The case of Awan v. ICTS UK Ltd [EAT 0087/18] deals with whether it is fair and/or a proportionate means of achieving a legitimate aim for an employer to dismiss an employee by reason of ill-health/capability, when an entitlement to long-term disability benefits has accrued or is accruing.


Awan commenced employment with American Airlines in April 1992.

Awan’s employment contract entitled him to company sick pay, followed by the benefit of a long term disability benefit plan (more usually known as Permanent Health Insurance or PHI) which was provided by Legal & General (“Scheme”).

One the Scheme's criteria was that any entitlements would cease in the event the employee ceased to be employed.

In December 2012 Awan’s employment TUPE transferred to ICTS. In accordance with the TUPE Regulations the benefit of the Scheme also transferred – or at least it was supposed to.

Before the TUPE transfer, in October 2012 Awan became ill with depression and was signed off sick right up to until his eventual dismissal by ICTS in November 2014 for capability/ill-health.

The Scheme

ICTS had sought as part of the proposed TUPE transfer to have the Scheme continue with itself, however discussions with Legal & General had broken down.

As a result, ICTS took out a similar policy with Canada Life in order to meet its future obligations for those employees transferring their employment from American Airlines.

Canada Life refused to provide cover for employees already on sick leave which, of course, included Awan.

Similarly, Legal & General refused to provide cover as its contract was with American Airlines, and by the time Awan’s sick absence triggered an entitlement under the Scheme, he was no longer employed by American Airlines.

Tribunal Proceedings

Awan brought claims for unfair dismissal and disability discrimination.
The Tribunal found that Awan’s dismissal was fair and there was no disability discrimination, as his dismissal was a proportionate means of achieving a legitimate aim.

Importantly, the Tribunal found there was no implied term in Awan’s contract preventing ICTS from dismissing him for incapability while he was potentially entitled to receive ill-health benefits under the Scheme.

Employment Appeal Tribunal (EAT)

The EAT found that by reference to the wording of Awan’s employment contract he had a unambiguous contractual right to the payment of disability benefits by ICTS assuming, of course, that Awan satisfied the eligibility criteria.

It is important to note that the employment contract wasn’t caveated in any way to say that the obligation by ICTS to make payments was subject to payments being received by the company from the insurer. Nor did the employment contract make reference to benefits being subject to any insurance scheme rules.

Referring to a long line of authorities (the most notable perhaps being Aspden v. Webbs Poultry Meat Group (Holdings Ltd) [1996] IRLR 25), the EAT said that an employer who has made a contractual promise to cater for long term incapacity from work by setting up some form of PHI Scheme, would be defeating the whole purpose of providing such a benefit if it could expunge any entitlement by dismissing employees when they become unfit for work. So in essence there was an implied term that the employer would not take any steps to deny an employee such a benefit in the event of incapacity.

Note that this wouldn't affect the employer’s right to dismiss an employee for gross misconduct.  

The Judge commented that if an employer wanted to retain an express right to dismiss an employee for incapacity, despite it providing some form of disability benefit, then the contract would have to be very clearly worded. Even then the Judge doubted the validity of any such express reservation as the Aspden case had previously made clear it wouldn’t work.


This decision doesn't highlight anything new, however it does emphasise two important points for employers who provide PHI benefits.

The first point is to make sure that in the contract of employment any clauses which deal with the provision of PHI benefits are expressed to be subject to any insurance scheme rules (which should be made available to the employee when they join any scheme), and that any obligation to make payments by the employer is strictly conditional upon the employer having first received payments from the insurance company. Employers who offer PHI benefits should always take legal advice in order to obtain the benefit of a clearly drafted clause in the employment contract which offers sufficient protection.

The second point concerns companies (transferees) having to take on the obligation of providing PHI benefits when employees TUPE across. Pre-completion due diligence will obviously identify these benefits, and it is imperative that either the existing insurer agrees to continue providing cover to the transferee under the same terms, or  a new or existing insurer agrees to cover any employees who are off sick.

CONTACT: Christopher Filor
EMAIL: cfilor@filorsolicitors.co.uk   TELEPHONE: 01647 231475
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This publication is not intended to provide legal or other professional advice and should not be relied upon as such. Readers should take legal advice before applying the information contained in this briefing.
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