Solectron Scotland Ltd v. Roper & Ors

Factual and Procedural Background

This is an appeal against a decision of the Cardiff Employment Tribunal dated 14 February 2003. The Tribunal held that the Respondents (Applicants before the Tribunal) were entitled to enhanced redundancy terms under their employment contracts, originally conferred by their employer, Company A (BT), and that these terms transferred through two transfers of undertakings. Approximately 110 individuals were involved, most represented by Attorney Reade. Six individuals accepted compromise agreements, which are also subject to this appeal.

The Applicants were originally employed by Company A at its factory in The City. The enhanced redundancy terms were part of their contracts. In October 1990, the factory was transferred from Company A to Company B (STC/Nortel), with an undertaking that Company A’s terms would continue until October 1991. Unions contended these terms were contractual and should persist beyond that date.

Between 1992 and 1994, a redundancy exercise introduced different terms negotiated with the unions, but the Tribunal found no variation of the original terms resulted from this negotiation. Subsequent redundancy exercises occurred in 1997, 1998, and 1999 with slightly varied but similar terms, offered to volunteers who accepted them.

In 2000, a further transfer occurred from Company B to the Appellant (Company C, Solectron Scotland Ltd). About a year later, redundancies were made, prompting this dispute over redundancy terms.

The Appellant argued that the original Company A terms had changed due to union agreements (rejected) and custom and practice, and that those who signed full and final settlements or compromise agreements had waived their rights to the Company A terms.

Legal Issues Presented

1. Whether the enhanced redundancy terms originally conferred by Company A transferred through two transfers of undertakings to the current employer.
2. Whether the original redundancy terms were varied or extinguished by custom and practice or union agreements.
3. Whether compromise agreements signed by some employees effectively waived their rights to the enhanced redundancy terms, particularly in light of Regulation 12 of the Transfer of Undertakings (Protection of Employment) Regulations (TUPE).
4. Whether the Tribunal adequately explained its reasoning, especially concerning the custom and practice argument and the effect of compromise agreements.

Arguments of the Parties

Appellant's Arguments

• The original Company A redundancy terms had been varied or replaced by custom and practice, evidenced by subsequent redundancy exercises with different terms.
• Employees who signed full and final settlements or compromise agreements waived their rights to the original terms.
• The Tribunal failed to properly address the custom and practice argument, warranting a remittance for reconsideration.
• Regulation 12 of TUPE does not invalidate compromise agreements that simply waive enforcement rights, distinguishing this from exclusion of substantive rights.
• Employees accepted new terms by conduct, continuing to work without objection to the changed redundancy terms.

Respondents' Arguments

• The original Company A redundancy terms remained contractual and transferred through the undertakings.
• There was no effective variation by union agreements or custom and practice.
• The Tribunal found that those who signed full and final settlements did so on a basis that did not prejudice their Company A rights.
• Compromise agreements were void under Regulation 12 of TUPE if they purported to exclude transferred rights.
• Employees did not accept variation by conduct because redundancy terms only apply upon redundancy, not by continued employment.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Meek v City of Birmingham District Council [1987] IRLR 250	Requirement for Tribunal to provide adequate reasons for decisions.	The Appellant argued the Tribunal’s explanation was inadequate under this standard; the court found the Tribunal’s reasoning on some points lacking in clarity.
Young v Canadian Northern Railway Company [1931] AC 32 (P.C.)	Custom and practice must be reasonable, notorious, and certain to become contractual terms.	The court applied this principle to reject the Appellant’s claim that custom and practice had varied the redundancy terms.
Devonald v Rosser & Sons [1916] 2 KB 728	Custom must be reasonable and certain; precarious practices depending on employer’s will do not qualify.	Used to illustrate that the alleged custom and practice here was neither reasonable nor certain.
Duke v Reliance Systems [1982] IRLR 347	Customary terms can fix employment conditions such as retirement age.	Referenced to acknowledge that custom can create contractual terms, but only if well established.
Quinn v Calder Industrial Materials Ltd [1996] IRLR 126	Custom can establish redundancy terms binding on employees.	Referenced to confirm the principle that custom may create contractual redundancy terms, but not to support the Appellant’s case here.
Sagar v H Ridehalgh & Son Ltd [1931] 1 Ch 310	Employees may be bound by established customary terms even if unaware at recruitment.	Used to explain the nature of custom in employment contracts, but distinguished from the present facts.
Jones v Associated Tunnelling Co Ltd [1981] IRLR 477	Employees do not impliedly accept unilateral contract variations without immediate practical effect merely by continuing to work.	Applied to reject the argument that employees accepted new redundancy terms by continuing employment without objection.
Foreningen af Arbejdsledere i Danmark v Daddy's Dance Hall A/S [1988] ECR 739	Prohibition on varying terms solely by reason of a transfer under TUPE.	Established the principle that post-transfer variations to contracts due solely to transfer are void; the court analyzed its application to compromise agreements here.
Wilson v St. Helens Borough Council [1999] 2 AC 52	Application of TUPE principles regarding transfer and variation of employment contracts.	Used to support the interpretation of Regulation 12 and the limits on varying contracts post-transfer.
Ralton v Havering College of Further & Higher Education [2001] IRLR 738	Interpretation and application of TUPE restrictions on contract variation after transfer.	Referenced as part of the jurisprudence on TUPE and contract variations.
Martin v South Bank University (Advocate-General Opinion, 17 June 2003)	Extension of TUPE principles to variations mainly by reason of transfer.	Considered in discussion of whether compromise agreements were made solely or mainly by reason of transfer.
Prebon Marshall Yamane (UK) Ltd v Rose (3 December 2002)	When to remit cases for further reasons or reconsideration.	Referred to in deciding procedural handling of remitting the issue of compromise agreements.
Adebowale v Peninsula Business Services Ltd (20 January 2003)	Procedural jurisprudence on remittal for further Tribunal consideration.	Referenced similarly to Prebon Marshall Yamane regarding remittal.

Court's Reasoning and Analysis

The court carefully considered the history and nature of the redundancy terms and the transfers of undertakings. It reaffirmed that the original redundancy terms from Company A were contractual and transferred through the undertakings.

Regarding the custom and practice argument, the court rejected the Appellant’s claim that subsequent redundancy exercises and varying terms established a custom that displaced the original terms. It emphasized the legal requirement that custom must be reasonable, notorious, and certain, and that the employer must be bound by the custom as a matter of legal obligation, not mere policy. The court found no such established custom existed, noting the variability and employer discretion in the terms offered.

The court also rejected the argument that employees accepted new terms by continuing to work without objection, explaining that redundancy terms only apply upon redundancy and that mere continued employment does not imply acceptance of contract variation without immediate practical effect.

On the issue of compromise agreements, the court analyzed Regulation 12 of TUPE, which prohibits contract terms or agreements that exclude or limit the operation of Regulation 5 (rights transferring with the undertaking). The court rejected the Appellant’s submission that such agreements could validly waive enforcement rights without infringing the regulation. It held that preventing enforcement effectively excludes the right and is void under Regulation 12.

However, the court distinguished that the compromise agreements in this case were made to settle financial claims on termination rather than to vary ongoing contract terms. It found no principle or policy reason to prevent enforcement of such compromise agreements, as they do not alter future terms but resolve disputes over termination payments.

The court noted ambiguity in the Tribunal’s reasoning regarding whether the compromise agreements were made with an understanding that they would not defeat claims to the original terms. Due to insufficient findings, the court determined this issue remained unresolved and should be remitted for fresh consideration by a different Tribunal.

Holding and Implications

The court DISMISSED the ground of appeal concerning custom and practice, affirming that the original redundancy terms remained contractual and were not displaced by subsequent practice or conduct.

Regarding the compromise agreements, the court held that they are not invalidated by Regulation 12 of TUPE merely because they settle financial claims arising from termination. However, due to unclear findings on whether the agreements were understood not to waive rights to the original redundancy terms, the court REMITTED this issue for fresh hearing by a separate Tribunal.

The direct effect is that the majority of the appeal is dismissed, preserving the contractual redundancy rights as transferred. The unresolved issue concerning compromise agreements requires further Tribunal consideration. No new precedent was established beyond the application of existing principles to the facts.