Employee entitled to long-term disability benefits after TUPE transfer
02 October 2019
The Employment Appeal Tribunal (“EAT”) concluded in a recent case that, following a TUPE transfer, an employee who was unfairly dismissed and suffered disability discrimination was entitled to compensation on the basis he would have been entitled to long-term disability benefits until death or retirement, had he not been dismissed.
Facts of the case
Mr Visram began working as a security agent with American Airlines at Heathrow Airport in 1992. He had a contractual right to benefits provided under a long-term disability benefits plan (“LTDB Plan”). This was funded by an insurance policy between American Airlines and Legal & General Insurance.
Under the terms of the LTDB Plan, once Mr Visram had been on sick leave for 26 weeks, he would be entitled to benefit under the policy until “the earlier date of your return to work, death or retirement”. The LTDB Plan went on to state:
- A member would be entitled to benefit for as long as they were considered a “disabled member”. This was defined as a member who was “incapacitated by an illness or injury which prevents him from performing his own occupation”.
- “His own occupation” was defined as “the essential duties required of the [member] in his occupation” at the relevant time.
In October 2012, Mr Visram went on sick leave with work-related stress and depression. Two months later, his employment transferred under TUPE to ICTS (UK) Ltd (“ICTS”).
When Mr Visram did not begin to receive any benefits under the LTDB Plan after 26 weeks, he submitted a grievance to ICTS. This prompted negotiations between ICTS and the insurer, following which ICTS wrote to Mr Visram confirming that the insurer had agreed to reinstate his full benefits. In fact, the insurer had only agreed to pay the benefits for one year. After this period, in September 2014, Mr Visram was dismissed on grounds of capability. He brought claims for unfair dismissal and disability discrimination, which were upheld by an Employment Tribunal (“ET”).
So far as TUPE was concerned, regulation 4 provides that employees transfer to the new employer on their existing terms and conditions. This would include any contractual benefits, such as permanent health insurance (“PHI”) or disability benefits. Mr Visram’s right to long-term disability benefits had therefore automatically transferred.
At the remedies hearing, the ET awarded Mr Visram compensation on the basis that the benefits to which he was entitled would have continued until death or retirement. In making this finding, the ET accepted that Mr Visram was entitled to benefits until the earlier date of his return to his original job with ICTS, death or retirement. It rejected ICTS’s argument that his entitlement would cease when he was able to return to any full-time suitable work.
The EAT dismissed ICTS’s appeal. Ultimately, its judgment came down to how the words “return to work” in the LTDB Plan should be interpreted. The EAT concluded that this phrase meant going back to work for the original employer for whom Mr Visram remained an employee (i.e. ICTS). It also ruled that the ET had been entitled to conclude, based on the LTDB Plan’s definition of “disabled member”, that the wording meant returning to the work performed at the time Mr Visram went off sick.
When entitlement to PHI or long-term disability benefits transfer under TUPE, this often leaves a practical question about what happens with the insurance policy. As the transferor will no longer be a party to the scheme, the new employer is often left with two options: set up a new policy, or renegotiate the existing terms.
Although the EAT’s decision largely came down to its reading of the specific LTDB Plan, it provides a useful reminder that, when renegotiating terms following a TUPE transfer, the transferee employer should be careful that benefits are completely replicated.
ICTS (UK) Ltd v Visram UKEAT/0133/18 – judgment available here