14 November 2012

Can an employee dismissed for ill health sue for damages if he thereby loses benefits under a PHI policy?

Not on the facts in Lloyd v BCQ Ltd, said the Employment Appeal Tribunal (EAT).

Daniel Barnett’s Employment Law Bulletin reports:

Mr Lloyd was dismissed because of ill health. One of his claims was that this was in breach of an implied term that the employer would not dismiss him if this had the effect of removing his entitlement to PHI benefit.

In Aspden v Webb's Poultry and Meat (Holdings) Ltd Sedley J (as he then was) held that there was a term implied into the employee's contract that, notwithstanding an express term allowing for termination for prolonged sickness, this would not be exercised if it had the effect of depriving him of his PHI benefit in the absence of any fundamental breach by him. In Reda and another v Flag Ltd however, the Privy Council explained that Aspden was a case with special facts. On the evidence it was found that it had never been the employer's intention to exercise its contractual right of dismissal where to do so would frustrate the employee's entitlement to income replacement insurance. In Lloyd, however, no such background existed. And Mr Lloyd's contract contained an "entire agreement" clause. This was an express term and there was no scope for the implication of a term which contradicted it.

In the alternative, the EAT held that if it were, in a given case, appropriate to imply a term restraining the exercise of the power of dismissal in this context, this could only be actioned where (per the Court of Appeal's view in Briscoe v Lubrizol) the dismissal was "without reasonable and proper cause". In this case, dismissal was for good cause because of the claimant's absence from work and lack of prospect of returning to work.

Finally, in the event, Mr Lloyd had no claim as he received the equivalent of the PHI benefit and had suffered no loss.