Previously Paid Enhanced Redundancy Payments May be Contractually Binding

The Court of Appeal in Shumba & others v Park Cakes Ltd confirmed that enhanced redundancy payments may become contractually binding through custom and practice.

The Claimants, who had been subject to a TUPE transfer, were dismissed for redundancy. They claimed that they were unfairly dismissed and that they were entitled to enhanced redundancy pay on the basis that enhanced payments had been made over the years before the TUPE transfer. It was initially claimed that there was an express contractual entitlement to the enhanced benefits but that claim was not pursued and the entitlement was said to arise as a matter of custom and practice. The employment tribunal upheld the claims of unfair dismissal but the claims in relation to the redundancy payments were dismissed. Notwithstanding evidence in relation to past payments, the tribunal stated that it was “unable to infer that the enhanced terms were paid without exception”.

The Court of Appeal upheld the decision of the EAT and held that the employment tribunal’s failure to find that the enhanced redundancy benefits had been paid in the past on at least seven occasions was a material flaw in its reasoning. Accordingly, the case had to be remitted for re-hearing by a different tribunal.

At paragraph 36 of the Judgment, the Court of Appeal provides helpful guidance on when contractual rights concerning enhanced redundancy benefits may arise through custom and practice.