Terms and Conditions – can verbal or discretionary agreements become binding?

In a recent Court of Appeal Case, it was discussed whether a group wide policy of enhanced redundancy payments could become an implied term of an employee’s contract of employment, if that employee worked in a subsidiary branch of that group.

It is widely recognised that custom and practice can imply terms into the employment relationship, for example when an employee does not sign a contract of employment but continues in your employment. In this situation the employees actions in practice would infer their agreement to the terms of the contract. Can the same be said for discretionary policy’s that are regularly adopted within a Company?

In this case, four employees had been made redundant, they were only paid a statutory redundancy payment. The Company had an enhanced redundancy payment policy in their group HR manual, and this was a group wide policy that has previously been implemented. They collectively took their employer to Tribunal and claimed that they were entitled to an enhanced redundancy payment, as it was an implied term of their contract of employment.

This argument was not accepted by the Tribunal and the Claimants case was rejected. The Tribunal held that as this policy had not actually been brought to the employees attention as applying to their particular branch, despite it being available on request from the group HR department. Also the Tribunal held that as this branch had not made enhanced payments to any previous employees it was not applicable in this case.

The matter was taken to appeal where they overturned the Tribunals decision. The Court Appeal ordered the matter be re heard at another Tribunal. The outcome of which is yet to be released. The case does show that there are obvious factions of thought when it comes to discretionary policies and Companies should therefore think carefully when looking to implement anything on a discretionary level. Make sure the policy documents are clear and do not conflict with any other documents, such as contracts, or, if you are part of a group, and group wide policy. It should be clearly stated what is purely discretionary and what is not.

Published: 08 Nov 2013

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