EAT upholds decision that refusing to extend PHI cover beyond age 60 is not age discrimination

EAT upholds decision that refusing to extend PHI cover beyond age 60 is not age discrimination

The Employment Appeal Tribunal has upheld an Employment Tribunal’s decision in Smith v Gartner that an employer’s refusal to extend permanent health insurance cover beyond the age of 60 was not age discrimination.

Ms Smith transferred pursuant to TUPE to her employer, Gartner UK Ltd (Gartner), in 1996, at which time she was sent a letter setting out her terms and conditions, including her benefits. The letter referred to a ‘disability plan’ and stated that ‘all benefits offered are subject to the rules in force at that time’ but that the company ‘reserved the right to terminate or offer alternative benefits wherever appropriate’.
In November 2002 Ms Smith went off sick and did not return to work. She received payments in line with her benefits under the permanent health insurance (PHI) plan from May 2003, at which time her contractual retirement age was 60.  In August 2007, the company sent an email to all employees which indicated that PHI cover would be provided up to the age of 65.  However, Gartner did not offer this to Ms Smith as she was already claiming under the previous PHI policy.

Gartner therefore advised Ms Smith in March 2014 that her benefits would cease to be paid when she reached the age of 60, as she would no longer be covered by the PHI provider.

Ms Smith brought a claim of unlawful deduction from wages and direct age discrimination before the Employment Tribunal (ET), asserting that she had a right to continue to receive PHI payments from the company until she retired and further that she had been treated less favourably because of her age in not continuing to receive such payments. Gartner applied for the claims to be struck out.

The ET struck out the claim and held that there was no unlawful deduction of wages on the basis that the claimant received her payments from an insurance provider and was bound by the terms at the time she started to claim.  Further, the ET held there was no age discrimination as the reason Ms Smith was not covered by the PHI scheme was unrelated to her age.

Ms Smith appealed to the Employment Appeal Tribunal (EAT).

The EAT held that the employer’s obligations regarding the provision of PHI depended on the contractual wording. The EAT held that the ET had been right in this case and that the employer’s obligation only extended so far as to provide PHI, subject to the terms and conditions of the scheme. The fact that the contractual wording referenced ‘insurance’ clarified that the employer’s obligation was to provide insurance, rather than the cover itself.

The decision noted that the 2007 email, which was not presented to the ET and so was considered for the first time by the EAT, was too general to alter Ms Smith’s position.  Gartner’s decision not to extend the PHI policy introduced in 2007 to provide cover to age 65 to Ms Smith was not direct age discrimination. She could not benefit from the new PHI policy because she was already claiming under the previous policy. She did not meet the conditions of the new scheme as she was not actively working immediately before beginning to claim.

In regards to the age discrimination claim, the EAT followed previous decisions in which it considered the reason for the less favourable treatment. The reason for the less favourable treatment in Smith was due to the terms of the insurance in place at the time when Ms Smith started claiming the PHI payment and this was a decision of the insurer, not Gartner. The EAT therefore held that this could not constitute direct age discrimination by Gartner.

When considering the EAT’s decision, it is important to remember that the decision was to uphold the ET’s decision to strike out the claim, rather than a full decision on the facts and evidence in the case. However, the decision in Smith clearly held that if an employer ceases to make PHI payments on the grounds that the insurance provider’s rules state that benefits will cease at that age then this will not constitute direct age discrimination on the part of the employer.  However, in this case the PHI scheme was entered into prior to the age discrimination legislation coming into effect and at that stage it was common practice to have set retirement ages.  It should also be noted that this finding contrasts to the ET decision in Whitham and it will be interesting to follow future developments in this area.

In any event this decision emphasises the importance of employers having clear and precise wording in employment contracts and associated handbooks when referring to benefits, including PHI schemes. This is important to protect employers from liability for having to continue to provide benefits if for any reason the insurance provider ceases to provide the benefits or refuses to provide them in the first place.

Employers should also note that under the Equality Act 2010 employers are able to cease offering PHI and other insured benefits at the age of 65 or state pension age, whichever is higher.

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