6 June 2013 The legal status of workplace policies

By Laura Sowden, Solicitor


In Brief

This is an important question for employers and employees alike. Workplace policies can be contractually binding. Whether or not they are will depend on how any employee contract or agreement deals with workplace policies. 

When introducing workplace policies it is important for employers to consider whether or not they want their policies to have the force of contractual terms. Remember a breach of a contractual term can breach the contract itself and result in a claim for damages for breach of contract.  For this reason it is very important to seek advice regarding employment contracts and workplace policies.

Goldman Sachs JB Were Services Pty Limited v Nikolich [2007] FCAFC 120

Mr Nikolich brought an action on the basis the "Working With Us" document formed part of his employment contract and that in not following its policies Goldman Sachs had breached the contract and that breach had caused him a psychological injury. 

Chief Justice Black, and Justices Marshall and Jessup applied an objective test in the case and concluded that while the requirement to take "every practicable step to provide and maintain a safe and healthy work environment" was contractual, the harassment and grievance sections of the document were not.

Justice Marshall noted that Mr Nikolich's employment agreement stated he should comply as applicable to policies and practices and that also imposed responsibilities on the employer. It was significant that the duty to take "every practicable step to provide and maintain a safe and healthy work environment" mirrored statutory health and safety responsibilities for employers as well as the common law contractual duty.

It was relevant that sections of "Working With Us" were required to be signed by Mr Nikolich, the document was distributed upon the offer of employment and importantly the terminology of "every practicable step to provide and maintain a safe and healthy work environment" was accepted by the majority of the Full Court as contractual in nature.

Yousif v Commonwealth Bank of Australia (2010) 193 IR 212

Ms Yousif claimed that the Commonwealth Bank of Australia (CBA) had breached various express and implied terms of her contract of employment. She claimed that a policy entitled "Appointment to Roles" was contractual and had been breached by CBA. The trial judge had concluded that even if CBA's "Appointment to Roles" policy was incorporated into the contract of employment the policy had not been breached and so Ms Yousifs claim failed. His Honour had concluded that the policy was not part of the contract due to a disclaimer in the Human Resources Reference Manual document which stated policies did not form part of employment contracts.

Ms Yousif appealed that decision and the Full Court of the Federal Court accepted the first instance finding that the policy was not contractual. This case reveals that a disclaimer stating policies are not part of the employment contract can make all the difference.

Barker v Commonwealth Bank of Australia [2012] FCA 942

Through a series of events Mr Barker was made redundant by CBA. Mr Barker contended that CBA had not followed its policies in regard to its selection of him for redundancy and did not comply with its redeployment policy. In not following such policies Mr Barker argued CBA had breached the employment contract.

A document titled "HR Reference Manual" had, as in Yousif above, stated that the manual did not form part of any employment contract for an employee. The Court took evidence from witnesses who were employed by CBA which indicated they thought they had to abide by the policies as they were referred to in their employment contracts.

Justice Besanko concluded there was an implied term of mutual trust and confidence in the contract of employment between Mr Barker and CBA. His Honour then concluded a breach of the redeployment policy could constitute a breach of that implied term of mutual trust and confidence. So unlike in the Goldman Sachs case the Court implied a term of mutual trust and confidence instead of directly implying any contents of a workplace policy. The end result was however, that the employer was bound by the policy.

What does this mean?

These three cases clearly demonstrate that employers should seek advice when dealing with policies and contracts of employment.  Whether or not a policy has the force of a contractual term is a complex question about which employers should seek advice.

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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