Policy Manuals Take a Back Seat

Zafiriou v Saint-Gobain Administration Pty Ltd [2013] VSC 377 (24 July 2013)

Gramotnev v Queensland University of Technology [2013] QSC 158 (19 June 2013)

The importance of comprehensive policies and procedures has been called into question by two separate Supreme Court decisions. In both cases, employees tried to rely on the fact their employment contracts referred to the employer’s policies and used that to claim damages. However both the Victorian and Queensland Supreme Court decisions dismissed these views, preferring to place the policies of the employers on the periphery of the debate.

In the Victorian case, the employee argued that because the employer had not followed its own policy, its termination of his employment was invalid. Even though the policy included performance management steps, the employee’s contract nevertheless said the employment could be terminated on the giving of four weeks’ notice. If the employee’s case were valid, it would mean that the company’s policy had precedence over the express terms of the contract, something the court was not prepared to accept. It would in effect be an abrogation of the contract.

Meanwhile, in the Queensland decision, the employee claimed that the employer’s policies and procedures were incorporated into the employment contract and therefore were binding on the employer. Since in the employee’s view, the employer had failed to follow the procedures, his dismissal was invalid. But the court found the policies and procedures were not expressly incorporated into the contract and even if they were, they could not be considered contract terms because in many cases they were merely statements of intent, or aspiration, so incapable of being part of an employment contract.

These two cases are very important in that they highlight the difficulty of the many layers of regulation in the modern workplace. For decades, industrial tribunals, advisors and lawyers have encouraged employers to establish detailed policies and procedures in the workplace. Many enterprise agreements make reference to ‘abiding by policies’ as part of the terms of employment provisions. These decisions make the point that in the end, in a court of law, it will always be the express terms of the employment contract that will count the most.

Employers should not be dissuaded from establishing and maintaining policies and procedures by these decisions, but should nevertheless ensure the employment contracts cover the essentials. In these two cases, the court ruled against the employee relying on company policy and procedure. The reverse could be equally devastating for an employer, where it acts in accord with its policy and procedure but the employment contracts themselves do not support the action.