Peacock Stores v Peregrine & Ors (Contract of Employment)

A contractual entitlement may be implied from an employer’s established practice of providing a benefit. The decisive question is whether, viewed objectively in all the circumstances, the employer’s words and conduct conveyed an intention that employees should receive the benefit as of right.

Once such a term is inferred, inconsistent later payments do not vary it unless the variation is agreed, expressly or by conduct from which agreement may properly be inferred. On appeal, challenges to the tribunal’s assessment of evidence and witness credibility succeed only where the conclusion is perverse.

Three former employees claimed that their contracts entitled them to redundancy payments calculated on statutory terms but without caps on weekly pay or years of service. The Employment Tribunal accepted that a long and consistent practice had implied that contractual term. It also allowed Mrs Matthews’s separate claim for accrued holiday pay, but dismissed Ms Norman’s because it found that she had not proved her personal entitlement.

Peacock Stores appealed against the enhanced redundancy award. Ms Norman cross-appealed against the dismissal of her holiday-pay claim. The central issues were whether the evidence entitled the Tribunal to infer and preserve the redundancy term, and whether the differing holiday-pay outcomes were perverse.

1. Both the appeal and the cross-appeal were dismissed. The Employment Judge was entitled to find that, by at least 2006, the employer’s established practice had implied a contractual entitlement to redundancy payments calculated without either statutory cap.

2. The applicable enquiry, consistently with Park Cakes Ltd v Shumba and others [2013] EWCA Civ 974, was objective. It was whether the employer’s conduct, by word or deed and in its surrounding context, conveyed that employees were entitled to the benefit as of right. Relevant considerations included the duration and consistency of the practice, communication to employees, contractual language and whether the conduct was equally consistent with a discretionary arrangement.

3. The Tribunal’s findings concerning the practice before 2006 were supported by accepted evidence. Its assessment of that evidence, including credibility and weight, disclosed neither a material factual error nor perversity. The EAT could not substitute its own assessment merely because another view of the evidence was possible.

4. Once the redundancy term had been agreed, departures from it could amount to breach unless the affected employees knowingly agreed to a variation. The later variable practice did not establish an agreed variation. There was no evidence of an express oral variation, and no consistent replacement practice from which agreement could be inferred.

5. For holiday pay, each claimant bore the burden of proving entitlement on the balance of probabilities. The Tribunal permissibly accepted Mrs Matthews’s evidence but rejected Ms Norman’s vague and unreliable evidence. That factual distinction was not perverse.

• Employment Appeal Tribunal: dismissed Peacock Stores’s appeal and Ms Norman’s cross-appeal.
• Employment Tribunal (Cardiff): on 27 March 2013, upheld the three employees’ contractual claims for enhanced redundancy payments; allowed Mrs Matthews’s holiday-pay claim; and dismissed Ms Norman’s holiday-pay claim.