A reminder for employers to take care with long term disability benefit offerings

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A reminder for employers to take care with long term disability benefit offerings

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It is a relatively common practice for employers to offer some form of long-term disability benefit to their employees, usually covered by an insurance policy.

However, recent developments have demonstrated that care must be taken when implementing such policies in terms of how they can impact employees and how relevant documents should be drafted.

It has been previously established that dismissing an employee with the benefit of long-term disability cover, or income protection of some form, will likely be unfair (depending on the terms and wording of the scheme). Furthermore, should that employee be disabled under the Equality Act 2010, any decision to dismiss whilst the employee has the benefit of the scheme would amount to direct discrimination.

The question, therefore, is how long such protection may last for. In the recent case of ICTS (UK) Ltd v Mr A Vishram UKEAT/0133/18/BA, the employee was an International Security Co-Ordinator, until he went on sick leave in April 2013 with work-related stress and depression. Mr Vishram was the recipient of long-term disability benefit, which amounted to receiving two thirds of salary once an employee was off for over 26 weeks. In August 2014 Mr Vishram was dismissed for medical capability. The Employment Tribunal found that the dismissal was both unfair and amounted to discrimination. However, the question on appeal related to remedy, and for how long the payment under the scheme should have continued for.

The relevant policy stated that the long-term disability benefit would “continue until the earlier date of your return to work, death or retirement”. Mr Vishram argued that the words “return to work” meant his return to the work of International Security Co-Ordinator with ICTS, which an expert confirmed would not be possible. ICTS argued that the words “return to work” meant the Claimant’s return to any form of work, whether for them or anyone else.

The Employment Appeal Tribunal upheld the view of Mr Vishram and said that the words “return to work” taken in their true sense meant the return to the work that he had been doing prior to his going off sick. This meant the specific role at ICTS and therefore meant that in terms of remedy he was entitled to continue receiving the benefit until that happened, or his death or retirement. As a result, the liability for ICTS was very significant.

The other slight quirk in this case was that the original scheme was put in place by American Airlines, not ICTS, who took on the staff including Mr Vishram as part of an earlier TUPE process. All the more reason to ensure that a thorough due diligence exercise is carried out when acquiring businesses, particularly in relation to policies that may sit deep within lengthy handbooks.

The key lessons for employers to take from this case are firstly to ensure that all policies are clearly drafted, along with the corresponding contractual terms. Terms should be specific and not too broad. Ideally, terms will refer to the cover being subject to the terms of any linked insurance policy in force from time to time, and with the ability for the policy to be brought to an end in the case of other forms of dismissal, such as redundancy. The other lesson is to ensure that a due diligence exercise is always carefully completed when a business is changing hands, so that a new employer understands the full extent of their potential future liability.

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