The employer had provided a permanent health scheme for directors and senior managers, which included the complainant. After its introduction the complainant, who up to that point had no written contract of employment, entered into a written contract. Unfortunately the form used was one which had previously been used before the scheme was introduced, and it was mistakenly adopted without modification. The contract contained a specific power enabling the employer in the event of prolonged illness to dismiss an employee who was unfit for work and a general provision entitling either party to bring the contract to an end on three months’ notice.
Held: The court was satisfied on the evidence that it was not the employer’s intention to exercise its contractual right of dismissal in circumstances where to do so would frustrate the employee’s entitlement to income replacement insurance. The question was whether it was an implied term of the contract that it should not do so. The problem was that the implication of the necessary term would contradict the express terms of the contract. Sedley J was able to overcome this difficulty because the contract as written was internally inconsistent in its provisions for sick pay and termination. Furthermore, the situation in which the contract was entered into was known to both parties to include an income insurance scheme which could only work if the employee whom it covered remained in employment for the duration of his incapacity or until some other determining event specified in the policy took place. The inconsistent terms of the contract were the result of using an inappropriate form without appreciating the consequences of doing so. These factors persuaded the judge to imply into the contract the term for which the complainant contended. ‘… the provisions for dismissal in a contract of employment … would not be operated so as to remove the employee’s accruing or accrued entitlement to income replacement insurance at the sole instance of the defendant (that is to say, otherwise than by reason of the employee’s own fundamental breach).’
Sedley J
[1996] IRLR 521
England and Wales
Cited by:
Cited – Reda, Abdul-Jalil v Flag Limited PC 11-Jul-2002
PC (Bermuda) The courts should be reluctant to accept a fetter on the employer’s right to dismiss on notice where there is an express term in the contract empowering the employer to do so.
Lord Millet . .
Cited – First West Yorkshire Ltd (T/A First Leeds) v Haigh EAT 20-Nov-2007
EAT Unfair dismissal – Reasonableness of dismissal
Where an employee is long-term absent on grounds of ill health, and his pension scheme contains provisions entitling him to an ill health pension on grounds . .
Cited – Lloyd v BCQ Ltd EAT 12-Nov-2012
lloyd_bcqEAT2012
EAT Contract of Employment : Damages for Breach of Contract – The Claimant was dismissed because of ill health. He claimed that he was entitled to (a) a golden handshake; (b) money under personal health . .
Lists of cited by and citing cases may be incomplete.
Employment
Leading Case
Updated: 12 January 2022; Ref: scu.220481