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Employers (and indeed their lawyers) take great care to ensure that they differentiate between contractual terms and policies. Policies are typically kept in the staff or employee handbook or on the company’s intranet. Usually, a policy will include ‘wriggle room’ ie words to the effect that the policy is a policy only and that the employer may deviate from it as and when it sees fit.

A recent case in the employment appeal tribunal (EAT) had to consider whether enhanced redundancy terms contained in an employer's redundancy policy were contractual.

The Claimants had been employed by the Respondent at a factory. The employees received a Statement of Terms and Conditions, along with an Employee Handbook. The Statement was said to set out main terms and conditions and referred employees to the Handbook in relation to rules eg on sickness. The Statement of Terms said nothing about redundancy payments but the Handbook stated that in the event of redundancies "the Redundancy Policy will be implemented".

The Respondent wrote to its employees promising that the existing redundancy policy would not be re-negotiated until 2010. This was followed by a further letter saying that redundancy policy negotiations would not take place until January 2011. In 2010, the Respondent closed the factory but failed to adhere to the redundancy policy.

The tribunal found that the redundancy policy was not contractual as it was not referred to in the statement of terms and conditions. Further the employees had no reasonable expectation that it was a contractual agreement.

The EAT found that redundancy policies commonly included statements regarding the general approach to be taken and specific provision as to enhanced redundancy payments. It also observed that different contractual entitlements would be dealt with by different documents. It also observed that contractual terms may be incorporated by custom and practice or orally.

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 a widely accepted feature of an employee's remuneration package.

The Tribunal had erred in failing to consider whether the Handbook was capable of being a source of contractual obligation. 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.

Moral of the story: check the wording of any staff handbook carefully and look to see if there are any policies lurking around that might cause a headache in the future. You may think that your handbook policies are not contractual, but the tribunal may disagree.

See Allen v TRW Systems Ltd UKEAT/0083/12/ZT

Sarah Rushton

Tel: 0207 539 4147


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