August 2007 Issue 60

EMPLOYMENT BRIEFLY

Full Bench Upholds Decision: Company policy part of employment contract

On 7 August 2007, the Full Bench of the Federal Court of Australia (“FCA”) upheld the decision of a trial judge to award an employee, Mr Nikolich, more than $500,000 in damages. It was found his employer, Goldman Sachs JBWere Pty Ltd (“the Firm”), had breached its contract of employment by failing to act in accordance with policies dealing with occupational health and safety and resolving workplace grievances, which had been set out in their policy document.

Mr Nikolich had worked as an associate investment advisor for the Firm from May 2000. At that time, he accepted an offer of employment by letter and had in his possession a document entitled “Working With Us”, which had been given to him around the time that he was first offered employment with the Firm.

This comprehensive document outlined the Firm’s policies for dealing with a number of issues, including occupational health and safety and resolving workplace grievances. It also outlined the Firm’s Code of Conduct.

In July 2003, Mr Nikolich sent a letter to the Firm’s Human Resources Manager in relation to a request made to his supervisor to reallocate certain clients away from him. The letter also discussed that supervisor’s subsequent conduct towards him, which was said to include “malicious personal attacks and threatening and disturbing actions”.

When the human resources manager failed to follow up and investigate the matter, Mr Nikolich became increasingly distressed by the conduct of his supervisor.

As a result, he suffered a psychological injury and took leave from work from December 2003 until January 2004. He continued in employment until August 2004 and did not return to work after this time.

In December 2004, the Firm terminated Mr Nikolich’s employment as it considered that he did not intend to, or was not able to, return to work in the foreseeable future or at all due to his psychological injury.

In early 2005, Mr Nikolich commenced proceedings in the FCA claiming that the Firm had terminated his employment in contravention of the Workplace Relations Act 1996 (Cth) (“the Act”) as it then stood, as well as claiming that the Firm had:

breached the Trade Practices Act 1974 (Cth); and/or
made negligent misstatements; and
breached the contract of employment.

It was submitted by Mr Nikolich that a phrase contained with the document entitled “Working With Us” was a term of his employment. He claimed that the Firm had breached his contract by failing to “take every practicable step to provide and maintain a safe and healthy work environment for all people” as was stated in the “Working With Us” document.

In turn, the Firm argued that the document did not constitute a term or condition of Mr Nikolich’s contract of employment, as it was “merely aspirational” in its purpose.

Decision

In a split majority decision, the Full Bench of the FCA concluded that the Firm had breached the contract of employment by delaying the handling of Mr Nikolich’s allegation that he had been intimidated and threatened by fellow employees.

Although the Full Bench acknowledged that the Firm’s statement to “take every practicable step to provide and maintain a safe and healthy work environment…” could be regarded as “merely aspirational”, the trial judge was found to be correct in holding that it was a binding term of the contract of employment.

The failure of the Firm’s human resources manager to adequately investigate or follow up on Mr Nikolich’s written complaint was held to be a breach of his contract of employment, and the Full Bench upheld the amount of damages to be awarded at $515,000.

Implications for Employers

This is a very important decision for all employers whose contracts refer to company policies. It demonstrates that the Courts are prepared to regard statements made within policies as terms and conditions of employment when such policies can be linked with an employee’s engagement. In this instance, it was enough that the policy document was presented to Mr Nikolich around the same time as his letter of employment.

Accordingly, it is important that employers are mindful of the wording and obligations set out in company contracts and policies, as they may be held by a Court to be binding contractual obligations.

Policies such as those written for occupational health and safety, harassment and grievance resolution should not contain statements that the organisation does not intend to be bound by. In short, statements made in such documents should state how things actually are, not how you would like them to be. They must accurately represent your employment practises.

If breached, depending on circumstances and jurisdictions, it may be possible for an employee or ex-employee to sue for damages resulting from such a breach, such was the basis of Mr Nikolich’s claim.

This decision highlights the importance of careful drafting and regular review of contracts, policies and procedures to ensure that policies are not read into contracts of employment, unless it is the employer’s express wish to do so.

We encourage employers to seek further business specific advice when drafting contracts of employment and company policies and procedures, and offer and “audit” service at a fixed fee to our clients with the aim of ensuring such a situation will not arise.

For further information about issues covered in this article, please contact Belinda Richards on 8217 1337 or
E-mail brichards@normans.com.au.

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