United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR I TRUSCOTT (One of Her Majesty's Counsel) Instructed by: Messrs MacRoberts Solicitors 152 Bath Street Glasgow G2 4TB
For the Respondents	MR T BRENNAN (One of Her Majesty's Counsel) Instructed by: Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon London SW19 1SE


 


JUDGE A WAKEFIELD

1. This is an appeal by Albion Automotive Ltd against a Decision of an Employment Tribunal sitting at Manchester and sent to the parties on 2 February 2000, following a three day hearing in the previous month. By that Decision it was found that the Appellant was in breach of contract with each of the twenty two Respondents, who had been the original Applicants, in failing on termination of their respective contracts of employment by reason of redundancy, to pay an enhanced redundancy payment.
2. The history of the matter is set out in detailed and lengthy findings of fact in paragraph 6 of the Employment Tribunal Decision. Those findings are not challenged. It was contended on behalf of the Respondents before the Employment Tribunal on the basis of that factual background that enhanced redundancy terms paid by the Appellant, or its predecessor as the Respondents' employers, since early 1990 on the six occasions on which voluntary or compulsory redundancies have arisen up to September 1993, had become an entitlement by reason of a term to that effect becoming part of the individual contracts of employment of employees whose employment continued.
3. That contention was denied before the Employment Tribunal by the Appellant. It pointed to an absence of any express commitment to pay such terms other than on each one of the six particular occasions, when agreement was reached with the employees who were leaving. Having set out these arguments in the Decision, the Employment Tribunal then went on in paragraphs 10 and 11 as follows:

"10 In this case none of the applicants had a written contract of employment or a statement of his terms and conditions of employment. Each year negotiations have taken place between the company and the trade unions concerning terms and conditions and any agreements reached are recorded in writing. It would appear that the discussion of redundancy terms has never formed a part of the annual negotiating exercises and thus the collective agreements are silent upon this issue. However, we do not find that the absence of such terms in a collective agreement must necessarily lead us to conclude that there are no contractual terms with regard to redundancy in existence."

And then moving to part of paragraph 11:

"11…….it is common ground in this case that the real issue is whether a contractual entitlement arises by reason of custom and practice."

The Tribunal then goes on to deal with two authorities which I will come to in due course.

4. The Tribunal then at paragraph 12 referred to ten factors or pointers to which they had paid particular regard in reaching their conclusion as to contractual entitlement. These are lengthy, but need to be stated in full since they are the crux of the Tribunal Decision. They say this:

"12 In deciding whether the enhanced redundancy terms have become a term of the applicant's contract of employment on the grounds that it is an established custom and practice we have had regard to all of the relevant evidence in this case. However, we consider it appropriate to highlight certain issues which we have had particular regard to, namely:-

(a) we are satisfied that the availability of the enhanced redundancy terms has been drawn to the attention of the employees by the company in writing and that both the policy and the terms thereof were well known to all employees at Farington.

(b) we are satisfied that the policy has been followed for a substantial period of time. Clearly it was followed in all the redundancy exercises which took place from 1990 to 1994. During this period approximately 750 employees or 75% of the Farington workforce had been made redundant and all 750 employees have been able to take advantage of the enhanced redundancy terms. The only time in which the policy was not followed involved the dismissal of 5 employees in 1996.

(c) the policy was followed in respect of 6 redundancy exercises and it was proposed that it would be followed in respect of 2 other redundancy exercises which were subsequently cancelled.

( d) originally the enhanced redundancy terms were to be limited to those employees who were made redundant by reason of the closure of the BX facility. However the policy was later applied to all employees who were made redundant over the next four years. Clearly the terms of the policy had been consistently applied and all employees who were made redundant between 1990 and 1994 were allowed to take advantage of the enhanced redundancy terms.

(e) We are satisfied that the policy was first introduced following a period of protracted negotiations with the recognised trade unions. However, in later exercises the enhanced terms were simply applied or proposed to be applied by the company without the requirement of further reference to, or negotiations with, the trade unions.

(f) we are satisfied that all employees including the applicants had a reasonable expectation that the enhanced redundancy payments would be made.

(g) we are satisfied that the terms of the policy had clearly been reduced to writing. Indeed the terms are set out by the company at divider 137m of the bundle and the terms are also set out in a document (which has probably been prepared on behalf of the unions) and which can be seen at divider 153 of the bundles.

(h) although there is no evidence that any employees actually entered into employment on the faith of an expectation that enhanced terms would be applied we consider that this factor is of little relevance, particularly because all of the applicants commenced their employment before 1990 when the enhanced terms were introduced.

(i) we are satisfied that on some occasions and in particular in relation to the later exercises that the payment of the enhanced redundancy terms, as opposed to the redundancy exercises themselves, was not specifically authorised. Indeed, we find that in relation to at least the last five exercises or proposed exercises the payment of enhanced redundancy terms became automatic or virtually automatic from the company's point of view. However even if we had found that specific authorisation had taken place on every occasion this would not have caused us to reach a different decision having regard to all of the other factors in this case.

(j) we are satisfied that the nature of the communication of the policy to the employees supports the inference that the company intended to be contractually bound by it. For example, in the May 1993 newsletter it is stated that "the redundancy terms which will apply to these redundancies are those which are currently in operation". We consider that by reason of the fact that the company used such words it is proper for us to infer that the company intended to be contractually bound by the enhanced redundancy terms policy. Indeed we find that the evidence as a whole can properly lead us to infer that in respect of at least the last five redundancy or proposed redundancy exercises from September 1991 to December 1993 the company intended to be contractually bound by the enhanced redundancy terms policy."

They then set out the conclusion in the final paragraph, and it is this:

"13. Having regard to the facts of this case and to the relevant legal principles, we are satisfied that the enhanced redundancy terms whereby redundant employees will receive £1,000 for each completed year of service and £90 for each further completed month of service have become a term of the applicants' contracts of employment on the ground that it is an established custom and practice."

5. This appeal is based on an alleged lacuna in the reasoning of the Employment Tribunal in that there was no fact found, nor any that could have been found from the evidence, from which an intention could properly be inferred on the part of the Appellant to commit to paying the enhanced redundancy package on future occasions as opposed to the particular occasion of each of the six redundancy exercises engaged in between early 1990 and late 1993.
6. Although we were also addressed on behalf of the Appellant on the law as to implied terms and it was pointed out - correctly - that the present situation does not satisfy the necessity, business efficacy, custom of trade or other tests of such implication, we are satisfied, and indeed it appeared to be finally accepted by Counsel for the Appellant, that what we are looking at here is not the implication of the term which the parties have not considered, nor specifically agreed. What is at issue is whether or not the term as to the enhanced redundancy package had, as a result of what occurred prior to the Respondents' redundancies in January 1999, in fact become incorporated as a term in the individual contracts.
7. In the case of Duke v Reliance Systems Limited [1982] ICR 447 the Employment Appeal Tribunal considered the question of the correct retiring age for a female employee whose contract of employment was silent as to this. In giving the judgment Mr Justice Browne- Wilkinson, as he then was, said at paragraph 9 of the judgment:

"A policy adopted by management, unilaterally, cannot become a term of the employees' contracts on the grounds that it is an established custom and practice unless it is at least shown that the policy has been brought to the attention of the employees or has been followed without exception for a substantial period."

That case was relied upon in Quinn -v-Calder Industrial Materials Limited [1996] IRLR 126, a case on its facts more similar to the present, being concerned with redundancy policy. In Quinn the Employment Appeal Tribunal found that the policy in question had not been incorporated into the contract but it was pointed out by Lord Coulsfield, giving the judgment in the Employment Appeal Tribunal that by using the words "at least" in the quotation I have just given from the Duke case, Mr Justice Browne Wilkinson had shown that the two factors mentioned were not the only ones to be regarded. As I recently referred to in this judgment, the Employment Tribunal in this case set out in paragraph 12 numerous factors, all of which we consider relevant, to which they had regard.

8. In this present case the only matter in the factual background of the implementation of the redundancy policy which has made us pause is that in 1996, shortly after the present Appellant became the Respondents' employer by acquiring the worksite, five employees were made redundant and they received only a statutory redundancy payment. This was dealt with in paragraph 6 of the Employment Tribunal findings of fact as follows:

"(t) in 1996 a further redundancy exercise took place in which 5 employees were made redundant. These employees did not receive an enhanced redundancy payment but instead they received a statutory redundancy payment together with pay in lieu of notice. None of the 5 employees took action against the respondent either in the Employment Tribunal or in the County Court albeit the limitation period in respect of the latter has yet to expire. The respondent contends that the failure to take legal action is an indication that those employees and their representatives accepted that there was no contractual right to receive an enhanced redundancy payment. The applicant's witnesses in the present applications claim that it was argued on behalf of those dismissed in 1996 that they did have a contractual right to receive an enhanced redundancy payment. Moreover they, or at least some of them, were advised that they should take legal action but they declined to do so. We find that the fact that the five employees dismissed in 1996 failed to take legal action is of little, if any, assistance when deciding if the present applicants have a contractual entitlement to receive an enhanced redundancy payment."

We do not think that approach can be criticised.

9. Having considered carefully the Employment Tribunal reasoning and findings and having read the written submissions and listened to the oral submissions of Counsel of both parties today, we are quite unable to say that there was any lacuna or flaw in the reasoning of the Employment Tribunal. It was not necessary for that Tribunal to find an express or specific commitment by the Appellant to the enhanced package in the future.
10. The Employment Tribunal's conclusion was that in the light of all the factors they did rely on, quite correctly in our view, the Appellant, and its predecessors as the Respondents' employers, had demonstrated such an intention to be bound that there was a term to that effect incorporated in the Respondents' contracts of employment. That finding was one properly open to them on the facts and, in our view, cannot be said to be perverse. The appeal is dismissed.