Shumba & Ors v Park Cakes Ltd

A contractual entitlement may arise from an employer’s enhanced redundancy practice only where an objective assessment of all the circumstances supports an inference that the employer intended to be contractually bound. Consistent payment without exception over a substantial period is an important factor, but is not alone decisive. The relevant factors are not exhaustive and carry no prescribed weight.

An Employment Tribunal errs in law where it rejects uncontradicted, material evidence of consistent practice without rationally assessing it. Internal policies and collective discussions must be considered in their full evidential context. Where that error materially affected the result, the enhanced-payment claim must be reheard.

The Claimants, formerly section managers at a cake factory, were dismissed for redundancy in July 2009. Their employment had transferred from the Northern Foods group to the Respondent under the Transfer of Undertakings (Protection of Employment) Regulations 2006.

They claimed an enhanced redundancy payment as an implied contractual term established by custom and practice during the Northern Foods period. The Manchester Employment Tribunal, in a judgment dated 7 February 2011, rejected that claim. It found that the enhanced payments had not been shown to have been made without exception or automatically. The Tribunal upheld separate unfair-dismissal claims, which were not appealed.

The central issue on appeal was whether the Tribunal had rationally rejected the evidence that enhanced redundancy payments had consistently been made without exception, and whether its conclusion on the implied term could stand.

1. Appeal allowed by a majority. The Employment Tribunal erred in law in rejecting the Claimants’ case that enhanced redundancy payments had been made without exception for many years during the Northern Foods period. Its conclusion was a substantial factor in rejecting the alleged implied contractual term.

2. The fundamental inquiry is objective: whether all the circumstances in which an enhanced redundancy package was made known, or became known, support an inference that the employer intended to be contractually bound. Consistent payment without exception over a substantial period is an important consideration, but not a self-sufficient rule. The relevant considerations identified in Duke, Quinn and Albion are not exhaustive and have no fixed relative weight.

3. The Tribunal had not rationally addressed the critical evidence of Mr Streeter, a long-serving union representative, that enhanced payments were always made. That evidence was supported by the disclosed payment documents and by the temporary-workers agreement. The Respondent had adduced no direct evidence of an exception during the relevant period. The Tribunal could distinguish the additional £600 payment from the core enhanced redundancy terms, but it had not done so.

4. The internal policy for non-negotiated employees was, in ordinary language, a formal policy, although it could rationally be read as setting policy limits and managerial guidance. It was not decisive. Its significance had to be assessed with all the evidence, including the alleged unexceptional practice. Nor did employees’ awareness of a policy establish that it had been drawn to their attention in the relevant contractual sense.

5. Proof of consistent application does not automatically make every management policy contractual. The Employment Appeal Tribunal could not resolve the disputed factual issue itself. The enhanced-redundancy claims were therefore remitted for a complete rehearing before a freshly constituted Employment Tribunal, which was to assess the key witness’s credibility and the documentary evidence afresh.

• Employment Appeal Tribunal: By a majority, allowed the appeal against dismissal of the enhanced-redundancy claims and remitted those claims for rehearing before a freshly constituted Employment Tribunal.

• Employment Tribunal, Manchester: Judgment dated 7 February 2011. Rejected the contractual enhanced-redundancy claims. Upheld the Claimants’ unfair-dismissal claims; that part of the decision was not appealed.