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HR Policies: Are Employers creating rods for their own backs?

Employment Law

Most employers of any significant size will have workplace policies with which employees are expected to comply.  They often seek to regulate employee standards of conduct, disciplinary procedures, bullying and harassment procedures and other similar issues. Often, these are compiled in handbooks which are given to the employee at the commencement of their employment, along with a contract to sign.

The beauty of workplace policies is that, unlike contracts, they can be changed without the need to reach agreement with the employee.  This means that they are perfect for governing issues which the company wishes to maintain some flexibility over. It also provides an opportunity to adapt to changes in technology and the law.

However, employers may not be aware that, in circumstances where policies have not been handled correctly, courts have held that they have binding contractual effect on employers, and have ordered damages against employer companies when such companies have not complied with their own procedure.  This principle has been upheld, perhaps most prominently, in the decision of Goldman Sachs JB Were Services Pty Ltd v Nikolich.

To cite an example, if a company maintained a bullying and harassment procedure, whereby complaints could be made and action taken to prevent such conduct, an employee could potentially allege breach of contract in circumstances where the company failed to apply its own policy.  This was the issue which arose in the Nikolich decision.

Similarly, many companies have disciplinary procedures, often encapsulating the concept of ‘three strikes’, in which an employee is given a set number of warnings before they are dismissed.  There is no legal obligation to give three warnings; all that is required is that a fair and reasonable process be followed. What is fair and reasonable will vary, depending on the particular situation involved. If an employer breached their own policy which required three warnings, and dismissed a badly underperforming employee after 2 strikes, the employee would have a very clear case for unfair dismissal.  The company would be considered bound by its own policy and obliged to comply with it, even though that policy goes far beyond what is required by legislation.

Employers need to be aware that they will be held to comply with their own policies.  In short, it is crucial that policies contain guidelines which the employer is willing and able to comply with. It is equally important that all employees, and in particular management, are trained in the application of the policies so that everyone understands what is expected of them.

Please contact a member of our Employment Law Team if we can be of further assistance.