the contractual rights to those contained within that contract).
Payments were made to the employee under the PHI scheme until August 2010 when the employer negotiated a lump-sum cash settlement with the insurer. This sum was paid to the employee. The employee notified the employer that he felt it unlikely that he would be able to return to work. As a result, the employer went through a consultation with the employee after which they decided to dismiss him due to the length of absence and the probability that he would not be able to return to work in the future.
The employee brought a claim in the tribunal on the basis that (amongst other things) he believed that there was an implied term that his employment would not be terminated in order to remove any entitlement he had to receive payment under the PHI scheme. The employment tribunal dismissed the claim and the employee appealed.
The appeal was also dismissed, confirming the position that the employee’s contract of employment could not be considered to include an implied term that he would not be dismissed whilst he was in receipt of benefits under the PHI scheme. The Employment Appeal Tribunal concluded that any such implied term would not apply unless the employer’s decision to dismiss had been without reasonable and proper cause, which was not the case here.
PHI is a very important benefit for employees. However, it can cause employer’s significant problems where they are unable to terminate the employment of an employee on long-term sick absence because many PHI schemes require employees to remain in employment to receive the benefit of the scheme.
Employers who provide employees with the benefit of PHI cover should therefore ensure that their employment contracts contain an express provision allowing them to make a dismissal in the event of long-term sickness. An entire agreement clause is also a must.