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Disability Benefits to Be Paid by Employer Until Death or Retirement

on Thursday, 18 April 2019.

Employees may be entitled to receive long term disability payments until death or retirement, even if their disability would allow them to work in some capacity.

The Facts of the Case

Mr Visram was employed by American Airlines in 1992, as a security agent, and, as part of his employment, he was entitled to disability benefits under a permanent health insurance (PHI) policy in circumstances where he was absent from and unable to return to work due to long term sickness. In October 2012, Mr Visram was signed off work with work-related stress and depression.

During the time Mr Visram was absent from work, his employment transferred from American Airlines to ICTS Limited (ICTS), under the Transfer of Undertakings (Protection of Employment) Regulation 2006 (TUPE). Pursuant to TUPE, Mr Visram's terms and conditions of employment including his entitlements under the PHI scheme were protected and transferred with him.

In March 2013, Mr Visram attempted to return to work on a part-time basis, but this was unsuccessful. After he had been off work for 26 weeks, Mr Visram was expecting to receive payment in respect of the PHI benefits. When he did not receive the expected PHI payments, he raised a grievance to ICTS. In an attempt to resolve the grievance, ICTS reached an agreement with the PHI provider that they would fund the benefits for one year, until September 2014. When Mr Visram was unable to return to work at the end of this period, ICTS terminated his employment on capability grounds.

The Decision

Mr Visram brought a successful claim against ICTS for unfair dismissal and disability discrimination and, when assessing how much compensation he should receive, ICTS were ordered to pay a sum equivalent to the long-term PHI benefits Mr Visram would have been entitled to receive, until he was able to return to the job he was doing prior to his sick leave or failing that death or retirement. The Tribunal was satisfied that Mr Visram's health was such that he would never be fit to return to the same job he had carried out prior to his absence and therefore compensation was assessed on his loss until his anticipated date of retirement.

ICTS appealed this decision, arguing that Mr Visram should only be entitled to receive the PHI benefits until he was able to work in some capacity, not necessarily the job he had been in previously.

The EAT dismissed the appeal and concluded that "return to work" when read in the context of the PHI Policy meant that Mr Visram would need to be fit to return to the same job he had held previously and, as he was not going to be returning to that job, the Tribunal had not erred in finding that he was entitled to receive compensation in respect of the long-term disability benefits he would have otherwise received until either his death or retirement.

Best Practice

When acquiring a business or winning a new contract to provide services it is important to identify and seek advice on what employee benefits will transfer with the employees you will inherit. In relation to insurance policies to cover the costs of benefits such as PHI, insurers will undoubtedly have their own restrictions in relation to what can transfer. Therefore it is essential that you assess your liability as part of the due diligence exercise and make suitable arrangements to replicate the benefits with another provider post-transfer.


For more information please contact Joanne Oliver in our Employment Law team on 0117 314 5361, or complete the form below.

 

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