Employer Liable for Full Value of Death in Service Benefits

The family of an employee who died shortly after being dismissed could recover the full value of his death in service benefits as part of the compensation for unfair dismissal and disability discrimination.

Whilst employed, F was entitled to death in service benefits worth £85,000.  He was dismissed on capability grounds five days before an operation which he hoped would enable him to return to work.  However, he died unexpectedly within three weeks of the operation.  His family claimed that his dismissal was unfair and amounted to disability discrimination.

The tribunal considered, as a preliminary issue, whether the death in service benefit could be recovered.  It held that the benefit was a benefit to F’s dependants, rather than F himself, and that only nominal compensation of £350 would be awarded – to reflect F’s loss of the comfort of knowing that his relatives would be compensated after his death.

The EAT overturned the tribunal decision, holding that the loss of the contractual right to the death in service benefit was a real loss suffered by F.  He had lost the entitlement to have the benefit paid to his dependants on his death.  His dependants would be therefore be entitled to recover the full value of his death in service benefits if the unfair dismissal or disability discrimination claims succeeded.

Normally you would expect that an employee would only be entitled to recover as compensation the cost of the premium for purchasing equivalent death in service cover.  However, because the employee died so soon after dismissal and had not been in a position to purchase alternative cover, the EAT in this case decided that the employer would be liable for the full value of the benefit itself if the claims were ultimately successful.  Although this situation is unlikely to arise very often, the potential downside for employers is large, and there appears to be nothing the employer can do to protect itself against the risk of such a claim – apart, of course, from ensuring that any dismissal is fair and non-discriminatory. Having said that, in practice it may not be that easy for a deceased employee’s dependants to prove the claim in the absence of evidence from the employee himself.