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Disability discrimination: When can you dismiss employees on capability grounds when they are entitled to long-term disability benefits?

28 November 2018
Healthcare | DWF
In the case of Awan v ICTS UK Limited (ICTS) the Employment Appeal Tribunal (EAT) has found that the Employment Tribunal had erred in finding that the dismissal of a disabled employee when he was entitled to long-term disability benefits was fair and a proportionate means of achieving a legitimate aim for discrimination purposes.

Facts

Mr Awan commenced employment with American Airlines as a Security Agent at Heathrow Airport on 11 April 1992 and was subsequently promoted in 2005 to International Security Coordinator.  Under his contract of employment he was entitled to both contractual sick pay and the benefit of a long-term disability benefit plan. American Airlines had an insurance policy for the provision of the long-term disability benefits to its employees.  

On 14 October 2012 Mr Awan was certified unfit to work because of depression. On 1 December 2012 Mr Awan's employment transferred to ICTS UK Limited, along with 17 other Lead Security Agents/International Security Coordinators.  Mr Awan's entitlement to income protection transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006.  

There were issues with regard to the insurance cover, with American Airlines' insurer disputing eligibility for cover as Mr Awan was no longer employed by American Airlines when he became eligible for the scheme. Mr Awan was in receipt of contractual sick pay at the time of transfer and only became eligible for the scheme after he had been employed by ICTS for some months. ICTS could not seek cover with their new provider for people who were already on sick leave.

Mr Awan remained on sick leave until the termination of his employment on 26 November 2014 on the grounds of medical capability.  Mr Awan brought claims of unfair dismissal and unlawful discrimination because of something arising from his disability, namely the absence related dismissal. 

The Employment Tribunal

The Employment Tribunal rejected Mr Awan's claims and found that ICTS had acted reasonably in dismissing Mr Awan and that his dismissal was a proportionate means of achieving a legitimate aim.  The Tribunal also rejected Mr Awan's argument that there was an implied term preventing ICTS from dismissing Mr Awan for incapability while he was entitled to long-term disability benefits.

The EAT

The EAT allowed the appeal and held that on proper construction of the contract a term can 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". The EAT found that it was contrary to the functioning of the long-term disability plan, to permit ICTS to dismiss Mr Awan so as to deny him the benefits which the scheme envisages will be paid.  

The EAT went on to state that the implied term was reasonable in the particular circumstances and operates to limit (rather than contradict) the express contractual right to terminate on notice.  The limitation merely prevents the exercise of that right in circumstances where it would frustrate altogether the entitlement to long term disability benefits expressly provided by the contract. 

Due to the Employment Tribunal's failure to recognise the implied term the case has been remitted to an Employment Tribunal to consider whether the dismissal was fair and a proportionate means of achieving a legitimate aim for the purpose of the discrimination arising from disability claim. 

Comment 

Employers need to tread carefully when managing an employee who is entitled to long-term disability benefits.  This isn't the first case where a term has been implied preventing dismissal if such a dismissal would limit benefits due under a long-term disability scheme.  Careful contractual wording setting out the clear intentions of the parties is key.  Although each case will be considered on its own facts, the following practical considerations should be taken into account when drafting terms and conditions:

  • Include a clear express term permitting the employer to terminate employment even when this will limit the employee's entitlement to cover.
  • Include a clear express term stating that if the cover is refused by the insurer, the employer's duty is discharged and the employer is under no obligation to continue employment.  
  • Ensure the term entitling the employee to cover does not go any wider than the insurance policy provision.  

On rare occasions the courts have been willing to override an express term with an implied term. However, employers with unambiguous express terms, allowing no room for confusion, will find themselves in the strongest possible position. 

Further Reading

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