Employment appeal tribunal rules on incorporation of enhanced terms

Clients of Employee Management Ltd's (http://www.employeemanagement.co.uk) HR outsourcing concerned about whether employees could be contractually entitled to a redundancy payment scheme written into their staff handbook but not referred to in their contract, will be interested by the case Allen v TRW Systems.

TRW Systems, a car parts manufacturer with one plant in the North East and another in the Midlands, agreed via a "works council" at the first-mentioned premises to mirror enhanced redundancy payments that had already been agreed at the unionised plant in the West Midlands.

The adopted mechanism was deemed clumsy and inelegant, consisting of a reference in the handbook to a written agreement and subsequent "promisory" correspondence. Nonetheless, it was sufficient to convince the EAT to overrule the employment judge in the first of the employment tribunals. In Albion Automotive v Walker, he had reached the conclusion that the absence of any mention of the policy in the employment contract meant that it had no legal effect, as a result of his rigorous application of the guidelines that the Court of Appeal had set out.

Clients of human resource consultants will be interested to read that it was held by the EAT that despite the failure to fully comply with some of the Albion provisions, the redundancy terms in the handbook were "apt for incorporation" into the contracts. For example, little evidence existed of frequent use of the mechanism, or of payment in accordance with it being automatic. There had also been a failure to follow the provisions of the handbook on one or two occasions.

However, significant evidence did exist of the employer's adoption of the scheme significantly influencing latter-stage wage negotiations. Clearly having a bearing on the EAT's thoughts was its concern that the employer, after making a series of promises, could not deny that the employees reasonably expected the company to act in accordance with such promises. It was held by the EAT that the enhanced redundancy scheme mentioned in the handbook could be enforced as a contract term.

This decision, as in any case on contractual incorporation, is fact specific. However, it does show that the courts are not completely wedded to rigid interpretation, which is perhaps more befitting for the contracts of senior executives than a collective context that would seem to call for a more flexible approach. The parts manufacturer seemed to want to rely on the scheme during wage negotiations, only to show little willingness to honour it when redundancies were needed. These circumstances marked the case out from those involving a more nebulous enhanced scheme between employer and employee.

This case demonstrates the need for organisations to have carefully drafted employment documentation in place in relation to such benefits as these. Employee Management Ltd (http://www.employeemanagement.co.uk)'s employment law specialists can help you to carefully consider and review how your contracts and handbook interrelate, in order to avoid unintended consequences.   

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