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20 December 2018

Can an employer ever dismiss an employee on long term disability benefits?

The recent EAT decision in Awan v ICTS is a reminder of the difficulties faced by employers seeking to dismiss an employee who is absent on long term sickness benefits (normally in the form of permanent health insurance). Employees will often ask the court to imply a term preventing dismissal if it would deprive the employee of benefits to which they would otherwise be entitled. They argue that the employer should not grant those benefits with one hand and then take them away in the very circumstances in which it was intended they should be available.

Since this principle was first established by the courts in 1996 (Aspden v Webb), various exceptions have been carved out enabling employers to dismiss those entitled to long term sickness benefits in limited circumstances, where the reason for the dismissal is not the incapacity itself.  For example for gross misconduct or in a redundancy situation.

In Awan, the employer dismissed Mr Awan for incapacity after two years absence, despite the fact that he had a contractual entitlement to long term sickness benefits. The EAT found that there was an implied term that the employer would not dismiss while he was entitled to these benefits. To do so would mean that the long term sickness benefits clause would be deprived of its substance, and effectively cease to be a be an entitlement at all.

There are however drafting steps employers can take to ensure they retain the broadest flexibility they can. Some points to consider are:

  • Retain the ability to dismiss for incapacity despite the PHI benefits. An express clause in the contract should always override any implied terms, and avoid the difficulties of Awan; 
  • Ensure that within the benefits clause itself, benefits are only payable if the insurance company underpinning the clause accepts the claim; 
  • Reserve the right to withdraw or amend the clause;
  • Consideration must also be given to any potential disability discrimination and unfair dismissal issues if the dismissal of someone on long term absence is being considered.

Once an employee has been accepted on to a long term absence benefits scheme, it will be rare that an employer will consider dismissal. There are however some occasions where it will be appropriate, and provided the contract is well drafted, and a proper procedure followed, this line of cases will not necessarily prohibit dismissal.


For more information please contact Trevor Bettany.

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