Custom and Practice
12 September 2018

Contracts of employment – variation of contract terms – implied terms of employment

Employment terms can be varied in a number of different ways. Custom and practice is one of them. For an employment term to become implied by custom and practice it must be “reasonable, notorious and certain”.

To have the effect of varying a contract the custom or practice must be:

  • fair and not capricious;
  • well established over a period of time;
  • known to employees;
  • clear and unambiguous.

The longevity of a term itself does not necessarily mean the custom or practice has become a binding entitlement. This is firstly because the term must be known to staff. For instance, if details of a benefit are published in an easily accessible document such as a staff handbook this might point towards an implied term. However, if information about the benefit is set out in a restricted policy document available only to a small group of management or HR, this would indicate that the benefit is less likely to have become an implied term. Secondly, the employer must have behaved in such a way which suggests it felt a sense of legal obligation to provide the benefit.

If a tribunal is considering whether or not there is custom and practice it will ask is whether the circumstances demonstrate that the parties intended the term to form part of their contract? Can they be taken to have accepted that the practice has attained contractual status?

In Park Cakes v Shumba & Ors, 2013, the Court of Appeal considered the matter which concerned a disputed entitlement to an enhanced redundancy payment. The Court emphasised that the crucial task for a tribunal was to assess objectively whether the employer's conduct evidenced an intention to be bound by the term:

It went on to set out some useful questions to consider in such cases.

  • Over how long a period and on how many occasions, a, have the benefits in question been paid? The more often enhanced benefits have been paid, and the longer the period over which they have been paid, the more likely it is that employees will reasonably understand them to be paid as of right.
  • Do the benefits remain the same? Any inconsistency during the period relied on as establishing the custom is likely to be fatal to establishing custom and practice.
  • To what extent are the enhanced benefits publicised? Where the availability of enhanced benefits (for example, on redundancy) is published to the workforce generally, that will tend to convey that they are paid as a matter of obligation. In some circumstances publication to a trade union, or perhaps to a significant group of employees, may be enough to constitute publication to the workforce as a whole.
  • How are the terms described? If an employer clearly and consistently describes benefits in language that makes clear that they are offered as a matter of discretion - for example, by describing them as ex gratia - it is hard to see how the employees or their representatives could reasonably understand them to be contractual, however regularly they may be paid.
  • What does the express contract say? As a matter of ordinary contractual principles, no term should be implied, whether by custom or otherwise, which is inconsistent with the express terms of the contract, at least unless an intention to vary the relevant contractual term can be established.
  • Is there any ambiguity? The burden of establishing that a practice has become contractual is on the employee, and he or she will not be able to discharge it if the employer's practice is, viewed objectively, equally explicable on the basis that it is pursued as a matter of discretion rather than legal obligation.

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Although every effort has been made to ensure the accuracy of the information contained in this blog, nothing herein should be construed as giving advice and no responsibility will be taken for inaccuracies or errors.

Copyright © 2022 all rights reserved. You may copy or distribute this blog as long as this copyright notice and full information about contacting the author are attached. The author is Kate Russell of Russell HR Consulting Ltd.