Death in Service Benefit for a dismissed Employee?

11 October 2012

Maxine Orr, Worthingtons Solicitors Belfast, considers a claim for death in service benefit made by the estate of an Employee who had been dismissed prior to his death.

A death in service benefit is a policy taken out by an employer to pay a benefit to the estate of an employee if they were to die during their employment.

However what happens to this benefit when an employee is dismissed and dies shortly thereafter?   Can the employee’s estate bring a claim for this benefit?

A recent decision of the Employment Appeal Tribunal considers this very question.  Mr Fox was employed by British Airways PLC and had the contractual right to a death in service benefit. Just days before his death Mr Fox was dismissed by his employer on the grounds of capability on the grounds that he was physically unable to carry out his job.

Mr Fox’s estate brought a claim for unfair dismissal and disability discrimination to the Employment Tribunal. It was argued by his estate that the loss of the death in service benefit was a real loss to Mr Fox and was recoverable in the Tribunal.

The ET found that Mr Fox lost the right to the death in service benefit upon his dismissal and that as such the loss of this benefit was not that of the employee but that of the beneficiaries of his estate. Thus it was held it was not recoverable by the estate which could only claim losses suffered by the deceased. The Employment Judge determined the only loss to Mr Fox was the knowledge and comfort that his family would receive a lump sum payable under the benefit. The Tribunal valued this at £350.

The estate appealed. It was argued on behalf of the estate of Mr Fox, that under the principles set down in the earlier case of Pickett v British Rail Engineering [1980] AC 136, the deprivation of an ability to make provision for beneficiaries is a real loss to a claimant and is not just a matter of emotion but of real monetary value. The EAT agreed with the arguments advanced by the ‘Claimant’s’ representative and allowed the appeal. The EAT held that a death in service benefit was a contractual right that was lost to the employee upon dismissal. The fact that the employee would never be able to enjoy the benefit of the money paid upon death did not preclude the loss of such a benefit from being a real loss to the employee. Furthermore, the EAT determined that the loss of such a benefit would be the sum which would ensure payment of the lump sum agreed under the policy. This would normally be valued as the cost to the employee of the insurance premium for the policy. In this case it was valued at £85,000. The EAT also had consideration of a cross–appeal by the employer as to the validity of the original claim at Tribunal. The employer’s representative put forward the argument that the claim form, which was issued by Mr Fox’s father (within the three month statutory time limit) was null and void due to the father’s failure to obtain appointment as a representative under section 206(4) of the Employment Rights Act 1996, in advance of issuing proceedings. The cross-appeal was dismissed on the circumstances of this particular case. However the EAT determined that pursuant to section 206(4) ERA 1996 an application to the Tribunal to be appointed as a representative must properly be made prior to the issuing of proceedings.

Only when the appointment has been granted may proceedings be issued to the Employment Tribunal.

Employers should always take appropriate professional legal advice on employment matters and contractual rights prior to dealing with any dismissal process. Maxine Orr is a Partner in Worthingtons Commercial Solicitors specializing in Employment Law.



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