Work­place Poli­cies: Direc­tives or Con­trac­tu­al Terms

In Brief

Most employ­ers have now have imple­ment­ed work­place poli­cies, whether they are address­ing dis­crim­i­na­tion, use of com­pa­ny vehi­cles or health and safe­ty. While poli­cies are often treat­ed as pro­vid­ing direc­tions from an employ­er the issue of their sta­tus is a more com­pli­cat­ed one. Work­place poli­cies can actu­al­ly have the force of con­trac­tu­al terms. This is high­ly sig­nif­i­cant as employ­ers not just employ­ees are bound by con­trac­tu­al terms. A breach of a con­trac­tu­al term by an employ­er can breach the con­tract itself and result in a claim by the employ­ee for damages.

Exam­ple 1 – a con­trac­tu­al term in a pol­i­cy document:

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

In this case Mr Nikolich brought an action on the basis the Work­ing With Us” pol­i­cy 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 pol­i­cy 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 with applic­a­ble 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.

Exam­ple 2 – Pol­i­cy not con­trac­tu­al due to disclaimer

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 hav­ing a dis­claimer which states poli­cies are not part of the employ­ment con­tract can make all the difference.

Exam­ple 3 – terms of pol­i­cy con­trac­tu­al in effect as they echo com­mon law con­tract principles

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 rede­ploy­ment policy.

What does this mean?

When intro­duc­ing or review­ing work­place poli­cies it is impor­tant for employ­ers to con­sid­er whether those poli­cies should have the force of con­trac­tu­al terms. Poli­cies with con­trac­tu­al force are more dif­fi­cult to amend, as employ­ee agree­ment is required to amend them, unlike poli­cies in the form of direc­tives. For this rea­son it may be best for employ­ers to main­tain poli­cies as direc­tives and avoid giv­ing them the force of con­trac­tu­al terms. One sim­ple way to attempt to do this is to include a dis­claimer in work­place poli­cies that they are not con­trac­tu­al terms.

These three cas­es demon­strate that it may be wise for employ­ers to seek advice when deal­ing with poli­cies and con­tracts of employ­ment. For fur­ther infor­ma­tion, please contact: