In the case of Amdocs Systems Group Ltd v Langton UKEAT/0093/20 and UKEAT/0210/20, Mr Langton was originally employed by Cramer Systems Ltd (Cramer) from 2003. He received an offer letter, a summary of benefits and a contract of service. The offer letter and the summary of benefits set out the terms of a long-term sickness absence scheme and the level of income protection payments (IPP) payable under it. These included reference to an 'escalator' of 5% per annum which would apply after the first 52 weeks. Cramer had insurance cover in respect of its obligation to pay IPP, which included the escalator. The contract of service expressly incorporated the terms of the offer letter and summary of benefits.
Amdocs Systems Group Ltd (ASG) acquired Cramer in 2006 and Cramer's employees transferred to ASG under TUPE. In 2007, an ASG HR representative gave a presentation in which they stated that the IPP provision would not be affected following the TUPE transfer and this was confirmed in a subsequent letter. Mr Langton also signed a form confirming that he wished to participate in ASG's income protection scheme.
In June 2009 he began a period of long-term sickness absence. From November 2009 he began to receive IPP, paid through PAYE. In November 2016 Mr Langton was informed by ASG that the escalator had not been applied and would not be applied going forward. Mr Langton was informed that he was not entitled to access the escalator as it had ceased to be part of the IPP scheme in 2008, and he had not begun to claim under the scheme until November 2009.
In 2018, Mr Langton presented a claim to the employment tribunal for unlawful deduction from wages relating to the failure to pay the escalator. The tribunal held that Mr Langton was contractually entitled to have the escalator applied in the calculation of the IPP. As the insurance put in place by ASG did not cover the escalator, the ET's decision meant that the company would be liable for the difference between what the insurance policy paid out and what Mr Langton was entitled to under his contract of employment.
The Employment Appeal Tribunal dismissed ASG's appeal. It held that the offer letter and summary of benefits were contractually binding as they were incorporated into Mr Langton's contract of employment.
The EAT did not accept that the wording in the summary of benefits: "the operation of both schemes is governed by the terms of the group policies and nothing will override the terms of that document", limited ASG's obligations to make payments to the level of Mr Langton's entitlement under the insurance policy. Mr Langton had not been given a copy of the insurance policy terms or any other document which set out the specifics of those terms. The EAT stated that if ASG wanted its obligations to be limited to anything paid out under the insurance policy it should have taken further steps to bring that particular term to Mr Langton's attention. The general wording in the summary of benefits was not sufficient.
This EAT decision is a useful reminder that when describing insurance backed benefits, the contract of employment should be clear and not promise more than any underlying insurance policy will deliver.
It also highlights the importance of due diligence when purchasing a business.