A recent decision in the Federal Court highlights the importance of the content of company policy documents provided to employees and the need to ensure compliance with the processes and standards set out in such policy documents.

We recommend you carefully consider whether the terms of any policies or procedures that provide benefits to employees, or impose obligations on your business, are intended to be contractually binding on both you and your employees. It may be appropriate, for example, to clearly distinguish between “aspirational” statements and clear directions you expect employees to follow, or clear procedures that employees can reasonably expect your business to follow.

 

What this Means for Your Business

Employers should

• Conduct a thorough review of employment policies and contracts to examine whether the language is promissory
• Take particular care with OH&S and EEO/Harrassment policies because breach of contract under these policies could incur claims for substantial damages.
• Put procedures in place to ensure any employee complaints are investigated immediately and ensure the investigators are clear about their role ie not to attempt informal resolution.

Please find following a summary of the Federal Court decision:

NIKOLICH WARNING
CONSIDER YOUR POLICIES AND PROCEDURES

The recent decision of the full bench majority of the Federal Court in Goldman Sachs JB Were Services Pty Limited v Nikolich, confirms that employment policies may bind both employers and employees.

On 7 August 2007, the Federal Court upheld in a majority decision, the ruling by Justice Murray Wilcox that company, Goldman Sachs JB Were Services Pty Limited breached the terms of an employee’s employment contract contained in the company’s HR policy, that it maintain a safe and healthy workplace.

FACTS

The employee, Mr Nikolich was provided with a 119 page policy document entitled “Working With Us” (WWU) when he accepted an offer of employment with Goldman Sachs JB Were Services Pty Limited. The document contained policies about behavioural standards and managing issues. It included grievance handling procedures, strict policies against bullying and harassment and a code of conduct dealing with “integrity”. The WWU policy also included a commitment to take “every practicable step to provide and maintain a safe and healthy working environment”.

Following disputes with management about the allocation of work and clientele, Mr Nikolich formally complained to the company’s human resources section. While he alleged that he was subject to threats and intimidation, no immediate steps were taken to address his concerns. Goldman Sachs JB Were Services Pty Limited later wrote to Mr Nikolich advising that his concerns had been investigated, although no action had been taken in relation to any of the issues raised by him.

Mr Nikolich developed a depressive disorder and went on extended leave. Ultimately, his employment was terminated.

One of the claims brought by Mr Nikolich against the company, claimed that the WWU policy formed a term of his contract of employment. The company argued that the policy was “aspirational” and merely indicated its general philosophy and approach to employee relations. The company contended that the WWU policy was only intended to bind Mr Nikolich and not itself. Further, they claimed that the WWU policy was “simply a manifestation of its right to issue lawful and reasonable directions to its employees (including Mr Nikolich), and the corresponding obligation of employees to comply with such directions”.

DECISION

At first instance, Justice Wilcox found last year that the company had breached three express terms of the employment contract – that it provide a safe and healthy work environment, follow grievance procedures and prevent harassment.

The majority of the Federal Court have found that the company had breached one express term of the contract – that it take every practicable step to maintain a safe work environment.

A copy of the recent Federal Court decision can be downloaded via the following link: Goldman Sachs JB Were Services Pty Limited v Nikolich [2007] FCAFC 120 (7 August 2007)

To obtain further information about this decision or discuss how it might impact on your business, please contact Andrew Bland at[email protected].