Permanent Health Insurance – Employers beware

Category: Employment

A look at the case of Awan v ICTS UK Limited.

Mr Awan was employed by an airline at Heathrow working in security. He was contractually entitled to six months’ sick pay. If he was unable to work due to sickness or injury, he was also entitled to two thirds of his salary until he returned to work, retired or died; a long-term disability plan or permanent health insurance (PHI). This benefit was provided via an insurance policy taken out by the airline.

What happened Next?

The airline decided to outsource security. Two months later in October 2012, Mr Awan became too ill to work due to depression. Two months later, in December 2012, he was TUPEd to ICTS.


ICTS had an insurer who provided the same PHI benefits as the airline. However, their insurer would not cover Mr Awan or anyone else already on sick leave.


Somewhat surprisingly the airline’s insurer agreed, as a gesture of goodwill, until September 2014 when they stopped paying. Mr Awan was still too ill to return to work; So in November 2014, ICTS dismissed him for lack of capability in accordance with their right to give him contractual notice at any time under his contract.

The ET rejected his claim of unfair dismissal and disability discrimination. They noted that his continued employment would have caused ICTS operational difficulties.

The EAT reversed that decision. The right to give notice in the contract of employment at any time was contradictory to Mr Awan’s right to be paid when he was not able to work until he got better, retired or died.


The EAT implied a term into Mr Awan’s contract that “once the employee became entitled to payment of disability income…the employer will not dismiss him on the grounds of his continuing incapacity to work”.


The EAT noted that the whole purpose of PHI or other disability schemes would be defeated if an employer could end entitlements under such a scheme by dismissing employees when they became unfit for work. Whether an employer has a right to do so is a matter of construction of the particular contract of employment.


Key points:

Employers who offer PHI or long-term disability benefit plans should be made aware of all the implications of such an attractive benefit. If an employer, despite offering PHI or long-term disability benefit wants to have the right to be able to terminate an employee’s contract when that employee is or might be entitled to benefits then the contract must be very explicit in terms of giving the employer the right to terminate in such a situation.