Are HR Policies binding on the Local Government

Mr Brendan TaylorEmployee Relations Advisor

16 November 2012

Ask the audience?

• If the Local Government breached an HR Policy what would be the legal cause of action?– Tort (e.g. Negligence, Nuisance)?– Breach of the Competition and Consumer Act

2010- Misleading or deceptive conduct?)– Breach of contract?– Unfair dismissal?– Adverse action?

Breach of Contract

Breach of Contract

• Employee will usually base their argument in breach of contract.

• Case examples where employees have been awarded damages because policies were incorporated into the employment contract.– Breach of a policy entitling cash payment on redundancy -

Riverwood International Australia v McCormick [2000] FCA 889

– Breach of a policy on commission - Akeemeena v Murray & Ors [2009] NSWSC 979).

– Breach of a policy on health and safety - Goldman Sachs JB Were and Sons v Nikolich [2007] FCAFC 120

How can policies create contractual obligations?

How can policies create contractual obligations?

Express Terms– Contractual terms may expressly state the

obligations of the parties.– Beware of using an express term stating that

the employee must “abide by” HR Policies.Riverwood International Australia v McCormick [2000]

FCA 889

– Consider an express term stating that policies are not contractual in nature.

Yousif v Commonwealth Bank of Australia [2010] FCAFC 8

How can policies create contractual obligations?

Implied Terms• In order to imply a term into a contract a term

must be:

– Reasonable and equitable– Necessary to give business efficacy to the contract– Be so obvious that it goes without saying (such as specific custom or

practice or implied by law)– Be capable of clear expression– Not be contradicted by an express term of the contract

BP Refinery (Westernport) Pty Limited v Hastings Shire Council (1977) 52 ALJR 20

Implied Mutual Trust and Confidence

• A body of jurisprudence that every Australian employment contract has a term implied which states:

“The employer has a duty to not, without reasonable and proper cause, act in a manner calculated to destroy mutual trust and confidence”

Malik v Bank of Credit and Commerce International (SA) (in liq) (1998) AC 20

• Malik is an English case not binding on Australian Courts.

Implied Mutual Trust and Confidence

• Up until now MTC mixed reviews in Australia– NSW Court of Appeal has acknowledged its existence

Russell v the Trustees of the Roman Catholic Church (2008) 72 NSWLR 559 (Full Court)

– Federal Court has in some cases doubted its existence.

McDonald v Parnell Laboratories (Aust) 2007 FCA 1903

(Buchan J)

– High Court has made an oblique reference to it.

Koehler v Cerebos (Australia) Limited [2005} HCA 15 (Majority)

Ground Breaking Case on MTC

• Barker v Commonwealth Bank of Australia [2012] FCA 942 – The Federal Court confirmed that all Australian

employment contracts do have an implied term of MTC.

– Senior Executive at CBA had an employment contract and the MTC term was implied into that contract

– CBA committed a “Serious Breach” of a HR redeployment policy which amounted to a breach of the implied term of MTC.

Hypotheticals

• Would a “Non Serious” breach of an HR policy amount to a breach of the implied term of MTC?

• Would the following clause in an employment contract be valid?

This employment contract expressly excludes the implied term of mutual trust and confidence

Policies (Aspirational Vs Promissory)

• In the Barker case Besanko J stated:

Each party expects that policies will be adhered to, subject to the fact that some of the statements are no more than aspirational or descriptive.

• If policies are merely aspirational statements, and the language is not promissory in nature, such policies will not be binding on the Employer

Goldman Sachs JB Were and Sons v Nikolich [2007] FCAFC 120

Policies (Aspirational Vs Promissory)

Harassment Policy

The Local Government’s culture and “family” approach means each person is able to work positively and is treated with respect and courtesy. It is within the context of our culture that all people within the Local Government team will work together to prevent any unwelcome, uninvited, and unwanted conduct which makes another team member feel offended, humiliated or intimidated in any work related situation and where that retain is reasonable in the circumstances

The professional behaviour and conduct of each team member is important. It is a reflection of the person, the Local Government and our attitude. Further information may be obtained from Human Resources.

– Does this policy contain binding obligations?

Policies (Aspirational Vs Promissory)

Health and Safety Policy

The Local Government will take every practicable step to provide and maintain a safe and healthy working environment for all people. Prevention is the most effective health and safety principle. Through a shared responsibility, co-operation and support from all people, we will realise our health and safety objectives and create a safe work environment for ourselves and our team. Each member of the team has a duty to take the care for their own health and safety and other team members affected by their actions.

• Does this policy contain binding obligations?

Policies (Aspirational Vs Promissory)

Grievance PolicyWe are committed to make sure that anyone who has a genuine concern will be supported and the issue will be handled with discretion.

The door is wide open at all times for people to discuss any issue, not only with Department Heads, Directors and Human Resources, but also with the Local Government CEO. Such discussions are welcome as the Local Government has been built on the principle that it is team with common interests and ideals. This interest extends beyond the range of career and business issues to more personal concerns.

We are committed to make sure that anyone who makes a genuine complaint will be able to discuss his concern confidentially, will be supported by the Local Government and is not penalised in any way.

• Does this policy contain binding obligations?

Practical Advice

Practical Advice

• Do include an express term in employment contract stating that policies are not contractual in nature.

• Do (if appropriate) draft policies in a descriptive and aspirational fashion (as opposed to putting defined obligations on the Local Government).

• If policies must put defined obligations on the Local Government, don’t commit the Local Government to things that cannot be done.

• Do make an effort to know your Local Government’s policies so that the Local Government can adhere to those policies when a situation arises.

Questions

• Any questions?