Employees who TUPE transfer from one employer (the “transferor”), to another (the “transferee”), must transfer on the exact same terms and conditions, under TUPE. The wise transferee should be aware of the need to offer substantially equivalent benefits offered, by virtue of the employment by the transferor to incoming employees.
This case illustrates this requirement well.
Mr Visram worked for ICTS (UK) Limited (the “Transferee”). He had been employed by American Airlines (“the Transferor”) as a security agent from 4 May 1992. He TUPE transferred to the Transferee from 1 December 2012. Under Mr Visram’s contract with the Transferor, he was entitled in the event of long term sickness absence, to a “Disability Income” (the “Benefit”) of 2/3rd of his salary. This would continue until his return to work, death or retirement. The Transferor offered this entitlement via a Permanent Health Insurance (PHI) policy, which required among other things, the employee to remain employed to remain eligible for payment.
Mr Visram went on sick leave from 19 April 2013 with work related stress and depression. He remained on sick leave save for a brief period, and qualified his claim for the Benefit before the Transferor dismissed him on 14 August 2014 on grounds of medical capability. Mr Visram brought claims against the Transferor for unfair dismissal and disability discrimination. The employee continued to receive the Benefit following 30 September 2014 on a without prejudice basis, pending the Employment Tribunal (ET)’s decision. Payment ceased on this date however.
Mr Visram was successful at the ET, who accepted that he was contractually entitled to the Benefit until he returned to his original job, his death, or his retirement at 68. The Transferee’s argument that his entitlement would cease if he could return to any job, was rejected at first instance.
The Transferee appealed to the Employment Appeals Tribunal (EAT). Mr Visram cross-appealed, arguing that the ET had failed to award an amount for aggravated damages. The Transferee had rather unwisely engaged in covert surveillance of Mr Visram and his family, including reviewing the social media pages of his wife and children.
The appeal was dismissed and Mr Visram’s cross-appeal was successful.
Under Mr Visram’s contract, the Benefit would start after 26 weeks of sick leave and cease on his return to work, death or retirement. The Employer argued that return to work referred to any work, while Mr Visram claimed it meant a return to his job as an International Security Co-Ordinator.
The ET interpreted the Transferor’s insurance policy in favour of Mr Visram, which referred to a return to his “own occupation”, which was defined basically as the duties held before going on sick leave. The EAT rejected the Transferee’s contention that the ET’s interpretation was wrong, deeming it relevant in the circumstances to help resolve the ambiguity arising from the words “return to work”.
Mr Visram was also successful in his appeal for aggravated damages, with the EAT noting that the ET had not given any reasons why no award was made (in addition to an ordinary award of £14,000 for injury to feelings).
The case has been remitted to the ET to consider and set the level of an award for aggravated damages and an award compensation for future loss of earnings.
The Transferee now potentially faces paying Mr Visram until he reaches 68 out of its own funds, as it did not replicate the PHI benefit carried over from the Transferor, as required by TUPE – to offer terms that were “substantially equivalent”. The failure to do so was a reason in connection with the TUPE Transfer in this case, and was unlawful.
This risk may reduce as many employers now take out, and offer their employees PHI with a sunset clause, with payments ceasing after 5-10 years – known as LTHI – Long Term Health Insurance rather than PHI – Permanent Health Insurance.
In our experience, the Transferee would be well advised in similar cases, to attempt to agree with the Transferor and their PHI Insurer, for the insurer to continue to honour payment of the Benefit, if a claim has been qualified for benefit prior to the TUPE Transfer, under insurance indemnity principles; in cases where, however, a claim for PHI only arises and is qualified after the transfer, the Transferee without these terms in place, supported by an insurance policy, may face considerable liabilities.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.