Dismissal and long-term disability

  • David Harris
  • Wednesday, January 23rd, 2019

Following a recent Employment Appeal Tribunal (EAT) judgment employers now need to be wary of dismissing employees for incapacity if they are entitled to long term disability benefits. This is due to an EAT ruling 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.” However, this may depend upon the wording of the employee’s contract of employment. Find out more about this case and ruling here.

The Employment Appeal Tribunal (EAT) in Awan v ICTS was recently tasked with deciding whether the Employment Tribunal was correct in finding that it is a fair and/or proportionate means of achieving a legitimate aim (under s 15 Equality Act 2010) for an employer to dismiss an employee by reason of permanent incapability at a time when an entitlement to long term disability benefits (whether or not under an insurance policy) has accrued or is accruing.

The Employment Tribunal also notably held (amongst other things) that there was no implied term preventing an employer from dismissing an employee for incapability whilst he or she was entitled to receive such benefits and that the employer acted reasonably in dismissing the employee for incapacity so that his dismissal was fair.

The employee in this case appealed those conclusions, contending, amongst other things, that the Employment Tribunal was wrong in finding that there was no such implied term and the EAT allowed the appeal.

The EAT felt that 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.” This is due to the fact that the term is capable of clear expression, is reasonable in the circumstances and seeks to limit, not contradict the express contractual right that the employer had to terminate on notice. It was felt that if such a term was not implied it would run contrary to the functioning of the long-term disability plan and to its purpose.

This means that whilst there may be an express term in the employee’s contract stating that the employer has a right to terminate his employment on notice, this is a limited right if it would frustrate that employee’s entitlement to long term disability benefits.
It should be noted that dismissal in breach of contract is not necessarily unfair but the contractual position here, which includes the above-mentioned implied term, was very relevant. This is because it formed part of the circumstances a court had to look at when considering the reasonableness of an employer’s actions.

Based on the above, it is understandable why the EAT remitted this case back to an employment tribunal to determine the question of whether the dismissal was fair or unfair and whether it was justified, as the judgment was based on an incorrect conclusion i.e. that there was no such implied term.

Author
David Harris, Managing Partner & Founder
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