Awan v ICTS UK Ltd

Where an employment contract provides long-term disability income until return to work, retirement or death, a general contractual power to terminate on notice will ordinarily be limited by an implied term preventing dismissal for continuing incapacity once entitlement to the income has arisen. Otherwise the disability scheme is deprived of meaningful effect.

Dismissal in breach of that term is not automatically unfair. It is, however, a highly relevant circumstance in assessing fairness and proportionality under Equality Act 2010 section 15. A tribunal may not find that dismissal would have occurred in any event without evidence addressing the counterfactual contractual position.

The Claimant, an airport security employee whose employment transferred to the Respondent under TUPE, was absent through depression. His contract incorporated a long-term disability plan. It provided disability income after 26 weeks of incapacity, continuing until return to work, death or retirement.

The Employment Tribunal held that the Respondent had to pay the benefit while the Claimant remained employed, but that its general notice clause permitted dismissal for incapacity. It therefore dismissed claims for unfair dismissal and disability discrimination under section 15 of the Equality Act 2010.

The Claimant appealed. The central issue was whether a term restricting dismissal for continuing incapacity had to be implied so that the contractual disability benefit could operate.

1. Appeal allowed and remitted to a fresh Employment Tribunal. Properly construed, the contract gave the Claimant a direct contractual right to disability income. The employer’s obligation was not contingent upon an insurer paying under a policy. Clause 6 and the incorporated booklet specified the benefit as income treated as normal pay. They did not make payment conditional on insurance cover.

2. The general notice provision and the express entitlement to disability income until return to work, death or retirement were inherently contradictory if the employer could dismiss for incapacity whenever benefits became payable. That construction would allow the employer to extinguish the benefit at will and would frustrate the scheme’s purpose.

3. A term was therefore implied, by either the officious bystander or business efficacy test, that once an employee is entitled to disability income under the plan, the employer will not dismiss the employee because of continuing incapacity. The term limited, rather than contradicted, the express notice power because it prevented its use in circumstances that would wholly defeat the contractual entitlement.

4. The dismissal was accordingly in breach of contract. Breach did not itself decide unfairness, but the implied term was highly relevant to the assessment of reasonableness and to whether dismissal was a proportionate means of achieving a legitimate aim under section 15 of the Equality Act 2010. The Tribunal’s conclusions on those issues could not stand and were remitted.

5. The Tribunal’s finding that the Respondent would have dismissed in any event was unsupported by evidence. The fact that dismissal was not motivated by avoiding benefit payments did not establish what the Respondent would have done had it understood its continuing contractual liability. The Respondent bore the burden of adducing evidence on that counterfactual and had not done so.

6. The Tribunal’s separate finding that continued absence caused operational difficulties was not perverse. There was evidence of difficulties in covering, recruiting and training for the Claimant’s role. The remitted issues were directed to be heard by a fresh Tribunal.

• Employment Appeal Tribunal: Allowed the appeal, substituted a finding that the implied term existed, set aside the findings of fair dismissal and justification, and remitted the specified issues to a fresh Employment Tribunal.
• Employment Tribunal: By a judgment promulgated on 22 November 2017, held that there was no implied restriction on dismissal for incapacity and dismissed the unfair dismissal and section 15 disability-discrimination claims.