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‘Custom and Practice’ Can Add to Employment Contract Terms

In a clear reminder that not every contractual term is written and that obligations may develop over time through ‘custom and practice’, the Court of Appeal has directed a fresh employment tribunal (ET) hearing of four unfairly dismissed bakery workers’ claims for enhanced redundancy packages.

The workers succeeded in unfair dismissal claims before the ET, but arguments that they were contractually entitled to double the redundancy payments required by statute, as well as a lump sum of £600, were rejected. The latter decision was later overturned by the Employment Appeal Tribunal (EAT) which ordered a freshly-constituted ET to reconsider the contractual issue at the heart of the case.

It was submitted by the workers’ lawyers that, although their employment contracts contained no explicit provision for the enhanced redundancy payments claimed, an obligation on their employer to pay such sums had arisen as a result of ‘custom and practice’ and long-established policy at the factory where they worked.

The employer challenged the EAT’s decision, insisting that the ET had been entitled to reach the conclusion that it did. However, in dismissing the challenge, the Court found that there had been a material flaw in the ET’s reasoning that led to its finding that enhanced redundancy benefits had not always been paid in the past.

After also pinpointing other unsatisfactory aspects of the ET’s decision, the Court declined to resolve the contractual issue itself.  Despite the substantial delay and expense that this would cause, the Court ruled that fairness demanded that the issue be remitted to the ET for consideration afresh.