Amdocs Systems Group Ltd vs Langton – an example of why TUPE due diligence is so importantIsobel Washington
At the end of August 2021, the Employment Appeal Tribunal decided a case which serves as a cautionary tale on the importance of drafting and TUPE due diligence in respect of permanent health insurance benefits (PHI) provided by employers.
In Amdocs Systems Group Ltd v Langton, the EAT held that the contractual entitlement to benefits under an Income Protection Scheme (IPP) scheme were those of the insurance policy which was in force in 2003 and which were expressly referenced in an offer of employment letter, a summary of benefits and a contract of employment.
The employee fell ill and began receiving a benefit under an income protection payment scheme (IPP) in November 2009. In 2015 his employment transferred via TUPE to Amdocs Systems Group. The employee subsequently realised that his IPP payment did not include the 5% uplift payment and proceeded to make a claim to the employment tribunal for unlawful deduction from wages.
The employer admitted that the 5% uplift had ceased in 2008 when this element was removed from the company’s insurance cover. The EAT held that the employee’s contractual terms in relation to the IPP was that of the policy in place in 2003 and in doing so it naturally fell that the benefits continued up to the point of the TUPE transfer and were on-going.
The decision also made it clear that if an employer wanted to rely upon a term which allowed them to cut back on substantial elements set out in a benefit offering, then substantive steps must be made to bring this to the attention of the employee.
On the facts, the offer letter and summary of benefits had clearly stated an entitlement to a 5% escalator payment and ‘objectively intended it to be incorporated’: they did not contain a clause which sought to reserve a right to vary or reduce the level of cover. Hence, Amdocs Systems Limited was “bound by the commitment’ it had inherited”.
This decision serves as a useful reminder to ensure that any Income Protection Payment offering, is carefully drafted so as not to given a unintentional open ended commitment to a level of cover which must be matched whenever the policy is up for renewal.
On a practical level, employers are naturally keen to ensure they obtain competitive insurance cover quotes at renewal time but must be informed about the level of cover that they have contractually committed to provide to their employers. Secondly, any TUPE due diligence process should be alert to the need for the transferor to include details of any IPP scheme and of any individual currently accessing the scheme or seeking access to it and the precise nature of any such entitlement. Finally, it’s also worth going back to basics in terms of the content of your offer of employment letters, benefits package summary and contracts of employment to ensure the right to amend, reduce, or withdraw benefits is expressly retained and communicated to your employees.
For any advice and support or a free consultation around any issue raised by this article or any aspect of employment law please don’t hesitate to reach out to our expert team of employment law solicitors on email@example.com