Below is a revamped article we first published in 2017. Nine years later, its message still holds true.
Why?
Because in 2024 the High Court effectively confirmed that an employer was liable for $1.44 million for breaching its own policy in terminating an employee’s employment.
Introduction
Well-intended employment policies can leave employers legally unstuck. Here are the top mistakes we see employers make with their policies.
Trying to help managers
Many workplace policies and procedures are drafted to give line managers a roadmap when navigating a particular (sometimes tricky) situation.
The textbook example is a disciplinary policy that maps out the best practice process a line manager should follow before deciding whether to dismiss an employee for poor performance or misconduct.
There are two problems with this approach.
First, line managers often don’t follow policies anyway.
Second, an employer’s failure to follow its own policy is not only embarrassing, but it can also result in an otherwise ‘fair’ dismissal being unfair under the Fair Work Act 2009 (Cth).
If an employer wishes to help line managers get their ducks in a row when handling disciplinary processes, there are better ways to achieve this.
Making policies too complex
When it comes to policies, simplicity is a feature, not a flaw.
Whilst some complexity may be necessary for certain policies (for example, anti-discrimination policies), employers should aim to make employment policies as simple as possible.
The best policies we see in our practice simply tell employees what they must and must not do. Importantly, they do not impose unnecessary burdens on employers that stretch far beyond what the law requires. Better yet, they impose no obligation on employers at all, except where doing so is strictly necessary.
Incorporating policies into employment contracts
Most employers do not set out to make their policies and procedures contractually binding. Sometimes, they do exactly that without realising it.
If a policy forms part of an employee’s contract and the employer breaches that policy, the employee who suffers loss or damage may have a claim for breach of contract.
The cases make it clear that whether a policy has been incorporated into an employment contract usually boils down to the language used in the contract and the policy.
- Employment contracts: Contracts that adopt merely descriptive language when referring to policies are less likely to create contractual obligations (Lloyd v Healthscope Operations Pty Ltd [2021] VSCA 327). By contrast, mandatory language such as “must”, “abide by”, “governed by” or “in accordance with” often points towards incorporation (see, for example, Vision Australia Ltd v Elisha [2024] HCA 50).
- Policies and procedures: Courts are more likely to find incorporation where a policy contains promissory language that creates clear mutual obligations between the employer and employee (Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCAFC 177). In those circumstances, the implication is difficult to displace unless the contract and/or policies contain express term(s) disclaiming incorporation.
Employers should tread carefully when drafting employment contracts and policies. If a policy is not intended to be contractually binding, employers may consider including express terms in the employment contract to deal with the issue of incorporation.
Adam Colquhoun (Principal) and Grace Foo (Lawyer)
This article is general information only. It is not legal advice. If you need legal advice about implementing or updating your workplace policies, please contact us.
