Employment Law Update - Disability discrimination: long-term disability benefits

18 December 2018

The Employment Appeal Tribunal (EAT) has ruled on whether an individual was fairly dismissed while entitled to long-term disability benefits.

Awan v ICTS UK Ltd, UKEAT/0087/18


The employee, Mr Awan, was on long-term sickness absence with depression. He had a contractual entitlement to a long-term disability benefit plan which would pay two-thirds of his base annual salary until the earlier of his return to work, retirement or death. The policy, with Legal and General, provided that the entitlement would only continue while the individual was employed by American Airlines. 

Following a TUPE transfer to ICTS, the disability benefit was provided by Canada Life but they refused to accept liability for any employees already on sick leave when the policy commenced, including Mr Awan. Legal and General would not continue to pay the benefit on the grounds that Mr Awan was no longer employed by American Airlines. ICTS made equivalent monthly payments to Mr Awan without admission of liability, until the situation could be clarified. It subsequently terminated his employment for capability reasons, on the basis that he had been off sick for over two years and there was no prospect of him returning to work. 

Mr Awan brought claims for unfair dismissal and disability discrimination. The tribunal held that there was no implied term preventing ICTS from dismissing Mr Awan for incapability while he was entitled to receive long-term disability benefits. It was satisfied that the company had acted reasonably in dismissing Mr Awan for incapacity, rejecting his claims for unfair dismissal and discrimination arising from disability.

EAT decision

The EAT has allowed Mr Awan’s appeal, finding that ICTS had acted in breach of an implied term of the contract. His contract did not state that his entitlement to the disability benefit was dependent on the rules of the policy or the rules of a particular insurance provider. There was a contractual obligation on the company to pay the benefits under the disability plan regardless of whether the insurer paid out under the policy or not. In dismissing Mr Awan, the company had acted in breach of an implied term of the contract that it would not dismiss on the grounds of incapacity once the employee became entitled to the payment of the disability benefit. 


This decision highlights the importance of ensuring that the contractual provisions for any type of insurance benefit are very carefully drafted, making it subject to the terms and conditions of the insurance policy and rules imposed by the insurer. It is also important to retain the express right to dismiss an employee who might be in receipt of such benefits, although employers should exercise caution and seek advice before relying on such a provision.

The content of this article is for general information only. For further information please contact Liz Stevens or a member of Birketts' Employment Law Team.

This article is from the December 2018 issue of Employment Law Update, our monthly newsletter on employment legislation and regulation. To download the latest issue, please visit the newsletter section of our website. Law covered as at December 2018.

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