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Can enhanced redundancy payments be contractual on the basis of custom and practice?

In Park Cakes Ltd v Shumba & Others, four employees who were dismissed by reason of redundancy brought claims for unfair dismissal and enhanced redundancy payments. They claimed that their entitlement to receive enhanced redundancy payments arose out of custom and practice rather than as a matter of express contractual entitlement.

Park Cakes had operated a formal redundancy scheme with enhanced terms and payments were made for many years whenever redundancies occurred. The scheme was well known to workers generally, however, Park Cakes argued that the enhanced redundancy payments were a matter of policy, not a matter of contractual entitlement.

The employees’ claims were originally dismissed by the Employment Tribunal but the Court of Appeal held that the case should be remitted to a fresh tribunal to decide whether or not the employees had an implied contractual right to enhanced redundancy payments based on custom and practice.

The Court of Appeal gave some guidance on when enhanced redundancy payments may be deemed to be contractual by way of custom and practice and stated that a number of factors should be taken into account, including whether the benefits are always the same, the extent to which the enhanced benefits are published generally, how the terms are described and on how many occasions and over how long a period the benefits in question have been paid.

It will be interesting to see the decision of the freshly remitted tribunal once they reach their judgement.

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