No Age Discrimination When Employer Stopped Permanent Health Insurance at Age 60
In Smith v Gartner UK Limited, the employer succeeded in striking out a claim of unlawful deduction from wages and age discrimination based on the cessation of permanent health insurance (PHI) benefits at the age of 60 (rather than 65).
However, the decision is not without its critics.
Ms Smith transferred to Gartner in 1996. She received a letter in the same year which set out her terms and conditions, including details of her contractual benefits. It referred to a 'disability plan' and stated: 'All benefits offered are subject to the rules in force at that time… Please note however, that the Company will always endeavour to operate a competitive and attractive package of benefits, but reserves the right to terminate or offer alternative benefits wherever appropriate.'
She also received a guide setting out a 'summary' of benefits, which included the following in respect of PHI: 'Gartner provides Permanent Health Insurance to all employees, subject to your terms and conditions of employment.'
In 2002, Ms Smith went off sick. She started to receive benefits under the PHI scheme in 2003. At that time, Gartner had a compulsory retirement age of 60 and the relevant insurance policy under which the benefits were paid stated that benefits would cease at that age.
Regulations prohibiting age discrimination (unless it could be objectively justified) came into force in 2006, and in 2007 Gartner sent an email to all its employees stating that PHI benefits would increase 'in line with legislation and the Gartner UK pension plan'. Following this, Gartner switched its insurance cover, and the new policy allowed for payments to cease at the age of 65.
Ms Smith continued to claim under the old policy until 2014, when she reached the age of 60. At that time she was informed that payments would cease. She remained in employment but lodged claims for unlawful deductions from wages and age discrimination. She argued that:
- the terms of her contract meant that Gartner was contractually obliged to continue PHI payments once payments from the insurer ceased
- failure to continue payments amounted to age discrimination by Gartner
Her claim was struck out by the Employment Tribunal (ET) following a preliminary hearing as having no reasonable prospects of success. Ms Smith appealed but the Employment Appeal Tribunal saw no error of law in the ET's approach.
Key Points
- The contract of employment and the guide did not place a contractual obligation on Gartner to provide permanent health insurance benefits. The only obligation on Gartner was to obtain insurance.
- The 2007 email did not vary Gartner's contractual obligations to Ms Smith.
- Ceasing to make payments to Ms Smith at the age of 60 was not related to her age but to:
- the terms of the insurance policy in place at the time she started to receive benefits
- the terms of the post 2007 policy which required employees to have been at work immediately prior to making a claim (Ms Smith had not been at work as she was claiming under the old policy)
Best Practice
It is very unusual for discrimination claims to be struck out before all the evidence has been heard at a full hearing. For this reason the lessons to be learnt from this case may be limited.
However, it does emphasise the importance of clear wording in contracts of employment and employee handbooks when describing PHI schemes and the benefits that flow from them. The employer must not be contractually liable to continue benefits if the insurance policy ceases to provide them.
The findings in respect of age discrimination should be treated with some caution. The particular facts of this case mean that certain issues were not looked into in detail, for example whether Gartner had discriminated against Ms Smith in the way it afforded her access benefits and whether the failure to give access to the post 2007 insurance scheme amounted to indirect discrimination (on the basis that older workers were more likely to be in receipt of PHI benefits under the old scheme than younger workers).
Finally, whilst not relevant to this case, it should be noted that under the Equality Act it is not unlawful discrimination for employers to cease to offer benefits (such as life assurance, health insurance and medical insurance) to employees at the point when they reach the age 65 or state pension age (whichever is the greater) if those benefits are arranged through third parties (such as an insurer).