PHI Benefits and Age Discrimination

Thanks to Dr John McMullen of Wrigleys Solicitors LLP for preparing this case summary

Was stopping permanent health insurance benefits once an employee turned 55 age discrimination?

Yes, says an employment tribunal in Whitham v Capita Insurance Services.

Mr Witham had been in receipt of benefits from Capita under a PHI scheme arranged between Capita and an insurance provider. The payments stopped when he turned 55.

He had been denied the opportunity to join a more favourable PHI scheme arranged in 2002 which would have entitled him to receive PHI payments until he turned 65. The insurance company were not prepared to indemnify Capita in respect of PHI payments if the employee was not "actively at work" when applying to join. Mr Witham was then ill and in receipt of benefits under the original PHI scheme and therefore not eligible for the new scheme.

It was held by the employment tribunal that Capita had directly discriminated against Mr Witham because of age. Nor could this be justified as a proportionate means of achieving a legitimate aim. The employer stated that its legitimate aim was to admit as many employees into its pension and PHI schemes as possible within the constraints of the insurance company's conditions. But the tribunal did not accept that the employer had this as an aim, as the offer of PHI membership was selective. Nor was stopping the PHI payment an appropriate and necessary means of achieving that purported aim. By ceasing to cover Mr Witham the employer had reduced the number of employees within the PHI scheme. This was hardly promoting its stated objective; and the employer's budgetary considerations in funding the PHI scheme were not to be taken into account.

Further, there was indirect age discrimination because the employer applied a provision, criterion or practice (the "actively at work" criterion) which put employees over a certain age at a particular disadvantage. For the same reason as applied in the direct discrimination claim, this also could not be justified.

Finally, on the facts of the case, the employment tribunal decided that Mr Witham had a contractual right to receive his PHI payments until the age of 65 because an earlier purported variation of employment terms and the policy entitlement was ineffective.