At what point, if any, does an employee’s employment cease when they are out on permanent health insurance (PHI)? Background: An employee with a serious medical condition is out on sick leave with little or no prospect of returning to work in the medium term. The Company pays full salary for 6 months, at which point PHI takes over. The employee remains on payroll and the cost is met by the PHI but still with little prospect of returning to work. Do they remain an employee until pensionable age?

An employee on PHI remains an employee until his/her employment is terminated. Subject to our comments below, an employer is entitled to terminate an employee’s employment where the employee is no longer capable of performing the work for which he/she was employed.

However, evidence must be provided to the employee that there is no reasonable prospect of the employee returning to work, and presented to the employee before making a decision to dismiss. However, where there is a contractual entitlement to PHI, there is potential for a breach of contract claim by the employee, if his/her employment is terminated by reason of the long term disability, and as a consequence, the entitlement to