We have an employee who has been on permanent health insurance for some years. The insurance provider has now advised us that, following their most recent medical assessment of the employee, he is fit for work and no longer entitled to permanent health insurance. The employee has contacted us about returning to work. We have no position for this employee who has been out of the company for many years. How do we handle it?

Jennifer Cashman writes:

Many employers provide income protection schemes or permanent health insurance benefit (“PHI”) to their employees as part of the terms and conditions of employment. The employer enters into a contract with an insurance provider, whereby the employer pays a premium to secure the continuance of income and payment of benefits for an employee during disablement through accident, injury or sickness. Generally speaking, the right of an employee to apply for PHI will kick in after a certain period of absence from work following accident, injury or sickness, such as a six month period.

On application for PHI, the individual will be assessed independently by the employer’s insurance company to determine whether or not they qualify for PHI. If the employee qualifies, then generally the arrangement is that the employee will be paid a certain percentage of their salary while absent from work, which money will be refunded by the insurance company to the employer, who in turn pays the employee directly for the period of absence. It is also generally the case that a condition of the policy is that the contract of employment remains intact and termination of employment will automatically disentitle the employee to the benefit.

Insurance companies who provide PHI arrange regular assessment of any employee in receipt of the benefit, to determine whether or not the employee continues to meet the qualifying criteria. Should an employee not meet the criteria at assessment, the insurance company will advise the employer that it is discontinuing the benefit. An employee generally has the right of appeal to the insurance company and, if that appeal is unsuccessful, an external appeal to the Financial Services Ombudsman. An employer is under an obligation to provide all reasonable assistance to the employee in making the appeals. If the appeals are unsuccessful, the employer must deal directly with the employee in terms of the employee’s return to work or otherwise.

The first step for any employer faced with this scenario is to arrange to meet the employee to discuss the matter directly. It may be the case that the employee does not accept the Insurance Company’s view that they are fit to return to work. Alternatively, the employee may accept the situation and may then be keen to return to work, for financial reasons of for no other reason.

Either way, the employer will need to have the employee independently medically assessed on its own behalf to ascertain the employee’s fitness to return to work or otherwise. It will be very important in this regard that a full and detailed job description is given to an occupational physician in advance of the review to ascertain the employee’s fitness to return to work. There may have been many changes to the manner in which the employee carries out his/her job during the period of their absence and it is vitally important that the occupational physician is made aware of how the job is done at the date on which the employer requires the independent medical assessment.

If the independent medical assessment on behalf of the employer reveals that the employee remains unfit to do the job, notwithstanding the insurance company’s assessment, then the employer must give consideration as to whether or not there are suitable alternative vacancies in the company for the employee. If not, then the employer is likely to be in a position to terminate the employee’s contract of employment. All employers should obtain legal advice before doing so.

If the employee is deemed fit to return to work, or fit to return to work provided certain reasonable accommodations are made by the employer, the employer must give consideration to facilitating the employee’s return to work. If the employer has no positions available, then the employer must look at the issue of redundancy. The employee who has been in receipt of PHI is not automatically the employee to be selected for redundancy. To select on that basis alone could constitute unfair selection on grounds of disability contrary to the provisions of the Employment Equality legislation. Therefore, the employer will have to engage in fair selection as between all employees carrying out the role previously occupied by the absent employee, as is the case with all redundancies.

This area is a tricky one for employers and can throw up many issues. For example, it is generally accepted that the employer can take no steps to terminate the employment of an individual in receipt of PHI, as to do so would disentitle the individual to the benefit. In redundancy situations, employees in receipt of PHI should be the last to have their employment terminated, to ensure they are in receipt of PHI for the longest possible time.

Furthermore, when an employee is appealing to the Insurance Company arising from the decision to discontinue the benefit, the employment contract should remain in being. However, employers should give careful consideration to what commitments they are prepared to give to employees who are making an appeal to the Financial Services Ombudsman, as an employee has six years to make that appeal, and the process itself can be lengthy. An employer may therefore wish to place time limits and conditions on the commitment not to interfere with the employment contract for such an appeal. Legal advice should be obtained on a case by case basis to limit the employer’s exposure in so far as possible.