The recent bizarre treatment of the Labour Court’s  Deputy Chairman, Mr. Alan Haugh by the Department of Expenditure and Reform, when  refusing to renew his warrant, brought the subject of custom and practice to the fore again. As one independent source observed, there is neither a  policy nor custom and practice of limiting Chairmen or Deputy Chairmen at the Labour Court  to two terms.  Previous Deputy Chairmen have served various periods of time in the role, with the deputies either becoming Chairman or retiring. For example, a longstanding former Deputy Chairman (Caroline Jenkinson) served in the role for over 20 years, whilst a previous Chairman (Kevin Duffy) had been a Deputy Chairman for six years, before becoming Chairman for a period of 13 years. Related thereto, it has also become standard practice at the Workplace Relations Commission to automatically renew the warrants of newly-appointed Adjudication Officers. The fallout from the Department’s revised practice has not been widely well received and may yet prove not be the end of the matter. 

Indeed, already this year, there have been a number of consequential cases where ‘custom and practice’ has influenced third party decisions (e.g. on bonuses (ADJ-00047744), unfair  dismissal (ADJ-00048496) and the mandatory retirement age (ADJ-00048496)). 

The subject of ‘custom and practice’ has long been a source of contention in Irish industrial relations. Whilst it’s common for employers to try to ignore it in the face of preferred changes, it’s also  common for workers to try to retain traditional ways of doing things that are in their interests. The bottom line is that implied terms can become so notorious and fixed in stone, that over time they secure the status of  an understood and accepted contractual term. For employers, ignoring custom and practice or altering an existing contractual entitlement without an employee’s agreement – either individually or via a collective agreement – may well prove problematic.

Employees’ terms and conditions of employment are provided for in a contract, implied by custom and practice, incorporated via collective agreement or  necessitated by statute law. So, for the benefit of practitioners looking to  assess ‘custom and practice’ and/or to vary contractual terms, it is worth assessing their  legal status and  manner of  treatment at third party fora.

Contractual Status

The relevance of ‘custom and practice’ is based upon the fact that terms governing an employment relationship can be implied into a contract of employment. When determining whether a benefit has been elevated to contractual status, via ‘custom and practice’, the Courts tend to assess the frequency and duration that the benefit has been available. So, the longer the period and the higher the frequency of the  benefit, the more likely it is that employees can successfully contend that there is a right to it.

Put plainly, even if a term of employment is not expressly stated in the contract or other written sources, in certain circumstances it can be implied into contracts  via ‘custom and practice’. For guidance, the statutory adjudication bodies in Ireland have repeatedly relied on the U.K. Court of Appeal’s (C.A.) decision in Albion Automotive Ltd v Walker (2002 - EWCA Civ 946). This case held that an employer who made enhanced redundancy payments on the same basis for several years had created a ‘custom and practice’ by which the employer intended to be legally bound. In judgement, it listed the following as some of the relevant factors to be considered in such scenarios:

• the repeated practice, arrangement or policy was drawn to the attention of employees;
• the employer’s communication of the practice, arrangement or policy shows that the employer intended to be contractually bound by it;
• it was followed without exception for a substantial period;
• it was followed on a number of occasions (and, if so, how many); and/or
• the terms were consistently applied.
   

A 2014 High Court case in Ireland (Elmes v Vedanta Lisheen Mining  IEHC 73) also provides a good example of a superior court ruling on how ‘custom and practice’ - even where there are written contractual terms to the contrary - creates contractual rights. In summary, in this instance, the employees (successfully) claimed that written provisions had been overwritten in practice and that a right (to continuing sick pay) had effectively been implied into their contracts by virtue of ‘established custom and practice’. A similar approach has been adopted by other third-party fora, as reflected in the following year (2015), when the Labour Court held that ‘custom and practice’ should be regarded as equivalent to a collective agreement and that in the instant case ‘the current arrangements in that regard cannot be altered other than by agreement’ (LCR 20979).

Similar advice was issued by IBEC (the employers’ representative body)  to its members during the post-2008 economic recession, as it informed them that: ‘the unilateral revision of the terms of any contract is fraught at the best of times .. It is best to communicate these changes collectively, and where there is a strong practice of doing so within a company .. through a union’.

Power of Precedent

It is also noteworthy that though third parties are not obliged to follow the decisions or precedents established by other relevant fora, the demands of legal certainty dictate that they normally do so. That is, it is a generally accepted legal principle that similar cases lead to similar results (see Metock v Mins. for Justice [2008] IEHC 77 and Irish Trust Bank v Central Bank of Ireland 1975 WJSC-HC 1231).  In support thereof, in 2022 the Labour Court acknowledged that it: ‘.. should normally follow its own decisions and must follow the decisions of higher Courts’ (PWD2216). Hence, it is of considerable consequence that the contractual status of ‘custom and practice’ has long been acknowledged by third parties in Ireland, across a range of fora (for example, see: AD1487/2014; ADJ-00030932; ADJ-00034486; LCR16618; LCR16845; LCR17232; LCR18164; LCR18576; LCR19616; LCR20757; EDA1632; UD 858/1999; UD 1047/2013; DEC-E2012-086; and in the High Court judgement in Finnegan v J&E Davy, 26/1/2007 Unreported Smyth J.).

Directly related thereto has been the Labour Court’s rider to its recommendations in such scenarios, directing  parties to resolve their differences via negotiation, stating:

‘Although the company has the right to vary conditions, this must be done by negotiation ..’ (LCR 17232); ‘.. the parties should have discussions with a view to reaching agreement’ (LCR19616); ‘.. if the college wished to discontinue the practice, it should enter into discussions with the workers with a view to reaching an agreement to that effect. The Court therefore recommended the concession of the union’s claim’ (LCR16618); ‘.. any change to the arrangements should be negotiated and agreed between all of the parties to the original agreement’ (LCR16432); ‘further negotiations should take place’ (LCR16491) and ‘meet to regularise the practice, based on the experiences of both sides’ (LCR16845).

Notably, even if a benefit or perk seems  discretionary, the ‘custom and practice’ pertaining thereto is commonly taken into account in judgements. This materialises as employee(s) may well have reasonable expectations in respect of the benefit/perk,  that may be implied into the employment contract. Even where the employment contract provides for an employer’s discretion, it is apparent that this discretion must be exercised reasonably. If exercised unreasonably, the employer may well be held to be in breach of contract (see Cleary & Ors v B&Q Ireland Ltd [2016] IEHC 119).  In brief, attempts to unilaterally alter a contractual provision are fraught with risks, as the High Court held (in a retirement age dispute in 1993 - see Donegal County Council v Porter [1993] E.L.R. 101).

Contract Amendments 

As flagged by IBEC (see above), arising from such precedents, it is now widely acknowledged  that amendments to an employment contract must be agreed between the parties to the contract. Failure to obtain that agreement could result in a finding of  breach of contract. Directly related thereto, an employer has a duty to act reasonably in relation to its employees. So, if an employer chooses to change or end a long-standing ‘custom or practice’, they may well be deemed to be  in breach of the employment contract.

Urgent Change Required

Of course, it may be the case that there are exceptional reasons necessitating immediate or urgent decisions by employers relating to such revisions. That is, it is widely accepted that employers need to be flexible to change work practices over time (i.e. changing employees’ duties and/or location). However, this does not allow for unilateral changes to the core terms of employment contracts, unless: (a) there is a change in the law; (b) both parties consent to the change or (c) a contractual provision exists that allows for variation (though this is not necessarily a ‘carte blanche’ to be wilfully exploited). In the absence of such provisions, employers risk exposure to legal action if making unilateral variations. If the employee is not notified and/or does not consent to the terms of their contract being varied, they can pursue a trade dispute, a claim for damages, indirect discrimination and/or constructive dismissal (e.g. see UD165/2007, UD101/2008 and UD 82644/2009) or for an unlawful deduction.

The Price Tag

However, some succour may be secured by employers from precedents that enable them to legitimately deduct money from employees’ wages, if the repayment is in respect of  an overpayment of wages or expenses. That is, the recoupment of overpayments made in error can be legitimately justified (e.g. see ADJ-00031803 and PWD1822). However, the case for successfully securing repayments is not necessarily a ‘fait accompli’ (see AD145 and LCR 21325). Employers will also note (the rare) third party findings that have deemed a traditional ‘practice’ void and undeserving of compensation (see LCR17466; LCR17848; AD1562 and LCR21142 ). Though when ‘push comes to shove’ before a third party, a ‘quid pro quo’ or price tag is frequently applied, enabling the ‘custom and practice’ to be removed and the affected cohort to be compensated accordingly (e.g. see LCR 16806; LCR17138; LCR17206; LCR17185; LCR21721; LCR 21734; LCR22666; IR-SC- 00002701 and ADJ-00049830).

No ‘Custom and Practice’ at Dublin Airport

A noteworthy example of relevance to an alleged ‘custom and practice’ re. a withdrawn overpayment surfaced in 2024, when a claim by airfield technicians at Dublin Airport for public holiday entitlements above their contractual entitlement - that had been made in error over several years – was rejected by the Labour Court.

In this instance, the Court held that an ongoing entitlement to higher public holiday payments did not arise through custom and practice, adding that when such errors are made, the employer should be able to correct them. In this instance, up to  2010, most employees got 16 hours of pay or time off in lieu when rostered to work on a public holiday. But this was reduced in that year to 11 hours of pay or time off in lieu (TOIL) for all staff recruited after 2010. Fifteen technicians (represented by the Connect trade union) were appointed from 2019 (on post-2010 contracts), but received 16 hours of TOIL when rostered to work a standard day on a public holiday. The employer (the Dublin Airport Authority) told the Labour Court that this error only came to light in November 2023, when implementing a new time and attendance system. 

Up to then, the workers’ entitlements had been ‘incorrectly recorded manually’. Whilst the union accepted that the workers were receiving above their contractual entitlements, it asserted that the contractual provision was ‘void for want of prosecution’,  as the company had several opportunities to remedy the anomaly but never did. The union also told the Court that the issue was discussed when an individual was appointed in 2019. He was awarded 16 hours when working public holidays and that error was replicated for employees subsequently recruited. As a result, the union argued that ‘it has all the hallmarks of a policy decision rather than an error’. 

However, the Labour Court held that it was accepted that the entitlement was as set out in the new contract and that the higher payment ‘resulted from human error during a time when such entitlements were manually recorded’. As a result, the Court concluded that it ‘does not accept that an ongoing entitlement to 16 hours public holiday entitlement arises through custom and practice in the circumstances of this case. In the view of the Court where an error of this nature occurs, the employer should be able to correct that matter’. Accordingly, it recommended that the relevant arrangement continue until the end of 2024, after which the workers should receive the public holiday entitlements set out in their contract (LCR23064).

‘Custom and Practice’ at Conoco

Notably, a quid pro quo formula was applied by the Labour Court in 2008, when a dispute across a range of issues between the trade union SIPTU and the Cork-based oil refinery Conoco Phillips went before the Court. This included a dispute about interpretations of an agreement relating to time off for providing shift cover. The union argued that when a day worker provides shift cover, the agreed time off should not include Saturdays or Sundays (or Bank Holidays), on the basis that these days were already considered as rest days. This, it claimed, was in line with the provisions of an agreement and ‘custom and practice’. The company responded that it had incorrectly applied the agreement in the past, but now wished to correct it. The Court was satisfied that the company had allowed the disputed arrangement to operate for an extended period and ‘in so doing the Company gave credence to the belief that those arrangements were acceptable and in accordance with the Agreement’.

However, it also concluded that the disputed arrangement was out of line with industry  practice and wasn’t sustainable. Accordingly, it recommended that it cease and that the arrangement proposed by management apply, concluding that ‘having regard to the background circumstances in which this practice came about and was allowed to continue, the Court believes that some element of compensation should be provided to those affected’, recommending that they receive two additional days annual leave in the forthcoming 2 years as a once-off and non-recurring concession. (LCR19110).

Conclusion

In conclusion, it is apparent that when it comes to change, there is an  overarching obligation on employers to act reasonably, via some level of consultation or even compensation. Clearly, communication and agreement are key components for the avoidance of disputes. Those employers who face resistance to change should ensure that there are up to date procedures (e.g. grievance) in place to provide a framework to identify and address any reasons for resistance. Should circumstances lead to legal proceedings, it is notable that though third parties are not obliged to follow the decisions or precedents established by other relevant fora, the demands of legal certainty dictate that they normally do so. From the array of case precedents referenced above, it is clear that (frequently morally-binding) recommendations, entailing a ‘buy-out’ or ‘once-off’ compensatory award in respect of ‘custom and practice’, are common. For practitioners, the key question is often whether this is done via ‘in-house’ negotiation or a third-party judgement/recommendation. Preferably for all and ongoing relationships, the former option can prevail, allowing the employer to adhere to the Terms of Employment (Information) Acts 1994-2014,  thus providing employees with written confirmation of changes within 1 month of agreement being reached (see ADJ-00054048).