When employers have to make people redundant, it is not uncommon for them to pay the departing employees more than their statutory redundancy entitlement. In some cases, this is an express contractual commitment contained in the contract of employment; in others it is simply something the employer chooses to do. Sometimes, when an employer has paid enhanced redundancy over a period of time, it may be that the right to an enhanced redundancy payment becomes an implied term in the employee’s contract of employment.
In the recent case of Park Cakes Limited v Shumba , the Court of Appeal considered a Tribunal’s decision that, on the facts of the particular case, the right to an enhanced redundancy payment was not implied, despite evidence that the employer had paid enhanced redundancy to all employees made redundant in the preceding 16 years. The Court of Appeal said that in deciding whether a term has been implied or not, the Tribunal must ask the question whether the employer’s conduct, viewed objectively, meant that the employees reasonably believed that the employer intended to be bound by the term. The question was not whether the employer actually intended to be bound.
The Tribunal had not asked itself the right question, and so Court of Appeal referred the case back to a different Tribunal to reconsider whether there was an implied term here or not.
In doing so, they took the opportunity to remind the Tribunal that for any term to be implied into a contract, it has to be certain, unambiguous, fair, clear cut and communicated to the employees.
The Court of Appeal also made clear that in making the decision to refer the case back to a different Tribunal, it was not expressing a view as to what the eventual outcome of the case should be. That was a question for the Tribunal to determine once it had considered the facts and asked itself the right questions.
In practice we often see situations where an employee relies on custom and practice to establish an implied term. This case illustrates the difficulties of identifying whether something frequently done by an employer becomes an implied contractual term. The question will always be very fact specific, but if in doubt, it is always sensible to get advice.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).