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31 July 2013
Employment Appeal Tribunal (EAT)
Moore-Bick, Rimer and Underhill LJJ
If redundancy payments have been enhanced in the past (ie a formula for calculating the payment has been applied which is more generous than the statutory formula), that enhancement may have become a contractual right through custom and practice.
Employees who had been made redundant claimed they were entitled, under a term of their employment implied through custom and practice, to enhanced redundancy payments. The tests for whether a term can be implied by custom and practice are that the term but be:
- well-known to everyone affected;
- certain (ie not so vague that rights under the term cannot be determined);
- applied consistently.
The tribunal had wrongly held that the last of these (ie consistent application) was not satisfied, even though the evidence showed it had been applied to all redundancies in the previous 16 years. The case was therefore sent back to the tribunal.
The Court of Appeal held that the following factors would typically be relevant:
a. how many occasions and over what period the enhancements have been paid;
b. whether the enhancement was always the same;
c. the extent to with the enhancements were publicised;
d. how the employer describes the enhancement - eg whether it is described as discretionary or ex gratia;
e. whether any of the express terms contradict any right to the enhancement;
f. whether the enhancement could be explained as a discretion rather than a legal obligation.
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