Some more examples from the cases

In Pellowe v Pendragon PLC [1999] UKEAT/804/98/0106, the EAT found no implied contractual promise to pay enhanced redundancy pay, although the same practice had been followed without individual decision or discretion, for more than ten years involving more than 100 redundancies. The main reason why the employees lost their claim was because the practice was a management policy that had not been communicated to employees.

In Quinn v Calder Industrial Materials [1996] IRLR 126, there was no custom and practice for enhanced redundancy pay because each time, management met to decide whether to make an enhanced payment, pointing to a discretion.

In Solectron Scotland Limited v Roper [2004] IRLR 4, employees had become entitled through custom and practice to enhanced redundancy terms, known as the “BT terms”. Following a TUPE transfer, their new employer tried to argue that these established rights had been lost because of a later period during which the new employer failed to honour the BT terms during redundancies. Solectron argued that this failure to pay the BT terms set up a new custom and practice, replacing the previously published practice. The EAT rejected this argument, and said it was unlikely that a custom or practice could ever vary existing, more favourable contractual rights.

When deciding whether or not to exercise discretion to pay enhanced redundancy, management decisions must not be “irrational or perverse” (Commerzbank v Keen [2007] IRLR 132 CA). In practice, challenging a decision on the basis that it is irrational or perverse is very difficult.

Whether a scheme really is discretionary is a question of interpreting the contract and any collective agreement to decide exactly what the parties must be taken to have intended (Powermarque v Sykes EAT/0954/03).

Tribunals will enforce clear contractual promises to make redundancy payments, even where changed circumstances result in the employer significantly losing out. For an example see Arkley v Sea Fish Industry Authority UKEAT/0505/09/101.