Carol McMahon v AXA ICAS Ltd

Payments promised under an employer’s permanent health insurance scheme may be wages where the contractual documents create a direct employer obligation to pay benefit. The employer’s insurance arrangements may secure that obligation without limiting it to procuring insurance.

Such payments are wages only while the contract of employment subsists. A dismissal in breach of an implied PHI term gives a claim in damages; it does not preserve an ongoing contractual wages claim after termination.

A claim should not be struck out as incapable of a fair hearing merely because it concerns historic events. The tribunal must first identify and focus the allegations, then assess on evidence the available witnesses, their recollections, and contemporaneous material.

The claimant, a former employee of the respondent, brought three appeals arising from long-running Employment Tribunal proceedings after her dismissal in 2013.

• A disability discrimination claim had been struck out because a fair hearing was said to be impossible after delay.
• A claim for unlawful deductions under the respondent’s permanent health insurance scheme succeeded for the period of employment. The claimant challenged the calculation of benefit, while the respondent cross-appealed on whether the scheme payments were wages.
• The tribunal refused an amendment seeking PHI payments after dismissal as unlawful deductions from wages.

The central issues were the contractual character and calculation of PHI benefit, whether post-dismissal benefit could be recovered under section 13 of the Employment Rights Act 1996, and when delay justifies strike-out.

1. The first appeal was allowed. A tribunal may recognise from litigation experience that memories fade over time. That does not answer the decisive question: whether the deterioration of evidence is so severe that a fair hearing is no longer possible. Before deciding that question, the tribunal should identify the claimant’s precise case, the witnesses needed to answer it, their recollections, and the relevant contemporaneous material. Here, the agreed deferral of further specification prevented an informed, evidence-based assessment. The strike-out order was set aside and the strike-out application remitted for determination anew.
2. The cross-appeal was refused. The engagement letter, handbook and HR document formed the contract. Properly construed, they obliged the employer to provide PHI payments, rather than merely to obtain and maintain insurance. The references to benefits being paid as salary and being secured by insurance showed that insurance was collateral to the employer’s direct obligation. While employment continued, the payments fell within wages for section 13 of the Employment Rights Act 1996.
3. The third appeal was refused. “Normal earnings” meant basic salary, not additional overtime payments. “Scheme salary” was the basic salary when entitlement first crystallised, not a notional later salary including prospective increases or promotion. However, the contractual 5% annual increase was to be applied to the benefit actually payable at each anniversary, rather than fixed by reference to first-year benefit. As the tribunal had not awarded a specific sum, that issue was remitted for quantum.
4. The second appeal was refused. PHI payments did not survive termination as contractual wages. Even if dismissal breached the implied term relied on, the remedy was damages for breach of contract. The late amendment was therefore correctly refused under the Selkent approach, save for the short pre-termination period which was many years out of time.

• Employment Appeal Tribunal: allowed the appeal against strike-out; refused the two appeals concerning PHI payments and the respondent’s cross-appeal; remitted the strike-out application and quantum under section 13 of the Employment Rights Act 1996.
• Employment Tribunal: struck out the disability discrimination claim for inability to hold a fair hearing; refused the proposed amendment; and determined the deductions claim for the employment period.