Fixed term employees – less favourable treatment

16 October 2014

An employer is not responsible for the terms of its insurance policy

In Hall v Xerox UK Ltd, the EAT considered a case where the employer had taken out a PHI insurance policy which provided income protection for employees who were off work for 26 weeks or more. However, employees on fixed-term contracts ceased to be members of the scheme when their fixed-term contracts came to an end.

The Claimant was injured on 12 April 2012, with his fixed-term contract coming to an end on 20 July. Although his contract was subsequently extended, the insurer concluded that he had exited the scheme on 20 July. He therefore considered himself to be 'worse off' than a permanent employee, and brought a claim under the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002.
The EAT had to decide - was it a breach of the 2002 Regulations for an employer to purchase income protection insurance that might not pay out to a fixed-term employee in circumstances where it would to a permanent employee?

Not on the facts of this case, held the EAT. The act that disadvantaged the Claimant was that of the insurer, not Xerox. For there to be less favourable treatment under the Regulations, there must be an ‘act or deliberate failure to act’ by the employer.

The Claimant also argued, in the alternative, that the employer should still be held responsible as the insurer was acting as the employer’s agent. The EAT however concluded that this was not the case; the contract between the employer and the insurer affected the employees, but this fell well short of creating an agency relationship.

Points to note –

It was relevant that employees on fixed-term contracts had not been completely excluded from the benefits of the PHI policy.

It is comforting for employers to know that third parties will only be regarded as acting as their agents (for whose acts the employer would be legally responsible) if those third parties are acting on the employer’s behalf, and directly under the employer’s control. This was not the case here.

This article is part of the UK Employment Law Update for October 2014