The Court of Appeal, in Garratt v Mirror Group Newspapers (MGN), held that there was an implied term requiring redundant employees to enter into a compromise agreement to be entitled to an enhanced redundancy payment.

A collective agreement between MGN and the British Association of Journalists (BAJ) provided for an enhanced redundancy payment of two weeks' basic pay per year of completed service. That collective agreement was incorporated into Mr Garratt's contract of employment. However, neither Mr Garratt's contract of employment nor the collective agreement referred to the enhanced redundancy payment being conditional on the signing of a compromise agreement.  Because Mr Garratt refused to enter into a compromise agreement due to "outstanding issues" he had with MGN, he received a payment that was £30,192 less than his entitlement under the collective agreement.

The Court of Appeal upheld MGN's argument that there was an implied term requiring all employees to sign a compromise agreement to be entitled to an enhanced redundancy payment.

The reasons for the Court of Appeal's decision were that:

  • every employee offered a redundancy package since 1993 had signed a compromise agreement;
  • it was "very well established" within the workforce that a compromise agreement had to be signed before an enhanced redundancy payment would be made;
  • the BAJ official was aware that entitlement to an enhanced redundancy payment was based on entering into a compromise agreement and did not raise this as an issue when the collective agreement was being negotiated with MGN; and
  • the implied term was reasonable, as Mr Garratt had the freedom to choose between entering into a compromise agreement or accepting a lower payment and pursuing any possible claims in the Employment Tribunal, but not the right to pursue both options.

Impact on employers

  • Employers should ensure that contractual terms are clearly specified in writing.
  • Employers seeking to rely on implied terms will require a policy that either has been drawn to the attention of the employees or has been followed without exception for a substantial period.
  • Where ex gratia payments are offered, it should be made clear if such payments are linked to the signing of a compromise agreement.
  • Although this may be a useful decision for employers, the facts of the case are fairly unusual in that every single employee made redundant since 1993 had signed a compromise agreement.

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