A legal guide to custom and practice for HR

20th Sep 2013

Many practitioners will have heard the phrase ‘custom and practice’ bandied around from time to time during the course of their career.

The difficulty however is understanding what is actually meant by the term ‘custom and practice’ and more importantly how to establish one. Hopefully this article will help the reader to understand what is meant by the term and when such a custom and practice might actually form part of the terms and conditions of employment.

The starting point

Usually most terms and conditions in the context of employment law are usually established in a written contract of employment setting out the express terms that are applicable for example pay, hours of work and overtime and rights to a bonus.  It is of course always best practice to record terms and conditions to ensure clarity and the intention of the parties and this should always be the starting point.

As an alternative there might be implied terms and conditions which exist where there are no written express terms as such, but where they are understood to exist because of the conduct and behaviour of the parties or because there is an expectation or assumption by both parties.

Such implied terms might be for example the well-established duty of mutual trust and confidence where the parties to the employment relationship rely on each other to be honest and trustworthy. Any breach of this type of implied term by the Employer could give rise to a legal remedy for a disgruntled employee.

When might a custom and practice argument arise?

In the absence of specific written terms or in the alternative implied terms then the parties might rely on the concept of custom and practice. A custom and practice is essentially a practice that has developed over a period of time or by arrangement that has never been specifically agreed between the employer and the employee but can be argued to have formed part of the terms and conditions of employment.

From the outset it is important to make the point that it can be difficult to establish that a custom and practice forming part of the terms and conditions of employment actually exists.   There is no fixed period of time during which a custom and practice can be established and this was the position in the authority of Henry and others –v- London General Transport Services Limited 2002 IRLR 473 CA.  

In this case it was unusually the employer who argued that there was a custom and practice in place where collective bargaining was agreed with the TGWU trade union which involved a cut in worker’s salaries and other changes to terms agreed in anticipation of a management buy-out.   

A wages act claim was issued two years after the changes had been implemented. The employer argued that the changes to wages had been accepted as a matter of custom and practice, even though some of the workers had suggested that they were working under protest and had not agreed to the changes.  

On appeal the Employment Appeal Tribunal and the Court of Appeal agreed that a tradition of collective bargaining between employers and a recognised trade union was sufficient to establish a custom and practice so that the changes could be incorporated into contacts of employment. It was also the position that the employees could not argue that the changes had not come into effect some two years after their implementation.

The following are also useful pointers in establishing that a custom and practice has been created where there is no written terms and conditions as such:-

  • Any custom and practice must be established and long-standing and followed by the parties over a long period of time.  If the custom and practice has been carried out only on a temporary basis then any employment tribunal claim is likely to be defeated.
  • The custom and practice needs to have been continuously applied on every occasion that it has arisen and above all it must be reasonable.
  • The custom and practice must also be certain and followed over a period of time, with very few if any exceptions.
  • The custom and practice must be known to the parties and communicated usually verbally or by carrying out the practice on each and every occasion with an expectation that it will be implemented.

Some examples

Some areas where a custom and practice might be said to have arisen is for example in the provision of overtime and overtime pay. This can arise where there are no written contractual terms but where the employer has always paid overtime at a specific rate with no exceptions, over a long period of time and so has created an expectation with the employee. There is an understanding between the parties that this is the position based on what has previously been implemented.

Another example where a custom and practice might arise is where the employer issues an annual bonus in circumstances where there is no written policy or written terms and conditions, and in the absence of any discretion. In addition such bonuses are payable each and every year as a matter of course, regardless of any specific criteria both good and bad times and are not set against any specific criteria.

In conclusion

It is usually going to be difficult to establish that there is a custom and practice in the workplace and in the event of any dispute it is always likely that this will be a matter for the employment tribunal to determine based upon all the facts and evidence.  

It is therefore important for employers to ensure that they have clear and concise written terms and conditions of employment and best practice policies in place which clarifies the position and which importantly makes it clear that such terms and conditions and policies are discretionary and can be changed by the employer. This should defeat having to defend timely and costly litigation in the employment tribunal to determine whether there is any custom and practice.

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