A term may be implied into a contract if it is used regularly (known as custom and practice). In Peacock Stores v Peregrine and ors, the Employment Appeal Tribunal (EAT) held that once a term has been agreed (whether actual or inferred) between the parties, the term will continue to apply until it is lawfully varied.

Basic facts

When a number of staff were made redundant between 1971 and 1996, Peacocks paid them on the basis of the full number of years they had worked and their actual wage, rather than applying the statutory cap to either of them. Although nothing was written down, the HR manager at the time said the awards were made on the basis of “custom and practice”.

The company made more people redundant between 1996 and 2006 when it seemed that the same policy was applied although the evidence was not entirely clear. Likewise, the evidence as to the position between 2006 and 2012 was not clear cut. In reply to an e-mail in February 2012 from the intending new owners about how redundancy pay was calculated, Peacocks admitted that it did not have a formal policy but as a “matter of practice”, it did not cap redundancy pay to the statutory weekly limit and tended not to apply the maximum number of weeks’ payment.

The claimants, who were made redundant between 2006 and 2012, argued that they were entitled to receive redundancy payments that were not capped in terms of the statutory weekly limit, nor the maximum number of weeks.

Tribunal decision

The employment judge held that making enhanced payments based on statutory terms but without a cap on either years of service or the amount of a weekly wage was applied consistently up until 2002.

As there was some evidence (albeit generalised) in relation to the position between 2002 and 2006, he held that a contractual term that redundancy payments would be made without either cap could be inferred during this period.

Although the evidence as to the position between 2006 and 2012 was inconsistent, he decided that the employees concerned were entitled to enhanced redundancy payments.

EAT Decision

The EAT said that, following the principles set out in Park Cakes Ltd v Shumba and ors (see weekly LELR 336), the question for the tribunal was whether the employer had, objectively viewed, either said or done things from which it could be inferred that they had agreed a term with their employees.

The judge was entitled to conclude from the evidence that it could be inferred from the conduct of the parties that a contract term about enhanced redundancy payments had been agreed by 2006. He was also entitled to find that that term would continue to apply unless there was some reason why it should not. Any change or departure from that term by the employer would represent a breach, unless the employees affected agreed to it.

As there were no circumstances from which the judge could infer that what had been agreed had been superseded by some other agreement, the judge had therefore been entitled to recognise that the variation in practice did not amount to a variation of the term.