CSC Computer Sciences Ltd v McAlinden & Ors

The Court of Appeal dismissed an appeal against a decision of the Employment Appeal Tribunal upholding a finding of the Employment Tribunal that the employer had made unlawful deductions from wages contrary to Part II of the Employment Rights Act 1996 by failing to pay annual increases linked to the retail prices index (RPI). The Tribunal had implied a contractual term in favour of the claimants based on the employer's consistent practice and communications after the TUPE transfer, applying ordinary principles for terms implied by custom, practice or conduct as explained in Park Cakes Ltd v Shumba and related authorities. The judge found that CSC consistently paid RPI-linked increases to the ex-ITS employees from 2001 to 2007, that management believed itself contractually obliged to do so, and that that belief and the contemporaneous documents and briefings communicated an entitlement to employees. The Court of Appeal held that the finding was properly based on objective communications and conduct and that any subjective mistake on the employer's part did not undermine the objective inference of an implied contractual right.

This was an employment law appeal about whether employees who transferred to CSC under TUPE were contractually entitled to an annual salary increase calculated by reference to RPI. The claimants were 23 ex-ITS employees whose ITS contracts provided for annual salary reviews. After transfer to CSC in 2000, CSC paid RPI-linked increases to the ex-ITS group for most years between 2001 and 2007 but paid lower increases in 2008 and thereafter. The claimants brought proceedings alleging unlawful deductions from wages under Part II of the Employment Rights Act 1996, relying in the alternative on (a) an express contractual term and (b) an implied term arising from custom, practice and conduct. The Employment Tribunal rejected an express term but found an implied term based on consistent practice, contemporaneous documents and communications (including management briefings and emails) and the employer's separate treatment of the ex-ITS group. The Employment Appeal Tribunal upheld that decision. On appeal to the Court of Appeal the appellant argued inter alia that the Employment Tribunal had impermissibly relied on the employer's subjective belief and that a mistaken belief could not give rise to a contractual obligation. The Court analysed the relevant principles for implying terms from custom and practice (referring to Park Cakes Ltd v Shumba, Garratt and Solectron), emphasising the objective question of what the employees reasonably understood from employer conduct and words. The court concluded that the Tribunal had adequate evidence to find that the employer's conduct and communications had conveyed a contractual entitlement to RPI increases and that any subjective mistake by management was irrelevant to that objective conclusion. The appeal was dismissed and the matter was remitted for remedy and procedural matters at the Employment Tribunal.

• Nature of claim: unlawful deductions from wages under Part II of the Employment Rights Act 1996 (failure to pay RPI-linked annual increases).
• Issues framed: (i) whether an express contractual right existed (rejected below and not pursued on appeal); (ii) whether a contractual term was to be implied by custom, practice or conduct; (iii) whether employer subjective mistake undermined the implication of a contractual term.
• Court’s reasoning: the Tribunal applied ordinary contractual principles for implication, found consistent practice and communications over a substantial period, and concluded objectively that employees would have understood there was a contractual entitlement; the Court of Appeal endorsed that approach and rejected the argument that a mistaken subjective belief on the employer’s part prevented an implied term arising.

Appeal dismissed. The Court of Appeal held that the Employment Tribunal had correctly applied the legal principles for implying terms from custom, practice or conduct and had sufficient evidence (consistent payments, contemporaneous documents and communications, separate treatment of the ex-ITS group) to infer an implied contractual entitlement to RPI-linked annual increases. The employer's alleged subjective mistake as to the pre-transfer position did not prevent an objective finding that employees had been led to expect a contractual right.

Appeal to the Employment Appeal Tribunal (Langstaff P) from the Employment Tribunal sitting at Manchester (Employment Judge Robertson) UKEAT/0252/12/LA; EAT decision upheld by the Court of Appeal, neutral citation [2013] EWCA Civ 1435.