In Lloyd v BCQ Ltd, the Employment Appeal Tribunal (“EAT”) considered whether there had been a breach of an implied term not to dismiss, when BCQ dismissed an employee who was in receipt of permanent health insurance (“PHI”) benefits. In doing so, it clarified the limitations of the finding in Aspden v Webbs Poultry and Meat (Holdings) Limited (a case in which it had been held that there was an implied term in a contract that the employer would not dismiss where to do so would frustrate the entitlement of the employee to benefit from PHI cover).
L had been employed by BCQ since 1978. In 2007, he suffered a back injury and was on long-term sick leave until his dismissal in May 2011. BCQ had provided PHI cover to its employees since 1988, but L’s most recent contract of employment, signed in 1992, made no reference to this and contained an ‘entire agreement’ clause, stating that all previous terms and arrangements were superseded. L received a lump sum upon termination in respect of the balance of the PHI payments due to him.
L argued that there was an implied term in his contract that his employment would not be terminated while he was in receipt of PHI benefits, where the effect of such termination would be to disqualify him from the benefits, and that this had been breached. The Tribunal rejected his claim and held that there was no contractual entitlement to PHI under the employment contract, given that the 1992 document made no reference to it, and had an entire agreement clause. It also held that there was no loss in any event, as Mr Lloyd had received a lump sum to cover all benefits due under the policy.
The EAT upheld the Tribunal’s findings that there was no contractual right to the PHI benefit under the contract, and confirmed its view that the implied term in the Aspden case had been specific to its facts, as the implication of the term in that case was necessary in order to make sense of two mutually inconsistent express terms. The EAT found in this case that the existence of an express right in the employment contract to terminate L’s employment in circumstances of incapacity meant that there would be no implied term to the contrary. Mr Lloyd was seeking to imply a term which would, in effect, negate the express term and that was not permissible in all but the rarest of cases and this was not such a case.
Impact for Employers
- The finding that there was no contractual right to PHI, due to the absence of any reference to it in the employment contract, is perhaps surprising given that BCQ had provided the benefit for a long period of time, and had confirmed to Mr Lloyd in correspondence that it would continue until his 60th birthday. However, it remained the case that Mr Lloyd suffered no loss, as he received the lump sum settlement in lieu of any loss of continuing cover.
- The case is useful as it confirms the view expressed by the Privy Council in another case, Reda and Another v Flag Limited, that it will only be in very rare circumstances that a term would be implied where there is an express term on the same point.