Garratt v Mirror Group Newspapers Ltd

An enhanced redundancy payment may be a contractual benefit conditional upon the employee entering a valid compromise agreement. Whether such a condition has contractual force through custom and practice depends on what the employer and employees, viewed as a group, expressly or clearly impliedly agreed. Relevant evidence includes the duration, frequency and consistency of the practice, employees’ knowledge and understanding, the communications made, and any written terms.

A collective agreement which addresses only the calculation of enhanced redundancy payments will not displace an established condition requiring a compromise agreement unless, construed against its factual background, it does so. The employee may choose to retain other claims, but cannot also require the conditional enhanced payment.

The appellant, a photographer employed by the respondent newspaper publisher, was dismissed for redundancy in 2006. He sought damages for the difference between statutory redundancy pay and an enhanced payment calculated under a collective agreement with his union.

The respondent offered the enhanced sum only if he signed a compromise agreement settling employment-related claims. He declined because he wished to pursue other issues. The Mayors and City of London County Court held that, by established custom and practice, signing such an agreement was an implied contractual condition of enhanced redundancy pay. It dismissed the claim.

The appeal raised whether that condition had become contractual, whether it survived the collective agreement incorporated into the appellant’s later contract, and whether the agreement independently conferred an unconditional enhanced payment.

1. Appeal dismissed. The court upheld the finding that the appellant’s contractual entitlement to enhanced redundancy pay was conditional upon signing a compromise agreement. He was entitled to choose whether to accept that bargain, but his contract did not entitle him both to the enhanced payment and to preserve the claims which the agreement would settle.

2. The proper inquiry for contractual incorporation by custom and practice is what the employer and employees, considered as a group, expressly or clearly impliedly agreed. The familiar indicia, including notice, duration, frequency, consistency, communications, expectations and written terms, are evidence directed to that question. A strict separation between the tests of reasonable, notorious and certain custom and a multi-factorial inquiry was unnecessary.

3. The evidence established an unvarying practice since 1993. Enhanced payments were offered in return for a compromise agreement, and no employee, union representative or adviser had challenged that condition. The judge was entitled to find widespread knowledge of it, including on the part of the appellant and the relevant union official. The condition was sufficiently certain and notorious, and was reasonable because final settlement was the quid pro quo for a payment above the statutory minimum.

4. The collective agreement was concerned with the calculation of enhanced redundancy payments. Read in its factual setting, it neither addressed nor displaced the established condition requiring a compromise agreement. Its later incorporation into the appellant’s contract therefore did not create an unconditional and more favourable entitlement. This construction was consistent with the approach to implication stated in Attorney General of Belize v Belize Telecom [2009] 1 WLR 1988.

5. The reference to payment for each completed year of service on the day the contract ceased identified the date by reference to which service was calculated. It did not prescribe payment independently of the compromise agreement.

• Court of Appeal (Civil Division): Dismissed the employee’s appeal and upheld the dismissal of his contractual claim: [2011] EWCA Civ 425.

• Mayors and City of London County Court: His Honour Judge Birtles held that the enhanced redundancy payment was subject to an implied contractual condition requiring a signed compromise agreement, and dismissed the claim.