An insurers' guide to what makes a fair sickness absence ...

An insurers' guide to what makes a fair sickness absence ...

An insurers guide to what makes a fair sickness absence procedure in the work place based on recent case law Jonathan Gray, Partner 24 April 2019 Introduction The insurance sector provides cover for the long term ill health absence of employees and their potential early ill health retirement. There have been a number of recent employment law related case decisions that address issues concerning permanent health insurance, ill health retirement and disability. This presentation aims to provide a summary of the relevant issues raised by these cases and the types of considerations an employer should be making when managing sickness. Getting it wrong can be costly for the employer and not only create a dispute between the employer and employee, but also the insurance/pension provider. Learning Objectives 1. To understand what is needed for a fair sickness absence procedure in the work place. 2. What extra is needed if the employee has a disability within the meaning of the Equality Act. 3. What are an employees contractual rights to

permanent health insurance. 4. What factors are relevant when considering whether early ill health retirement is a possibility. 2 When dealing with sick and/or disabled employees, consider: Entitlement to statutory and/or contractual sick pay, including deciding whether qualifying conditions have been met. Whether the incapacity has been caused by workplace factors such as stress, bullying or an accident at work. The reason for absence, and whether it is genuine. This will entail ascertaining the true medical position and may involve seeking a medical report. Does the absence coincide with any periods of holiday? 3 When dealing with sick and/or disabled employees, consider: Whether the absence/conduct is related to a disability and/or is known

to relate to a disability and whether any reasonable adjustments may need to be made. Whether the level or frequency of absence is a cause for concern: for example, whether it is a result of stress at work or whether there are doubts about sickness being the real reason for absence. Whether dismissal is appropriate and, if so, ensuring a fair process is followed. Whether the employee may be eligible for permanent health insurance or ill-health retirement. 4 DL Insurance Services Ltd v- OConnor warnings for sickness absence Mrs O'Connor had a disability (the nature of which is not specified in the judgment), resulting in high absence levels over a number of years. Mrs O'Connor's employer, DL Insurance Services Ltd (DLIS), had adopted a very careful approach in this regard and had treated her with great sensitivity and sympathy, effectively permitting her to have a much longer period of sickness absence than the strict terms of its sickness absence policy would have

allowed. Nevertheless, by 2016, DLIS considered that it was appropriate to issue a written warning for the 60 days' absence that Mrs O'Connor had had in the previous 12 months. This also meant her contractual sick pay ceased for future absences. Mrs O'Connor claimed discrimination arising from disability. The case turned on the issue of objective justification. DLIS had been pursuing the legitimate aims of ensuring adequate attendance levels and seeking to improve Mrs O'Connor's attendance. However, the warning was not a proportionate means of achieving those aims. DLIS had been unable to explain how the warning would assist their aims, other than by appealing to generalisations about the impact of absences. DLIS had also failed to follow some of its processes, in particular failing to refer Mrs O'Connor to occupational health, and this contributed to the evidential gap on the issue of justification. 5 City of York Council v Grosset consequences of an employee's disability Mr Grosset suffers from cystic fibrosis (accepted as a disability) and worked as a teacher and Head of English at a school. As a consequence of his condition, Mr Grosset spent up to

three hours a day in a punishing regime of physical exercise to clear his lungs. Following a change of head teacher, Mr Grosset's workload increased. As a result of his condition, Mr Grosset struggled to cope with the additional demands placed on him. He suffered stress, which in turn exacerbated his cystic fibrosis. During this period, Mr Grosset took two lessons of 15 and 16year-olds and showed the 18-rated film Halloween. When the head teacher later discovered this, Mr Grosset was suspended and eventually dismissed for gross misconduct. The dismissing panel did not accept that showing the film had been a momentary error of judgment, caused by the level of stress Mr Grosset was under. The employing Council argued, in defence of the claims made by Mr Grosset, that they had acted reasonably based on evidence before them that there was no link between employee's actions and his disability. However, knowledge is only relevant to the defence that the employer did not know, and could not reasonably be expected to know, that the employee was disabled. It does not apply where the employer did not know that the disability produced a certain consequence. Employers considering disciplining/dismissing a disabled employee should consider obtaining medical evidence on whether the employee's actions could in any way be a consequence of their disability. An employer should do everything it can to establish whether there is a causal link. Although the Council did take these steps it was still held liable as ultimately there will be cases where an employer will be forced to decide between giving an employee "the benefit of the

doubt" that their unacceptable behaviour was a consequence of their disability, or risk a successful claim against them. 6 Williams v- The Trustees of Swansea University ill health retirement Mr Williams was disabled within the meaning of the Equality Act. He had been employed by the university from 2000 until 2013, when he retired for reasons of ill health, aged 38. For the first 10 years of his employment he had worked fulltime, and for the last three years he had worked part-time. By the time of his retirement, his agreed working hours were half of his full-time hours. It was agreed that the reduction in working hours arose from his disabilities. The pension scheme provided for accrual of benefits on a final salary basis until 1 August 2009. After that date, accrual of benefits was on the basis of career average revalued earnings. Under the ill-health retirement provisions of the scheme, the employee was entitled to immediate payment of a lump sum and annuity. The dispute concerned his entitlement to an enhancement to the lump sum and annuity, calculated by reference to his actual salary at the date of retirement. Mr Williams asserted that calculation of the enhancement based upon his part-time rather than fulltime salary was discrimination under the Equality Act constituting "unfavourable" treatment because of something arising in consequence of his disability, namely his inability to work full-time. This was not unfavourable treatment. A disabled employee who had reduced his hours from full-time to

part-time before taking ill-health retirement had not been treated "unfavourably" when an element of his pension benefits was calculated by reference to his part-time salary at the date of retirement. The only basis on which the employee had been entitled to any award at the time of his retirement was by reason of his disabilities. If he had been able to work full-time, he would not have had a right to an enhanced entitlement, but would have had no immediate right to a pension at all. 7 Awan v- ICTS Permanent Health Insurance Mr Awan was employed as a security agent for American Airlines at Heathrow airport. His employment contract provided that he was entitled to six months full sick pay and if still on sick leave after that time, would benefit from a long-term disability benefit plan which would pay twothirds of his base annual salary (less any State disability benefits) until the earlier of his return to work, retirement or death. The contract also contained a clause entitling his employer to dismiss on notice. American Airlines had a group income protection policy with Legal & General covering the provision of the longterm disability benefits to its employees. The policy provided that the insured member would be entitled to benefits under the policy only so long as that person remained in employment. In October 2012, Mr Awan was signed off sick with depression and remained on sick leave until his employment was terminated in November 2014. On 1 December 2012, Mr Awan's employment was TUPE

transferred to ICTS UK Ltd when American Airlines outsourced its security department to them. ICTS used a new insurer, Canada Life, to provide the long-term disability cover to the employees transferred to it from American Airlines. However, Canada Life refused to accept liability for employees such as Mr Awan who were already on sick leave when the policy commenced. Legal & General also refused to provide benefits to Mr Awan because its contract was with American Airlines and at the time that Mr Awan became eligible to claim under the policy, he was no longer employed by that company. American Airlines raised a complaint and Legal & General subsequently agreed to cover Mr Awan until September 2014 as a goodwill gesture. ICTS wrote to Mr Awan on 6 October 2014 advising that the longterm disability benefit cover from Legal & General had been reinstated to the end of September 2014, but that it was pursuing the matter further as it considered that Legal & General had an obligation to continue making the payments. In the interim, ICTS advised that it would, on a without prejudice basis and without admission of liability, make equivalent monthly payments to Mr Awan until the situation was clarified. 8 Awan v- ICTS Permanent Health Insurance Following a capability meeting, on 26 November 2014 ICTS wrote to Mr Awan informing him that his employment would be terminated for capability reasons. It reasoned that he had been off sick for over two years and there was no prospect of him returning to work within a defined or a reasonable period of time. Mr Awan's employment terminated on 28 November 2014 and he was paid 12 weeks salary in lieu of notice. Mr Awan brought employment tribunal proceedings claiming that his dismissal while he was entitled to long-term disability

benefits was unfair and discrimination arising from disability. The tribunal found that ICTS was contractually obliged to pay Mr Awan long-term disability benefits while he remained employed. However, there was no implied term in his contract preventing ICTS from dismissing him for incapability while he was entitled to receive such benefits. It reasoned that there was an express term in the contract that allowed ICTS to terminate the contract on notice and an implied term cannot contradict or restrict an express term of a contract. Therefore, dismissal was fair and there was no discrimination. Mr Awan appealed and this was upheld. In dismissing Mr Awan, ICTS had acted in breach of an implied term of the contract. Mr Awan had a contractual entitlement to be paid two-thirds of his salary after 26 weeks of sick leave. His contract did not refer to an insurance policy or state that his entitlement to disability benefits was dependent on the rules of an insurance policy or the rules of a particular insurance provider. The whole purpose of PHI or other disability benefit schemes would be defeated if an employer could end entitlement under the schemes by dismissing employees when they became unfit for work. However, whether an employer had a right to do so was a matter of the construction of the particular contract in question. On a proper construction of the contract, it was contrary to the functioning and purpose of the long-term disability plan to permit ICTS to exercise the contractual power to dismiss and deny Mr Awan the benefits the disability benefits clause envisaged would be paid. A term could be implied into the contract, either on the officious bystander or the business efficacy tests of implied contractual incorporation, that "once the employee has become entitled to payment of disability income due under the long-term disability plan, the

employer will not dismiss him on the grounds of his continuing incapacity to work." 9 ICTS v- Visram - Employee entitled to PHI benefits until he could return to the same job with the employer In May 1992, Mr Visram started work at Heathrow Airport with American Airlines (AA). His contract of employment included a long-term disability benefits plan (the Plan), the details of which were set out in a booklet (the Booklet). The Plan is funded by an insurance policy (the Policy). The Booklet provides that benefits will commence 26 weeks after the start of the employee's absence and continue under the "earlier date of your return to work, death or retirement". The Policy provides that: An Insured Member will be entitled to benefit under the Policy but only so long as he is a Disabled Member. A Disabled Member is defined as an insured member who "is incapacitated by an illness or injury which prevents him from performing his own occupation". "his own occupation" is defined as "the essential duties required of the Insured Member in his occupation immediately prior to the commencement of the Deferred Period". In October 2012, Mr Visram went on sick leave from his job as International Security Co-ordinator and, two months later in December 2012, his employment transferred from AA to ICTS (UK) Limited under TUPE. Mr Visram attempted a phased return to work on a part-time basis in March and April 2013 but that was unsuccessful and he reverted to

sickness absence until his dismissal. Once Mr Visram had been absent on sick leave for 26 weeks, he expected to receive benefits pursuant to the Plan. When that did not happen, he presented a grievance in June 2013. That prompted negotiations between ICTS and the insurer which resulted in the insurer agreeing to pay those benefits only for one year until the end of September 2014. After expiry of that period, he was dismissed on the grounds of capability. He brought a claim for unfair dismissal and disability discrimination which were successful. At the remedy hearing, the employment tribunal accepted that Mr Visram was contractually entitled to benefits under the Plan until his return to his original job with ICTS, death or retirement. It rejected ICTS's argument that his entitlement ceased when he was able to return to any full-time suitable work. The tribunal therefore awarded compensation to Mr Visram on the basis that the benefits which he would have been entitled to under the Plan would have continued until death or retirement. 10 ICTS v- Visram - Employee entitled to PHI benefits until he could return to the same job with the employer ICTS appealed arguing that the words "return to work" in the Booklet meant return to any suitable work which Mr Visram was able to carry out, whether for ICTS or otherwise. ICTS said that the word "return" added nothing. The employment tribunal should have concluded that Mr Visram's entitlement under the Plan ceased on being able to engage in any full-time employment. In any event, the employment tribunal was wrong to rely on the terms of the Policy to construe the Booklet. The appeal argument was dismissed as "linguistic

sophistry. Return means 'going back. 'Going back' means going back to work for the original employer for whom Mr Visram remained an employee, which was ICTS. However, it was not clear from the Booklet what work Mr Visram had to return to in order to be disentitled to the benefits. The employment tribunal had to decide whether "return to work" meant a return to the work performed when going absent due to illness or return to ICTS to carry out any suitable full-time remunerative work. To resolve this ambiguity, the employment tribunal had no option but to resort to the wording in the Policy. The terms of the Policy provided that subject to other terminating events, the benefits would continue so long as the Insured Member was a Disabled Member. A Disabled Member is defined as incapacitated from carrying out the duties of the job he was carrying out when he became incapacitated. The employment tribunal was, therefore, entitled to come to its conclusion. 11 Steps to consider: STEP 1: CONSULTATION WITH THE EMPLOYEE DURING SICKNESS ABSENCES STEP 2: INITIAL CONSIDERATIONS ONCE THE EMPLOYEES ABSENCE HAS BECOME AN ISSUE Record absence, reason and duration how have other employees been treated in similar

circumstances? what impact does the absence have on the employer? STEP 3: INITIAL MEETING WITH THE EMPLOYEE Establish the reason for the absence consider if likely to return to work in the foreseeable future with or without adjustments consider the need to obtain a medical report and seek employees consent STEP 4: OBTAIN MEDICAL REPORT Consider requesting that the employee attends an examination with an independent specialist doctor or occupational health expert Check what the contract of employment allows Dont forget Access to Medical Reports Act 1988 and GDPR! STEP 5: ARRANGE MEETING TO DISCUSS MEDICAL REPORT Consider best location for meeting and right to be accompanied Consider whether contractual sick pay is going to be paid, continued or discontinued whether the individual is fit to return to work and any arrangements for a phased return whether, if the individual has a disability, any reasonable adjustments need to be made whether, if the individual is not fit to return to work, whether a dismissal is possible and/or if they are entitled to ill-health retirement or permanent health insurance 12 Steps to consider: STEP 6: IF THE EMPLOYEE RETURNS TO WORK Decide if appropriate to hold a return to work interview and if so

the format of it but above all be consistent! STEP 7: IF THE EMPLOYEE DOES NOT RETURN TO WORK INITIAL CONSIDERATIONS IF DISMISSAL IS CONTEMPLATED the nature of the illness its effects how long the absence may last whether it is possible to employ a replacement and, if so, how easily the employee's past record and length of service the effect of the employee's absence on the business/other employees whether continuing to employ the employee would give rise to health and safety risks whether the employee is entitled to permanent health insurance STEP 8: PERMANENT HEALTH INSURANCE (PHI) Employers should review their PHI policy carefully and well in advance of contemplating dismissing the employee If the scheme plan is incorporated into the contract of employment, the employee may sue for breach of contract if they meet the criteria and are not paid PHI benefits If the scheme plan is not contractual, the employee may nonetheless argue there is an implied term that the employer will make the PHI payments if the employee has met the criteria, and the employer is therefore in breach of contract if it does not do so STEP 9: INVITATION TO 1ST FORMAL MEETING Ultimately, such a meeting may still need to go ahead even if the employee cannot attend due to illness. If this is the case, the employee should be advised in writing that the employer will make a decision based on the material and medical evidence it has available to it at the meeting

13 Steps to consider: STEP 10: 1ST FORMAL MEETING CONSIDER: the employer's attendance/sickness policy the employee's attendance records the medical evidence evidence of other matters the employer wishes to consider, such as the impact of the employee's absence on the business and health and safety concerns with continued employment the employee's past record and length of service the likely date of return (arrangements for future contact, further medical review and further meetings under the procedure) and whether the employer can continue to wait for the employee to return STEP 12: 2ND FORMAL MEETING CONSIDER: the points discussed at the previous meeting any issues arising since the last meeting regarding the employees absence the likelihood of the employee returning to work whether the employer has given consideration to terminating the employees employment because of their ill-heath the employee should be given an opportunity to raise and address any objections to steps taken to date the employee should be given an opportunity to put their case forward and outline any mitigating circumstances consideration of the possibility of an ill-health early retirement ensure that no definite decisions are taken before this meeting and that correspondence, minutes and internal memoranda do not indicate otherwise what alternatives the employee may wish to explore such as

redeployment or application for employment benefits STEP 13: DECISION whether the employer may have to give consideration to terminating the employees employment because of their ill-heath. STEP 15: PROCEEDING TO DISMISSAL: GIVING NOTICE STEP 14: APPEAL The employee should be given their contractual notice (or a payment in lieu of notice made) unless gross misconduct. STEP 11: INVITATION TO 2ND FORMAL MEETING 14 Questions? 15 Jonathan Gray Partner DDI: 02380837785 E: [email protected]

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