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Long term disability and capability

Mr Awan was employed as a Security Agent at Heathrow Airport. His contract of employment entitled him to both contractual sick pay and a long term disability benefit plan. Mr Awan was on sick leave by reason of depression for over 2 years and in that time had his employment transferred from one employer to another along with the insurance policy under which he received his long-term disability payments.

After various meetings and treatment methods Mr Awan claimed he would not be able to return to work unless his employer or insurance provider paid for further treatment. They disagreed and terminated Mr Awan’s employment on the grounds of incapability.

Was Mr Awan unfairly dismissed and subjected to disability discrimination?

Awan v ICTS UK Limited

Mr. Awan was employed with American Airlines at Heathrow Airport as a security agent. His contract of employment entitled him to both contractual sick pay and a long term disability benefit plan. American Airlines had an insurance policy with Legal & General for this provision of long term disability benefits. The policy provided that employees would be entitled to the benefits under the policy only as long as they were incapacitated by illness or injury, continued to be in employment and did not engage in any other occupation. The policy also dictated that the insurance cover would terminate immediately in the event that the employee ceased to work for the employer.

To save costs, American Airlines outsourced its Security department and Mr Awan transferred to ICTS UK Ltd (ICTS) under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). He was told that his existing terms and conditions of employment would remain protected.

Mr Awan went on sick leave by reason of depression and was certified as unfit for work for 2 years, until his termination. During his absence the transfer of his employment took place. At the time Mr Awan became ill he was an employee of American Airlines and he was entitled to 26 weeks’ full contractual sick pay. By the time he had exhausted this he had been employed by ICTS for some months. Mr Awan believed that those who were sick prior to the transfer were covered by the Legal & General policy; however, ICTS never reached an agreement with Legal & General to transfer the policy and so sourced a new insurance provider, Canada Life, who refused to accept liability for those who were already on sick leave at the commencement of the policy.

Mr Awan raised a grievance and after complaints were issued to Legal & General they agreed to pay his benefits for a limited time. After this time, as a goodwill gesture, ICTS agreed to pay Mr Awan in equivalent payments until the situation could be clarified with the insurance provider.

Mr Awan was invited to a meeting to discuss his employment where he stated that there was no change to his condition and he had not been to see his GP for some months. His trade union rep stated that either his employer or the insurance provider had a contractual obligation to pay for further treatment. They disagreed. Mr Awan was asked if there was anything else that could be done to facilitate his return to work. Mr Awan said he would not be able to return to work until he received further treatment.

ICTS terminated Mr Awan’s employment on the grounds of incapability. They set out that he had had 12 sessions of CBT, a psychiatric evaluation and had been on medication (some of which he had failed to take). He had been recommended further therapy but this would not be funded by either them or their insurance provider. They could see no improvement in Mr Awan’s condition and they had been unable to reach an agreement on any reasonable adjustments. Due to Mr Awan being absent for a period of over 2 years’ they were not able to start looking at a return to work within a reasonable period of time.

Mr Awan brought claims of unfair dismissal and unlawful discrimination arising from his disability due to his entitlement to benefits under the insurance scheme no longer continuing after dismissal.

Decision

In the first instance, an Employment Tribunal found that ICTS acted reasonably and fairly in the circumstances. It held that there was no implied term in Mr Awan’s contract that prevented ICTS from terminating his employment while he was receiving long-term disability benefits and that Mr Awan’s continued employment would have caused ICTS operational difficulties. It concluded that the dismissal was a proportionate means of achieving a legitimate aim, so therefore there could be no unlawful disability discrimination under the Equality Act 2010.

The decision was appealed.

The EAT disagreed with the ET.

It determined that proper construction of the contractual term could be implied to the effect 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.” This therefore had the effect of limiting ICTS’s express contractual right to terminate on notice, as this would have frustrated Mr Awan’s entitlement to long term disability benefits.

Comment

This decision reaffirms the position that an employer should tread carefully when considering dismissal, if it would prejudice a contractual entitlement to any form of income protection or long-term disability benefits, particularly if the employee is disabled for the purposes of the Equality Act 2010. The whole purpose of having a long term disability plan is to provide income for the employee for a set period and so to dismiss them for capability during such period defeats the purpose. In most cases, the employer will not be at a disadvantage because of the benefits as they will be paid for by the insurance company. However, if an employer does want to retain the right to dismiss this must be expressly set out in an employee’s contract. Note that some policies will allow an employee to be dismissed, with the insurance company paying the ex-employee direct from that point. Employers should carefully check the terms of any policy and take advice if they are unsure.

Employers should always check any insurance schemes providing incapacity benefit and any ill-health early retirement options prior to taking any decision to dismiss for long-term ill health.

If you have any queries in relation to long term sickness absence or any other HR queries, please do not hesitate to contact the employment team on 01228 552600 or 01524 548494.

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