The Claimants had been employed by the Respondent at a factory producing engine valves. A redundancy policy was approved by the plant's Advisory Council in 1999. The employees received a Statement of Terms and Conditions, along with an Employee Handbook. The Statement did not expressly incorporate the Handbook but was said to set out "main" terms and conditions and referred employees to the Handbook in relation to rules on e.g. holiday and sickness. The Statement said nothing about redundancy payments but the Handbook stated that in the event of redundancies "the Redundancy Policy will be implemented".
The Respondent then wrote an open letter to its employees, promising that the existing redundancy policy would not be re-negotiated until 2010. This was followed by a further letter re-iterating that redundancy policy negotiations would not take place until January 2011. In 2010, the Respondent closed the Stephenson plant, but failed to honour the redundancy policy. The tribunal found that the redundancy policy was not contractual – it was not referred to in the s.1 Statement and the employees had no reasonable expectation that it was.
The EAT noted that redundancy policies commonly included statements regarding the general approach to be taken by the employer, and specific provision as to enhanced redundancy payments. It noted that it is rare for a single document to be the exclusive source of contractual terms. More commonly, different of contractual entitlement would be dealt with by different documents. Terms may be incorporated by custom and practice, or indeed orally. How was it to be decided whether enhanced severance terms had been incorporated in one of these ways? After reviewing the authorities, the EAT considered that the fundamental question was whether the circumstances in which the enhanced redundancy package was known supported the inference that the employers intended to become contractually bound by it. The critical consideration was that that provision for redundancy payments had become, during the last generation, a widely accepted feature of an employee's remuneration package. Tribunals should scrutinise with care arguments by employers that payments which were intended to be part of an employee's remuneration package, once promised and communicated, were merely matters of policy.
The Tribunal had erred in failing to consider whether the Handbook was capable of being a source of contractual obligation. It contained an express promise that the Policy would be implemented. In addition, the employees had a reasonable expectation that it would be in light of the statements made to employees. The matter was accordingly remitted for reconsideration by a freshly constituted Tribunal.
Michael Ford acted for the Claimants, instructed by Neil Goss of Thompsons.
Case Summary written by Ezra MacDonald, Old Square Chambers.