Garratt v Mirror Group Newspapers 2011 EWCA Civ 425

Mr Garratt worked with Mirror Group Newspapers from January 1989 to February 2006 when he was made redundant.  He claimed an enhanced redundancy entitlement of two weeks’ pay for each year of service.  He contended he was entitled to this payment as a consequence of a collective agreement of 2002 reached between the British Association of Journalists being the union to which he belonged as a member and MGM which was incorporated to his current individual contract of employment.  MGM was prepared to give Mr Garratt an enhanced redundancy but only on the basis that he signed on termination a compromise agreement to the effect that he accepted the payment in full and final settlement of all claims against MGM and its employees. 

Because of issues outstanding between Mr Garratt and MGM he was not prepared to sign that agreement with the result that MGM was only prepared to pay him his statutory entitlement.  As this was less than he would have received under the collective agreement, he started proceedings to recover the difference by way of damages for breach of contract.  The Court held that he was only entitled to an enhanced redundancy payment on receipt of a signed compromise agreement and his claim was dismissed,  even though the collective agreement contained the provisions as to redundancy without reference to the need to sign a compromise agreement.  The BAJ had never queried the use of compromise agreements and those who were made redundant were aware of the mechanics of the redundancy process.  The signing of a compromise agreement was a matter of standard practice and of universal application.   

The fact that the collective agreement did not cover this aspect did not alter the conditionality of the payment.  There was no intention to create a freestanding right for individuals to be entitled to a payment without a compromise agreement.  The agreement simply related to the level of payment that would be made when a redundancy was made and a compromise agreement signed.   

Mr Garratt was offered a termination payment of £80,343.  He did not accept this and he was paid a total of £49,965.  He was unsuccessful in his claim.  The case turned on whether MGM could establish the existence of an implied term that an enhanced redundancy payment was payable only on receipt of a compromise agreement.  The Court’s attention was drawn to the case of Albion Automatic Limited v Walker 2002 EWCA Civ 946 which also concerned a dispute as to whether a contractual right to an enhanced redundancy payment was established by employees.  The judge there considered the factors to be taken into account when considering whether a policy had acquired contractual status.  These factors included:  

  • whether the policy was drawn to the attention of the employees;
  • whether it was followed without exception for a substantial period;  
  • the number of occasions on which it was followed;  
  • whether payments were made automatically;  
  • whether the nature of communication of the policy supported the inference that the employers intended to be contractually bound;  
  • whether the policy was adopted by agreement;  
  • whether employees had a reasonable expectation that the enhanced payment would be made;  
  • whether terms were incorporated in a written agreement;  
  • whether the terms were consistently applied.  

The Court held that if Mr Garratt wanted to obtain a payment in excess of the statutory redundancy terms he had to enter into a compromise agreement.  He retained total freedom of choice.  What he could not do was to obtain the enhanced redundancy pay without entering into a compromise agreement.  The Court held that the term could be implied because no employee had been paid an enhanced redundancy payment without signing a compromise agreement for 15 years or more.  The requirement to sign a compromise was expressly notified to all employees identified as redundant and the signing of such an agreement was an automatic consequence of being dismissed for redundancy. 

Key point:  Employers should make the basis of any enhanced redundancy or severance terms clear to the employees so that any consequential discussions and negotiations are open and transparent.