EMPLOYMENT


Certainty - contract of employment - redundancy payments - staff handbooks



Christopher Keeley v Fosroc International Ltd: CA (Civ Div) (Lords Justice Auld, Dyson, Sir Martin Nourse): 5 October 2006

An employee (K) appealed against a decision that he was not entitled to an enhanced redundancy payment on his dismissal for redundancy by the respondent former employer (F).



K's contract of employment incorporated by reference F's staff handbook. This contained a number of provisions, many of which were expressed in terms of rights and obligations, and were typical of contracts of employment between a large employer such as F and individual members of a largely unionised workforce.



A provision in the part of the handbook entitled 'employee benefits and rights' provided that employees with two or more years' continuous service were entitled to receive an enhanced redundancy payment from F. The provision made no reference to the manner of calculation.



The judge, relying on extraneous material, held that the provisions in the handbook were incorporated into K's contract of employment insofar as they were apt to be terms of a contract of employment, but that the enhanced redundancy payment provision was not so apt. The judge rejected K's alternative claim that he was entitled to such a payment by way of an implied term of his employment based on custom and practice, holding that no such term could be implied.



K submitted that the judge was not entitled to rely on extraneous material as an aid to construction of the express enhanced redundancy payment provision; that the provision was clearly apt for incorporation as a contractual term as it was part of K's remuneration package; that it used clear language of entitlement and it should be construed in its context in the handbook, particularly its location in the part of the handbook entitled employee benefits and rights; and as to the absence from the provision of a formula for its calculation, the reference to 'an enhanced redundancy payment' was sufficient identification of the means of calculation, given the evidence of clear understanding by the parties of the minimum applicable formula and F's admission in its defence of that formula.



Held, the issue for the judge was essentially one of construction of an acknowledged contract, the written terms of which were not in issue. The variously expressed views on both sides in the formulation and application of the provision were not admissible on that issue. They were potentially relevant and admissible only in the event of the failure of K's case on construction of the express provision and reliance on K's alternative case based on an implied term (Air Great Lakes PTY Ltd v KS Easter (Holdings) PTY Ltd (1985) 2 NSWLR 309 and Carmichael v National Power Plc 1999 1 WLR 2042 distinguished).



Where a contract of employment expressly incorporated an instrument such as a collective agreement or staff handbook, it did not necessarily follow that all the provisions in that instrument or document were apt to be terms of the contract. Some provisions, read in their context, may be declarations of an aspiration or policy falling short of a contractual undertaking (Alexander v Standard Telephones and Cables Ltd (No 2) 1991 IRLR 286 and Kaur v MG Rover Group Ltd 2004 EWCA Civ 1507, 2005 IRLR 40 considered).



It was necessary to consider in their respective contexts the incorporating words and the provision in question incorporated by them. In this case, the inclusion of the provision in the part of the handbook entitled 'employee benefits and rights' and its language of entitlement were strong pointers that it was intended to have contractual effect. Other sections in the handbook, providing entitlements in respect of annual leave, parental leave and paternity leave, were also part of the context in which the entitlement in the redundancy section fell to be considered.



In the redundancy section itself, the provisions for paid time off to look for work elsewhere and the right to appeal against dismissal were a close supporting context for concluding that statements of entitlement in that section were intended to have contractual effect. Such matters were clearly to be treated differently from the distinct procedural or discretionary matters in the section going to the selection of employees for redundancy. Accordingly, as a matter of construction, the provision was apt to be a contractual term.

The provision was not vitiated by uncertainty with regard to the formula for calculating redundancy payment, since it identified by reference the means by which the redundancy payment would be calculable when such payments fell to be paid.





Appeal allowed.



Timothy Brennan QC, Akash Nawbatt (instructed by Abel-Brown) for the appellant; Geoffrey Cox QC, Richard Davidson (instructed by Decherts) for the respondent.