CSC Computer Sciences Ltd v McAlinden & Ors

A contractual term may be inferred from custom and practice where the evidence, viewed objectively and as a whole, establishes agreement between employer and employees. The inquiry is not confined to identifying a unilateral policy or a precise moment of offer and acceptance. The relevant factors include the regularity, duration, communication, consistency and shared understanding of the practice.

A practice may remain sufficiently certain although payment is subject to an individual performance qualification or exceptional circumstances. An index-linked annual pay increase is capable of contractual incorporation. It is not merely aspirational or inherently unreasonable. An employment tribunal may make a factual finding that neither party precisely advanced, provided the parties had a fair opportunity to address the material issue and no injustice results.

Twenty-three employees claimed that CSC Computer Sciences Ltd had made unauthorised deductions from wages by failing to pay an annual increase reflecting the Retail Price Index from April 2010.

The employees had transferred from ITS to CSC in 2000 under the Transfer of Undertakings (Protection of Employment) Regulations. The Employment Tribunal rejected their case based on an express term, but held that a contractual entitlement to at least an RPI increase had crystallised through custom and practice during the continuing employment relationship.

CSC appealed on six grounds. It challenged the procedural fairness of the Tribunal's approach, the inference of contractual agreement, certainty, reasonableness, contractual aptitude and aspects of the evidence. The central issue was whether the Tribunal had erred in holding that the established pay practice had become contractual.

1. Appeal dismissed. The Employment Tribunal was entitled to find that the employees had a contractual right to a minimum annual RPI increase and that CSC's failure to pay it caused unlawful deductions from wages.

2. The proper inquiry, following [2002] EWCA Civ 946 and [2011] IRLR 91, is whether agreement between employer and employees is established expressly or by clear inference from the evidence as a whole. The factors bearing on custom and practice are inclusive, not exhaustive. A term inferred in this way is not an implied term in the conventional sense. It may be an express agreement whose original words or occasion can no longer be identified.

3. The employment relationship continued seamlessly after the transfer. CSC's sustained conduct, its communications describing a guaranteed increase, and its attempts to buy out or negotiate away the entitlement were objectively capable of demonstrating that both sides regarded the obligation as contractual. The employer's belief that a pre-transfer contractual right existed did not prevent a term from crystallising through subsequent custom and practice.

4. The term was sufficiently certain. A regular global RPI award could be qualified by performance or exceptional circumstances without ceasing to be a contractual practice. The isolated employees who received no increase did not undermine the finding, particularly where identified exceptions had an explanation and no performance basis was advanced against the claimants.

5. An obligation to make index-linked increases was neither inherently unreasonable nor merely aspirational. It was apt for contractual incorporation. The Tribunal was also entitled to identify the date at which the practice crystallised without procedural unfairness: the material question was whether the obligation existed in 2010, and CSC had a proper opportunity to meet that issue.

• Employment Appeal Tribunal: CSC's appeal was dismissed. The Tribunal upheld the Employment Tribunal's finding that the RPI pay practice had crystallised into a contractual right.
• Employment Tribunal: The employees' express-term case was rejected, but their claims for unauthorised deductions succeeded on the basis of a contractual term inferred from custom and practice.