The employer in Allen v TRW Systems Ltd, a non-unionised supplier of car parts, had a longstanding redundancy policy which contained provisions for enhanced payments.  The employee handbook stated: "In the event of redundancies the Redundancy Policy will be implemented.  A copy can be obtained from the HR department."

Employees' written statements contained no general statement that terms and conditions were to be found in the handbook, but they did refer to the handbook.  Following pressure at one of the employer's plants for union recognition, an open letter was sent to employees giving a "guarantee" that the redundancy policy "will remain in its entirety" until the next pay deal.  Similar statements were made in another letter to employees.

The claimants were made redundant after the closure of the plant but were not paid the enhanced payments.  Their claims were dismissed at the tribunal stage, on a basis that there was no express term that the redundancy policy was incorporated into their contracts of employment, nor was there an implied term that the policy would be applied.

The EAT allowed the claimants' appeal; the handbook was certainly capable of being a source of contractual obligation and the case was sent back to a new tribunal to consider whether it was in fact contractual.  The EAT emphasised that enhanced redundancy provisions were in the past a widely accepted feature of remuneration packages and are often found in handbooks rather than in terms and conditions.  The fact that they contain general statements about the approach to be adopted in the event of potential redundancies and, within the same document, quite specific provision as to enhanced payments, is not uncommon and does not mean that the specific provisions will not be found to be incorporated into employment contracts.

The EAT urged tribunals to "scrutinise with care" arguments by employers that payments which were intended to be part of remuneration packages (and were communicated as such) were merely matters of policy and discretion.  The EAT also made the point that when economic circumstances become difficult, employers and employees will inevitably disagree about the contractual status of policies; hence any statements made by employer and employee in their own interest during this time are not generally relevant to whether the policy had any binding effect; contractual status will have been acquired (if at all) long before the time of dispute.