The recent decision in Allen & Ors v TRW Systems Ltd from the Employment Appeals Tribunal (EAT) has provided guidance on the status of a statement in an employee handbook which makes provision for enhanced redundancy payments.

The case concerned an employer, TRW, who had agreed that an enhanced package would be paid to employees beyond the statutory minimum in the event of redundancy. This agreement was formalised in a redundancy policy document which was available on demand from HR.

However, this redundancy policy was never adopted into the employee's statement of terms and conditions of employment, which made no mention of the policy. The redundancy policy was referred to in the employee handbook but was not reproduced in full. Despite this the HR manager of TRW had written to the employees on three occasions where he had made reference to the redundancy policy. The full policy was only available from HR.

Subsequently a redundancy programme took place. A decision was made at senior management level not to make the enhanced payments as laid down in the policy to those being made redundant. This then became the subject of dispute, with TRW attempting to argue that the redundancy policy had not been adopted into the employee's contract. Therefore TRW argued that they were not contractually obliged to make an enhanced payment.

The Employment Tribunal found in favour of TRW. The Tribunal placed weight on the fact that there was no reference within the employee's statement of terms to the redundancy policy. The employee handbook was capable of being incorporated into the statement of terms, but where this had occurred it would have been done so expressly. Furthermore, the Tribunal considered that the policy had not been applied consistently and therefore concluded that the policy was to operate on a voluntary basis and that there was no contractual requirement on TRW to make the enhanced payments. The policy was found to be more of a statement of what might happen rather than what would happen in every case.

This decision was appealed to the EAT. The EAT found in favour of the employees. They stated that, while there may be a statement of terms and conditions, this is not required to cover all contractual matters. There may be other provisions outwith the statement of terms that still have contractual force.  If the enhanced redundancy package had been created with the expectation that the employer would be contractually bound by it, then it could form part of the contract regardless of whether the provision was contained in the main statement of terms and conditions. An employee handbook was capable of containing contractual provisions. The further correspondence the employees had received from TRW referring to the redundancy policy also gave the employees a legitimate expectation that the policy formed part of their contract.

This case illustrates that the terms that define an employment relationship do not always have to be contained in the written statement of terms and conditions. Employee handbooks and other related documents are capable of containing contractual provisions. This is something that bears consideration for employers when considering staff handbooks and other policy documents.