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Estate of deceased former employee recovers full death-in-service benefit

20th August, 2012

In the recent case of Fox v British Airways [2012] the Employment Appeal Tribunal ruled that a full sum of death-in-service benefit was payable to the estate of a deceased former employee. It was held that the Employment Tribunal had been mistaken in only awarding his dependants a small amount for loss of life assurance cover. Compensation is usually calculated on the basis of the loss suffered by the claimant on dismissal and it was ruled that the deceased had still incurred a loss in not receiving the full sum even though he would not be alive to enjoy it.

Prior to his death Mr Fox had been employed by British Airways but had been on long-term sickness absence because of a severe back condition. He was contractually entitled to a death-in-service benefit equivalent to three times his salary which totalled over £85,000. He was dismissed on grounds of capability five days prior to undergoing surgery which he hoped would allow his return to work. However three weeks after the surgery, he died unexpectedly.

Mr Fox’s father issued a claim for unfair dismissal and disability discrimination under the Disability Discrimination Act 1995 on his son’s behalf. Section 206 of the Employment Rights Act 1996 allows for certain claims to be brought on behalf of a deceased party. Subsection (3) further states that such proceedings “may be instituted or continued by a personal representative of the deceased employee”. He brought the claim within the necessary time limit and included an application to act as his son’s authorised representative. However, he had not been appointed by the tribunal as his son’s personal representative before the claim was issued. At the time of the claim he had been appointed the administrator of his son’s estate but had not yet been granted the letters of administration to deal with it. The tribunal ruled that it had not been ‘reasonably practicable’ for him to bring a procedurally correct claim within three months of his son’s dismissal. His application for appointment was therefore made retrospectively and the time limit extended so that his claim could proceed.

The tribunal held that a nominal sum of around £350 should be awarded to Mr Fox’s estate to represent his loss of statutory rights. Mr Fox’s father appealed against the decision not to award the full death-in-service sum and British Airways cross-appealed, arguing his claim was out of time. The Employment Appeal Tribunal allowed his appeal. It was held that Mr Fox had indeed sustained a loss in not being entitled to this sum on his death. Although his beneficiaries had no contractual right to the money, it did not mean his estate should be denied compensation.

The Employment Appeal Tribunal noted such a case is likely to be rare as usually there would be enough time between dismissal from employment and death to purchase life assurance. This case was unusual as the period between his dismissal and death was extremely short and the weeks prior to his death were spent undergoing treatment which he expected to survive. As a result he was not given a chance to mitigate the loss he had suffered when his contract of employment was terminated.

For advice or information on any employment issue, please contact Claire Brook on 01244 405575 or send an email to [email protected].

In this case because the death-in-service benefit went to the estate, inheritance tax could be payable on it. For advice on how to avoid paying inheritance tax on death-in-service benefit sums, please contact Clive Pointon on 01244 405513 or email [email protected].




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