16 November 2011: A minority of employers offer permanent health insurance (‘PHI’) to cover a proportion of their employee’s salary (normally up to 75%) in the event that they go on long term sick leave. However can the employer then dismiss the employee for a reason connected with the long term sick leave?
In Lloyd v BCQ Ltd, in the EAT this month, Mr Lloyd was dismissed due to ill health. He claimed that BCQ was in breach of an implied term that it would not dismiss him if he lost his PHI as a result. It was not possible to imply a term that BCQ would not dismiss due to long term sick if he would lose PHI cover a result (as per Aspden v Webb’s Poultry and Meat) because Mr Lloyd’s contract contained an “entire agreement” clause.
In any case, the EAT said that even if such a term could be implied, it would only apply where the dismissal was “without reasonable and proper cause”. There was no reasonable prospect of Mr Lloyd returning to work due to his sickness, so it was reasonable proper to dismiss him.
This case will be a comfort to those few employers who offer PHI as a benefit but who still want flexibility to dismiss where appropriate.
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