Case law: Employer who promised employees the right to apply for voluntary redundancy breached contract by making them compulsorily redundant instead

Employers should take care what they say to employees about their rights leading up to possible redundancies, or risk their statements being treated as contractual promises which they must then deliver to those employees.

At the end of 2013, an employer posted a notice on its intranet with the heading 'Voluntary Redundancy (VR) Information and guidance for employees', which said:

  • The employer intended to offer a generous voluntary redundancy package during 2014/15 to 'affected' employees.
  • The affected employees would be contacted and invited to apply for voluntary redundancy.

However, in September 2014 some of the employees were told they would not be offered voluntary redundancy, but were to be made compulsorily redundant from the end of April 2015.

They claimed damages on the basis that the employer was in breach of contract by not allowing them to apply for voluntary redundancy. The employer said the employees had no contractual right to apply for voluntary redundancy, so there was no contract to breach, because:

  • The employer had only offered the enhanced voluntary redundancy package in one previous year and was unlikely to do so again after 2014/15. There was therefore no 'policy' giving rise to a contractual right.
  • It was only those employees invited to apply for voluntary redundancy who would be eligible for voluntary redundancy, and who had a contractual right to make the application.
  • The contractual right was limited to a right to make an application. Even if an application was made, there was no right to receive voluntary redundancy.
  • Employees within a pool of those whose roles were to be deleted had no right to apply for voluntary redundancy.

The Employment Appeal Tribunal ruled in the employees' favour, ruling that:

  • The employees' claim was that the employer had told them they could apply for voluntary redundancy, and then told them they could not. That was a breach of contract. It was irrelevant that there was no 'policy'. The proper focus was on what the employer had communicated to its employees.
  • The wording in the notice meant that 'eligible' and 'affected' employees were the same people. The notice had stated they would all be contacted and invited to apply for voluntary redundancy. The fact the employer would not necessarily grant them voluntary redundancy if they applied did not affect the employer's liability to invite them to do so (although it would be relevant to the issue of how much any damages for breach would be).
  • The employer had not said there was any restriction on the right to apply for voluntary redundancy.

Operative date

  • Now

Recommendation

  • Employers should take care what they say to employees about their rights leading up to possible redundancies, or risk making contractual promises that they are then bound to deliver to those employees

Case ref: Lynam & Anor v Birmingham City Council UKEAT/0072/17/JOJ

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