Overview:
This case examined Ms McMahon’s claims for unpaid wages under a permanent health insurance (PHI) scheme and the dismissal of her disability discrimination claim. The EAT clarified the obligations of employers under PHI schemes and the approach to strike-outs where significant delays have occurred.
Background
Ms McMahon worked for AXA ICAS Ltd from January 2000 until her dismissal in September 2013. After falling ill in 2010, she stopped working but claimed she was entitled to ongoing payments under AXA’s PHI scheme. Following her dismissal, she also brought a disability discrimination claim, alleging unfair treatment during her employment.
Key issues arose over:
1. The scope of PHI benefits during employment and whether these extended beyond dismissal.
2. AXA’s refusal to amend her wage deductions claim to cover post-dismissal payments.
3. The tribunal’s decision to strike out her disability discrimination claim due to delays.
Employment Tribunal and EAT Decisions
1. Deductions from wages under the PHI scheme:
Ms McMahon argued that AXA was contractually obligated to pay her 75% of her normal earnings, including overtime, and that the annual 5% uplift under the scheme should be calculated on a compound basis.
The tribunal found that AXA was directly responsible for paying benefits under the scheme and rejected AXA’s argument that its only duty was to maintain an insurance policy. However, the payments were limited to her basic salary, excluding overtime and speculative salary increases. The EAT clarified that the 5% uplift should apply on a compounding basis, increasing each year to reflect inflation.
1. Amendment to cover post-dismissal payments:
Ms McMahon sought to amend her claim to include payments owed after her dismissal, arguing that the termination breached an implied contractual term. The EAT upheld the tribunal’s decision to refuse the amendment, noting that wage deductions under section 13 of the Employment Rights Act (ERA) apply only to ongoing employment contracts. Any post-dismissal claim should be pursued as a breach of contract claim instead.
2. Disability discrimination claim:
The tribunal had struck out Ms McMahon’s disability discrimination claim due to delays, finding that the passage of time had diminished the quality of evidence and made a fair trial impossible. The EAT overturned this decision, agreeing that the strike-out was premature. It ruled that the tribunal should have allowed Ms McMahon to refine her case and assess the evidence before deciding whether a fair trial was possible. The case was remitted for reconsideration.
Key Takeaways for Union Representatives:
- Employer obligations under PHI schemes: Employers may be directly liable for payments if contractual documents indicate a clear obligation, even if the payments are funded by insurance. Employees should review employment contracts, handbooks, and related documents to understand their entitlements.
- Post-dismissal claims: Wage deduction claims cannot cover periods after employment ends. Claims for post-dismissal benefits must be framed as breach of contract actions.
- Managing delays in discrimination claims: Delays do not automatically mean a fair trial is impossible. Tribunals should assess witness availability and consider case management options before striking out claims.
This case underscores the importance of clear contract terms and fair procedures, particularly when claims span long periods.
