Till death (or retirement) do us part: Entitlement to long-term disability benefits until retirement age or death
In ICTS (UK) Ltd v Visram, the UK Employment Appeal Tribunal upheld a decision of an employment tribunal that a claimant’s entitlement to compensation for future loss of earnings included loss of long-term disability benefits (“LTDB”) until his retirement age or death, as he would never be able to return to the job he had performed prior to his ill health.
The claimant was originally employed by American Airlines as an International Security Co-ordinator. As a term of his employment, he was entitled to payment of two-thirds of his salary (less income received from State Invalidity Pension) after a period of 26 weeks of absence due to illness. The terms of the long-term disability benefits were set out in an Explanatory Booklet, which provided that the benefit would “continue until the earlier date of [his] return to work, death or retirement”. The benefit plan was funded by an insurance policy and any entitlement under the plan was conditional upon the claimant remaining in employment.
The claimant went on sick leave in October 2012 due to work-related stress and depression. Whilst on leave, ICTS acquired American Airlines and the claimant’s role transferred to ICTS under the UK TUPE Regulations.
After 26 weeks of absence, the claimant did not receive the LTDB and raised a grievance. It was accepted that the claimant’s entitlement to long-term disability benefits transferred to ICTS under TUPE and the insurer agreed to pay the long-term disability benefits for a defined period only. The claimant was subsequently dismissed on 14 August 2014 on grounds of medical incapability.
The claimant brought a claim of unfair dismissal and discrimination arising from disability to an UK employment tribunal.
Decision of the UK employment tribunal
The claimant successfully claimed unfair dismissal and disability discrimination before an UK employment tribunal.
Both parties agreed the level of the award for injury to feelings at £14,000. In relation to loss of future loss of earnings, the parties agreed that the claimant would never be medically able to return to the role he had prior to his absence. However, the parties disagreed in their respective interpretations of when the contractual entitlement to long-term disability benefits would end.
The tribunal rejected ICTS’s contention that the claimant’s entitlement to long-term disability benefits ceased when he was able to return to any full-time suitable work and found that the only circumstances under which the claimant would cease to be entitled to the benefits would be upon the earlier of his return to his original job, death or retirement. The tribunal did not specify a sum for future loss of earnings but held that such loss should put the claimant in the position he would have been had the disability discrimination not occurred. The tribunal found that, but for the discriminatory act, the claimant would have continued to be paid long-term disability benefits on a monthly basis until the earlier date of his return to work, death or retirement. The tribunal therefore held that payment of long-term disability benefits should continue to be paid monthly until he could return to work, noting that: “[T]his approach was particularly apposite in view of the indeterminate date upon which the terminating events described above may occur”.
Appeal to the UK Employment Appeals Tribunal
ICTS appealed the decision to the UK Employment Appeal Tribuanl (“UK EAT”) on the basis that it had misinterpreted the meaning of the phrase “return to work” as referenced in the Explanatory Booklet, arguing that the company was only obliged to continue long-term disability benefits until such time as the claimant was capable of returning to any suitable employment.
The UK EAT found that the relevant provision in the Explanatory Booklet was ambiguous and, in those circumstances, it was necessary to construe the clause in its commercial context. The UK EAT examined the terms of the insurance policy referred to in the Explanatory Booklet, which provided that payment of the long-term disability benefits would continue so long as the insured member was a “Disabled Member”. The term “Disabled Member” was defined as an employee who was “incapacitated by an illness or injury which prevents him from performing his own occupation”. The policy defined “own occupation” as the employee’s occupation immediately prior to going on long-term sick leave.
The UK EAT rejected the company’s appeal and found that the proper construction of the claimant’s employment contract meant that he was in fact contractually entitled to long-term disability benefits until he could return to the role he carried out prior to going on sick leave.
Separately, the claimant made a cross-appeal that the tribunal should have also made as award for aggravated damages, or included an additional sum in the amount awarded for injury to feelings, in recognition of the fact that the employer had placed the claimant under surveillance causing stress and anxiety to both him and his family. The UK EAT found that the tribunal had erred by failing to give adequate reasons for not increasing the award for injury to feelings or, alternatively, by failing to consider properly the claim for aggravated damages. The matter was referred back to the tribunal for a decision on quantum.
Advice to employers
This case serves as a warning to employers of the potential cost implications of poorly drafted contracts and policies and the real risk that courts will construe ambiguous provisions in employment contracts in favour of the employee.
The case is an important reminder of the complexity of issues which arise when dealing with employees who are absent from work and availing of income continuance benefits. An employer considering the dismissal of an employee on the grounds of medical incapability should not only consider its obligations under the employment contract and the Employment Equality Acts, but also whether the employee has an implied contractual entitlement to benefits under a long-term disability scheme or is in the waiting/qualification period for same. If so, employers are advised to proceed with extreme caution in moving to dismiss.
The approach of the employee in this case was also of interest, in that he sought to have the lost benefit quantified in damages/compensation by the UK EAT. Of greater potential concern to Irish employers, is whether employees based here might seek to prevent dismissal by way of a High Court injunction application on the basis that the effect of the dismissal would deny the claimant his/her contractual entitlement to such benefits.