The Court of Appeal has held in Amdocs Systems Group Ltd v Langton that the employer was liable to pay the level of income protection payments set out in an offer letter and attached summary of benefits which were incorporated into the contract.
Mr Langton was employed by Cramer Systems Ltd (Cramer) in 2003 and received an offer letter and summary of benefits which set out the terms of the long-term sickness absence scheme and the level of income protection payments (IPP) payable under it. These included reference to an "escalator" of 5% per year which would apply after the first 52 weeks. Cramer had insurance cover in respect of its obligations to pay IPP (including the escalator). Mr Langton's contract stated that the provisions relating to absence through illness were set out in the "manual" and outlined in the offer letter. In 2006 Amdocs Systems Group Ltd (ASG) acquired Cramer and in 2007 an ASG HR representative gave a presentation in which they advised that the IPP provision would not be affected. This was confirmed in a letter and Mr Langton signed a form confirming that he wished to participate in the scheme.
In 2009 Mr Langton began a period of long-term sickness absence and from November 2009 he began to receive IPP. In 2016 he discovered that the escalator had not been applied to his payments and, when he queried this, ASG replied that the escalator had been removed from the policy in 2008, before he started claiming under the scheme. He bought a claim for unlawful deduction from wages, and the tribunal upheld his claim, as did the EAT on appeal.
The Court of Appeal held that Mr Langton's contract, his offer letter and the summary of benefits clearly set out the terms of the contract. The employer was therefore obliged to procure the payment of the benefits to which Mr Langton was contractually entitled. If the employer's obligation to provide benefits is to be limited by reference to specific terms of the employer's insurance cover then this must be unambiguously and expressly communicated to the employee.
Take note: The decision in Langton serves as a reminder to employers to check their contractual documentation to ensure that employees do not have a greater entitlement to PHI payments under their contracts than they would have under the insurance policy. If an employer wants to ensure that the benefits on offer are limited to those provided under the insurance policy then it should ensure that this is stated expressly and that, if it is likely that there are to be changes to the policy, it should be made clear that the benefits are limited to those provided under the policy in force "from time to time".
