Enhanced Redundancy Payments

Previous enhanced redundancy payments can become contractually binding through custom and practice says the Court of Appeal in Shumba & others v Park Cakes Ltd.

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. The employment tribunal had upheld the claims of unfair dismissal but dismissed the claims in relation to the redundancy payments. Even though there appeared to be evidence of past payments on at least seven occasions, the tribunal concluded that it was "unable to infer that the enhanced terms were paid without exception".

The EAT and the Court of Appeal both decided 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. Therefore the case had to be remitted for re-hearing by a different tribunal. The Court of Appeal provides helpful guidance in its judgment on when contractual rights concerning enhanced redundancy benefits may arise through custom and practice.