The first case which tackled these issues was in 1996 and involved a Mr Aspden, who was eligible to participate in a generous permanent health insurance scheme and who had been absent for three months on sick leave. His employer thought that he was malingering and dismissed him, as a result of which Aspden successfully claimed damages for wrongful dismissal.
His contract of employment which included a right to sickness benefit did not expressly limit his employers power to dismiss him when sick. However, the court decided that such a term was implied in order to ensure that the purpose of the permanent health insurance scheme was not defeated. The only exception in such cases, the court said, was where the employee was dismissed lawfully without notice for gross misconduct. A later Scottish decision expanded on this, so that an employer could dismiss someone even though it meant that employee would lose their right to a contractual benefit if they had good cause.
The recent Court of Appeal decision in Briscoe v Lubrizol has focused on these issues again. Briscoes terms of employment included benefits under an insured long-term disability scheme whereby the insurers paid the benefit to the employers who then paid an equivalent amount to the employee. In June 1990 Briscoe began a prolonged period of sickness absence. After submitting a claim to the insurers, the employer continued to pay him his full wage until the end of February 1991. After that he was paid at the rate of the benefit under the scheme until November 1991, when the employer suspended the payment because the insurers had rejected the claim.
Briscoe then failed to attend a meeting arranged for 18 May 1992 by his employer to discuss his long-term absence and to return three telephone calls to re-arrange the meeting. In June the employer wrote to Briscoe dismissing him summarily. The reason given was Briscoes failure to return to work in the absence of independent medical evidence to justify such failure.
The Court of Appeal decided that Briscoes lack of response to and co-operation with his employers reasonable request and instructions were sufficient grounds to justify his dismissal. It was therefore lawful, expanding on the principle laid out in the Aspden case.
In Jenvey v Australian Broadcasting Corporation, Jenvey was dismissed for asserting his statutory right to apply for written particulars of his employment. In fact, his position was redundant, but by dismissing him for other reasons his employers could avoid making a contractual redundancy payment.
Jenveys contract of employment included a term stating than an employee could be dismissed without cause. But he argued that his employer should not be allowed to operate his contract of employment so as to remove his entitlement to a contractual redundancy payment except with good cause. The High Court agreed with him and awarded him 58,000.
The principles developed in cases involving long-term sickness (as in the Aspden case) were applicable to Jenveys case, because the effect of the dismissal was to deprive Jenvey of a contractual benefit in this case, a contractual redundancy scheme.
But how far will these principles be extended? The Privy Council recently declined to operate similar principles where the employer had terminated the employment relationship prior to and in order to avoid awarding stock options. It decided that if an employee was dismissed according to the terms of his contract then the fact that there was a collateral purpose (to prevent an employee becoming entitled to participate in a stock option scheme) was irrelevant.
There are many other contractual benefits that may be placed in jeopardy by a dismissal bonus payments, for example. The moral for employers is to define both contractual benefits and the reason for dismissal carefully in circumstances where the entitlement to a benefit may be adversely affected as a result.
janet.gaymer@haynet.com
Janet Gaymer is senior partner at Simmons & Simmons
