Dismissal and permanent health insurance

Some employers provide permanent healthcare insurance (PHI), which insures against the financial costs of long-term illness and provides a financial safety net for employees. The employer’s obligations will depend on the contractual terms of the scheme. The High Court has held in Aspden v Webbs Poultry ([1996] IRLR 521), that there is an implied term in a contract (part of the duty of mutual trust and confidence) that an employee will not be dismissed, except for redundancy, if a PHI scheme requires the individual to remain an employee in order to receive the benefit.

However, the Privy Council has suggested, in Reda v Flag [2002] AER 201), that the Aspden case was a unique case decided on its own facts. There can be no implied term if a contract contains an express “whole agreement” clause — i.e. a clause stating that the entire employment contract is contained within the one written document — if that contract expressly permits dismissal for sickness absence (Lloyd v BCQ Limited ([2012] UKEAT /0148/12/KN)).