The Employment Appeal Tribunal (EAT) held in Awan v ICTS UK Ltd that, if an employee is entitled to the benefits of a long-term disability plan under the employer’s insurance policy, a term should be implied into their contract that the employer could not dismiss them because they were unable to work once they had become entitled to the disability income due under the plan.
Mr Awan, a security co-ordinator for American Airlines (AA), was contractually entitled to long-term disability benefits under a policy with Legal & General as long as he remained in AA’s employment. On 14 October 2012 he was certified unfit to work because of depression. His employment then transferred to ICTS under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) on 1 December that year.
As ICTS was not able to agree the transfer of the Legal & General policy, it arranged a new policy for the provision of long-term disability benefits with Canada Life, but which excluded people already on sick leave (such as Mr Awan). Although Legal & General initially refused to provide him with cover on the basis that he was no longer an AA employee by the time he became eligible for long-term disability benefits, it agreed to cover him as a goodwill gesture until September 2014.
Mr Awan remained off work until his employment was terminated two years later on grounds of medical capability. He claimed that dismissal while he was entitled to long-term disability benefits was unfair and was also an act of unlawful discrimination because of something arising from his disability.
The tribunal held that although ICTS was contractually obliged to pay Mr Awan long-term disability benefits while he remained employed, there was no implied term in his contract preventing the company from dismissing him for incapability during the time he was entitled to receive them.
As the company had acted reasonably when it dismissed him for medical capability, the dismissal was fair. In addition it was a proportionate means (Mr Awan had been absent for two years) of achieving a legitimate aim (ensuring employees attend work) so that there was no unlawful disability discrimination under section 15 of the Equality Act
Mr Awan appealed, arguing that the tribunal was wrong to find that there was no implied term in his contract preventing the company from dismissing him while he was still receiving disability benefits.
Allowing the appeal, the EAT held that it did not make sense to allow the company to exercise its contractual right to dismiss Mr Awan for ill-health capability, if it meant he would be denied the benefits to which he was entitled under the insurance plan.
It was, therefore, appropriate to imply a contractual term that the employer would not dismiss the employee because they were unable to work once they had become entitled to the disability income due under the long-term disability plan. Such a term would limit the right of the employer to terminate on notice where termination would frustrate the employee’s entitlement to long-term disability benefits.
In terms of whether his dismissal was fair or unfair and whether it was justified, the EAT remitted these questions to a fresh tribunal for them to reconsider.