Albion Automotive Ltd v Walker & Ors

A workplace policy may become an implied contractual term through custom and practice where, viewed objectively and in all the circumstances, the employer has demonstrated an intention to be contractually bound. Relevant matters include communication to employees, consistent application over a substantial period, the number and scale of occasions on which the policy was followed, automaticity, written formulation, collective agreement or negotiation, and employees’ reasonable expectations.

No separate category of evidence beyond the employer’s previous implementation and communications is invariably required. Whether the necessary intention should be inferred is primarily a question for the employment tribunal. An appellate court may not interfere where the tribunal applied the correct approach and its inference was reasonably open on the evidence.

Twenty-two employees made redundant from Albion Automotive Ltd’s Farington site claimed enhanced redundancy payments in place of their statutory entitlements. Similar enhanced terms had been used in six redundancy exercises between 1990 and 1994, affecting about 750 employees, and had been announced for two further exercises. The Employment Tribunal held that the terms had become contractual through custom and practice.

The Employment Appeal Tribunal dismissed the employer’s appeal in [2001] UKEAT 415_00_1210. The employer appealed to the Court of Appeal, arguing that the previous redundancy exercises could not, without additional evidence, establish an intention to undertake a continuing contractual obligation. The central issue was whether the tribunal had lawfully inferred from the employer’s conduct and communications that the enhanced terms bound it in future redundancy exercises.

1. Appeal dismissed unanimously. Peter Gibson LJ delivered the judgment, with which Potter LJ and Sir Murray Stuart-Smith agreed. The Employment Tribunal had made no error of law in concluding that the enhanced redundancy policy had become a contractual term through custom and practice.

2. The correct inquiry was whether all the circumstances supported an inference that the employer intended to be contractually bound. The considerations identified in Duke v Reliant Systems Ltd [1982] ICR 449 and Quinn v Calder Industrial Materials Ltd [1996] IRLR 126 were applicable. Communication and duration were important, but they formed part of a wider factual assessment rather than rigid requirements applied in isolation.

3. The employer’s contention that evidence additional to its conduct in previous redundancy exercises was necessarily required was rejected. The inference could properly arise from the whole course of conduct and the employer’s communications. The tribunal was entitled to consider that the enhanced terms had been communicated in writing, were well known, had operated consistently during six exercises involving three-quarters of the workforce, and had become automatic or virtually automatic from the employer’s perspective.

4. The tribunal could also rely on the policy’s origin in extensive negotiations, its subsequent use without renewed negotiation, its written formulation, employees’ reasonable expectations, and communications describing the terms as currently in operation. Taken together, those facts supported an intention to undertake a continuing obligation rather than merely to make discretionary payments in individual exercises. The isolated failure to apply the terms to five employees in 1996 did not make the tribunal’s overall inference legally impermissible.

5. The existence of the necessary contractual intention was an inference of fact for the Employment Tribunal. Since its conclusion was reasonably open on the primary facts and it had addressed the correct question, neither the Employment Appeal Tribunal nor the Court of Appeal had a basis for intervention. The stay was lifted and the successful employees were awarded summarily assessed costs.

1. Court of Appeal (Civil Division): In [2002] EWCA Civ 946, unanimously dismissed the employer’s appeal and upheld the conclusion that the enhanced redundancy terms had become contractual through custom and practice.

2. Employment Appeal Tribunal: In [2001] UKEAT 415_00_1210, dismissed the employer’s appeal and upheld the Employment Tribunal’s inference that the employer had demonstrated an intention to be contractually bound.

3. Employment Tribunal, Manchester: Held that the 22 employees were contractually entitled to enhanced redundancy terms and that the employer was in breach of contract.