employer liable to pay income protection payments that are not covered by insurance

Many employers operate an income protection insurance policy, which means that if you are incapacitated from carrying out your role in the long term, you could be eligible to receive a benefit which is equivalent to between two-thirds and three quarters of your salary, sometimes until retirement age and on most occasions at least for five years.

In the recent Employment Appeal Tribunal (EAT) decision of Amdocs Systems Group Ltd v Langton, Auerbach HJ held that an employer was liable to pay an employee the level of income protection payments set out in his offer letter and summary of benefits provided by his original employer prior to a TUPE transfer. The EAT held that those documents had contractual force as they contained clear and certain terms and were intended to be incorporated into the employer’s contract of employment. Here the employer was bound to pay the additional “escalator” payment of 5% per annum that they referred to, regardless of the fact that this was not covered by the insurance. The EAT, after reviewing the relevant case authorities, said that if there was any ambiguity or uncertainty as to whether an employer’s obligations to provide benefits was limited by reference to the specific terms of its insurance cover any such ambiguity would be resolved against the employer and in favour of the employee.  Here the employee had not been given nor given access to, the insurance policy terms or any other document setting out the specifics of what those terms were and therefore what was stipulated in his contract prevailed. 

Many employers may want to take heed, as often they do not want to disclose the terms of an income protection policy to their employees. However, an employer misrepresents the terms, they will have to stand behind their actions, in the absence of being able to rely on the actual provisions.

The judgment can be found here.

This blog is written by Anita Vadgama, Legal Director for didlaw.