Implied Terms and Redundancy Payments

27 March 2014

Can the consistent practice of an employer calculating redundancy payments without the statutory caps convert into a contractual right for future practice?

Yes, held the EAT in Peacock Stores v Peregrine.

With thanks to Daniel Barnett’s employment law bulletin which summarises the facts of the case:

The employer had routinely paid redundancy pay to staff in accordance with the statutory redundancy scheme, except for the statutory caps relating to length of service and the amount of weekly pay being disapplied.

The burden of proof fell on the claimant to show that there was a contractual entitlement to the uncapped payments, which was a question of fact. The former head of HR's evidence was accepted, that calculation of redundancy payment in the above manner was ""most definitely custom and practice".

The Judge concluded that "there was 'a consistently applied and well understood policy of enhanced redundancy payments' and 'it is probable that remained the situation until 2002 when Mr Thomas was made redundant'". There was no evidence to the contrary.

Once the position was reached that a contractual right to an uncapped redundancy payment was to be implied by custom and practice, a departure from that term by the employer would represent a breach.