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Is a death in service lump sum recoverable by a deceased ex-employee?

The EAT has decided that it is possible for a death in service benefit to be recovered by a deceased employee’s dependents if the ex-employee was unlawfully dismissed.

Facts

Mr Fox had a disability and was off from work on long-term sick leave. He was dismissed on grounds of capability five days before having surgery, which he anticipated would allow him to return to work. Around three weeks after surgery Mr Fox died unexpectedly. Mr Fox was entitled to a death in service benefit worth three times his salary (ie approximately £85,000). Since Mr Fox was not in employment at the time of his death, his beneficiaries did not receive a payment for the benefit. Mr Fox’s father commenced Tribunal proceedings for unfair dismissal and disability discrimination.

Tribunal

Although the Tribunal was yet to consider liability in the claim, it was initially asked to consider whether the death in service benefit could be claimed as compensation if Mr Fox was unlawfully dismissed.

The Tribunal decided that the loss of the death-in-service benefit was not a “loss of substance” to Mr Fox and instead decided that it was a benefit to his dependents. Therefore, the Tribunal held that if liability in the claim was decided in Mr Fox’s favour, then a nominal sum (around £350) should be awarded. This nominal sum represented Mr Fox's loss of the comfort of knowing that his relatives would be compensated after his death. Mr Fox's father appealed against the decision not to award the full death-in-service sum (around £85,000).

EAT decision

The EAT disagreed with the Tribunal and held that the death-in-service benefit was a real loss of substance to Mr Fox. He had lost the right to have a sum paid to others on his death. The Tribunal also went on to decide that, if it was decided that Mr Fox was unlawfully dismissed, the loss could only be quantified by awarding the full sum payable on death. This was because there was no real scope for Mr Fox to mitigate his loss given the proximity in time between his dismissal and his death.

Comment

Usually claims brought by representatives for a deceased employee will be uneconomical since the claimant will not be able to show loss beyond the date of death. However, this case is important in demonstrating that surviving dependents may be able to recover valuable sums afforded under a death-in-service benefit, if they can show an unlawful dismissal.

In spite of this decision, the practical risk may remain low for employers since in many cases it will be difficult for a claimant’s dependant to win a claim in the absence of the ex-employee’s evidence at a Tribunal hearing.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2012. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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