In the recent decision of our new EAT President in McMahon v AXA ICAS Ltd [2025] EAT 8 we find a useful reminder of employer obligations in relation to PHI schemes. We also find consideration of whether a claim in respect of payments can be maintained as a wages claim post-employment. Finally, we are reminded of the test in relation to strike out of a claim on the basis that a fair trial is no longer possible.
Employer obligations in relation PHI schemes
The position in this space is that it depends on the terms of the contract under which the employee is entitled to benefit from the PHI scheme. As stated in Smith v Gartner UKEAT/0279/15LA “each scheme has to be construed carefully with particular attention to the terms as described to the employee.”
On the facts, the employment contract, the handbook, and a document provided by HR in relation to the PHI scheme, were all part of the contractual documentation. In these documents there were various references to payments being made ‘in the form of salary’ or being paid ‘a proportion of salary’. Perhaps unusually there was no reference to payment being in any way contingent on the approval by the third-party insurer. In the circumstances the tribunal had rightly concluded that the contractual liability of this respondent was not simply to maintain a policy of insurance but rather its obligation was to provide payments under the terms of the scheme. Such payments may or may not be covered by the collateral agreement with the insurer but that did not affect the employee’s entitlements or the employer’s obligations.
This is an important reminder that rights afforded to employees in this area are contractual and the employer, who holds the pen in drafting the contracts would be well advised to ensure that the scope of their obligation is appropriately defined.
Post-employment claim for wages
The employee in the case had sought to bring a claim for ‘wages’ due under the PHI scheme following the termination of her employment. The argument was that her termination was in breach of the Aspden implied term that she would not be dismissed on the basis of capability whilst she remained entitled to receive benefits under a PHI scheme. The employee was not arguing for breach of contract but rather that the implied term ‘negated’ the effects of her dismissal such that she remained eligible for pay. This argument was rejected by the Tribunal and the decision was upheld by the EAT.
There was no proper basis for suggesting any post-termination entitlement to wages. Aspden v Webbs Poultry and Meat Group (Holdings) Limited [1996] IRLR 521 did not make any termination in breach of the implied term void, rather it may give rise to a claim for breach of contract. On the facts no such claim was raised.
In any event ‘wages’ must be construed under Part 1 of the ERA as being confined to sums which fell due under a subsisting contract. Once the contract was terminated no claim for wages could arise.
Strike out where a fair trial is no longer possible
Finally, there was a separate aspect of the claimant’s claim, a disability discrimination complaint which had been struck out on the basis that it was no longer possible to have a fair trial given the passage of time and the impact on the respondent witnesses’ ability to recall events.
The claimant appealed on the basis that the tribunal should have required specific material to demonstrate why a fair trial was not possible and could not simply assume that to be the case given the passage of time, Daly v Northumberland and Tyne and Wear NHS Foundation Trust UKEAT/01/09/16. In circumstances where it was agreed that her claim required greater particularisation it was impossible for this assessment to have taken place.
The EAT agreed, in order to assess whether a fair trial is possible in circumstances where there has been a significant passage of time between the events in question and any trial the ET must first understand:
- What, precisely is the claimant’s case?
- Who are the witnesses needed by the respondent to answer that case?
- What recollection of the material events do those witnesses have?
- What contemporaneous documents or other sources of evidence are available which bear upon the case and the respondent’s defence of it?
