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Monday 21st March 2016
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The difference between policies and promises – a cautionary tale for employers
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In today's Workplace Bulletin:
- Employers reminded to ‘watch their words’
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 | A recent decision of the New South Wales Supreme Court of Appeal (McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James [2016] NSWCA 36 (9 March 2016)) highlights the Court’s approach to questions of whether employer policies form part of employment contracts. The decision is also a useful reminder not to make promises to your employees that you can’t keep. |
The court considered whether a redundancy policy of an employer was incorporated into an employee’s contract of employment. In considering this question, the court looked at the industry in which the employees were engaged, and the commercial reality of their engagement to determine whether a reasonable person in the position of the parties would conclude that they intended to be contractually bound by the policy’s terms.
Having done this, the court refused to find that the policy had been incorporated. According to the court, retrenchment on the grounds of a redundancy would not be one of the provisions that one would expect to find in a contract of employment even in the merchant banking industry – unless it was expressly written into the employment contract.
This decision highlights the Court’s reluctance to elevate the status of a company policy to a contractual promise, especially in circumstances where employees were commercially minded senior employees who would otherwise have the benefit of significant discretionary bonuses.
But what does this decision mean for the ‘average’ employer? |
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Julie Grant, Global IT Services
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The case provides a reminder to employers to be careful what they offer when seeking to encourage employees to remain in employment. In other words, don’t over-reach by making promises that you can’t, or will be unhappy, to keep.
The employees succeeded in their claims for severance payments after they established that the new employer had promised to honour the redundancy policies of the old employer if it retrenched them. This included a statement in an employee information pack on a proposed merger, which said: “in the case of redundancy, the Consortium has guaranteed to all staff that existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional”.
Regards,
 Charles PowerEditor–in–Chief Employment Law Practical Handbook
Does reading this send a shiver down your spine? Does it make you want to rush to check some of the ‘promises’ you may have made to employees… that you now regret?
Perhaps you’re just not sure. That’s understandable.
So, before you proceed any further, get hold of the Portner PressEmployment Law Handbook. The extensive chapters on Employment Contracts and Workplace Policies and Procedures will help you to avoid making costly mistakes now and in the future.
Written in plain English by employment law experts at Holding Redlich, it will give you advice and examples of what to include in an employment contract or a company policy.
Take an obligation-free trial today to see how the Employment Law Handbook is like having a legal expert on staff.
Do you have a colleague or friend you think will benefit from today’s Workplace Bulletin?
Knowledge is one of the biggest assets in any business. So why not forward this on to your friends and colleagues so they too can start taking advantage of these employment law tips?
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