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I have been employed by the same employer for a number of years, and they have recently provided a revised 'terms of employment' document which includes the following new paragraph

It is a contractual requirement that, if your ill health or injury is the result of an accident caused by a third party in respect of which damages are recoverable then you must notify us immediately of all the relevant circumstances and of any claim, compromise, settlement or judgment made or awarded in connection with it and give us any information about those matters as we may reasonably require. If we require you to do so, you must refund to us any amount received by you from any such third party, but the refund will be no more than the amount which you have recovered in respect of the sick pay which you have received.`

I'm unsure if I fully understand this, does it mean that if I am caused an injury by a third party, receive sick pay, then subsequently claim the third party for loss of earnings, I must claim from them my full earnings and then return the sick pay to my employer?

This seems to me like an unusual way of doing things, I've never seen a clause like this before.

Have I understood correctly?

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does it mean that if I am caused an injury by a third party, receive sick pay, then subsequently claim the third party for loss of earnings, I must claim from them my full earnings and then return the sick pay to my employer?

Yes.

It is designed to prevent a double recovery.

This kind of provision is common in casualty and health insurance contracts, where due to something called the "collateral source rule" you sue the third-party for your entire damages from an injury, and then you have to turn over the part of your recovery that the insurance company has already paid for when you win.

Since "sick pay" is really just a form of insurance, self-funded by the employer in most cases (although sometimes it is funded instead by a worker's compensation insurer, or by a state government sponsored sick pay insurance program, in the U.S.) it makes sense and isn't really unfair.

I agree, however, that it is unusual to see such a term in a simple employment agreement. This isn't because it isn't permissible, but because it usually isn't worth the trouble given the limited benefit such a term provides to the employer, while creating conflict between an employer and an employee in a situation where the optics aren't very good for the employer.

Usually, sick pay is so modest in amount that it isn't worth an employer's time to litigate being reimbursed for, in the rare cases where it is the result of a litigated third-party injury. But, if the employer was burned in a case like that before, or if it is a very large bureaucratic employer, or if it has sick pay managed by a third-party insurer, it might make sense for the employer to include.

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