Pioneer Technology (UK) Ltd. v Jowitt

A contractual long-term disability benefit is not made conditional on the employer’s insurance recovery unless the contract clearly incorporates the insurance policy. A handbook promise of income while an employee is unable to work may therefore create a free-standing and enforceable obligation.

In this context, inability to work does not mean inability to perform the employee’s former job. Nor does it require incapacity for every purposeful activity. It means that there is no continuous, remunerative, full-time work which the employee can realistically be expected to do. Whether that standard is met is a question of fact.

The employee, an electronics technician, became permanently unable to resume his former job after a cervical injury. His contract incorporated a handbook providing long-term disability income for permanent and established staff who were unable to work.

The employer’s insurer refused continuing cover because it considered that the employee retained capacity for some employment. The Employment Tribunal dismissed the employee’s unauthorised-deduction claim, holding that the handbook benefit was limited by the insurance policy. The Employment Appeal Tribunal reversed that decision and held that inability to work meant inability to do the employee’s former job.

The employer appealed. The central issues were whether the insurance policy was incorporated into the employment contract and the proper construction of inability to work in the handbook clause.

The appeal was allowed unanimously. Lord Justice Sedley gave the judgment, with which Lord Justice Kay and the Vice-Chancellor agreed.

1. The handbook clause created a contractual entitlement independent of the employer’s insurance policy. It stated that the employer ran a scheme and specified both the amount and duration of the payment. It neither referred to the policy nor incorporated its terms. The employee did not know of the policy or its terms. The clause was sufficiently certain to operate, even though some subsidiary details would require construction against the contractual background. The reasoning was consistent with Briscoe v Lubrizol [2002] IRLR 607.

2. The Employment Appeal Tribunal had erred in construing inability to work as inability to perform the former job. Elsewhere, the handbook expressly addressed employees unable to pursue their normal job but capable of alternative work. That contrasting language showed that clause 5.3 was not confined to the pre-injury occupation. Sargent v GRE (UK) Ltd was distinguishable because its wording and context led to a different construction.

3. Inability to work did not require incapacity for every purposeful activity. An employee satisfied clause 5.3 where there was no continuous, remunerative, full-time work which he could realistically be expected to do. The clause protected employees so disabled that they could neither be found alternative work within the organisation nor realistically obtain work elsewhere. The court compared Walton v Airtours [2003] IRLR 161.

4. The available medical material did not resolve that factual question. The employer was not estopped by its earlier position taken against its insurer from contesting the extent of the employee’s disability. The outstanding question was remitted to the Employment Tribunal for determination. Costs of the appeal were to be paid by the unsuccessful party before that tribunal.

• Court of Appeal (Civil Division) — [2003] EWCA Civ 411: allowed the employer’s appeal to the extent of remitting the factual issue of inability to work to the Employment Tribunal.
• Employment Appeal Tribunal — judgment given on 18 July 2002: reversed the Employment Tribunal, holding that the handbook obligation was free-standing and that inability to work meant inability to continue in the former job.
• Employment Tribunal (Leeds) — 30 January 2001: dismissed the employee’s claim after accepting that the insurance policy limited the handbook entitlement.