In what circumstances does a workplace policy form part of the terms of an employment contract, thereby creating binding obligations on both the employer and its employees? A recent decision of the Federal Circuit and Family Court of Australia which held that a company policy did not form part of the employee’s contract highlights the complexities that surround this area of law (Robinson v Pilbara Iron Company (Services) Pty Ltd (No 2) [2023] FedCFamC2G 593 (Robinson v PIC). We explore the details of the case below.
The employment contract and workplace policy
In a letter of offer from Pilbara Iron Company (Services) Pty Ltd (the Company) to its former employee Mr David Robinson, it was provided that:
“The terms and conditions of your employment are recorded in the attached Schedule of Remuneration, Benefits and Employment Conditions.” (the Employment Contract).
It was an express term of the Employment Contract under the major heading “Policies, procedures and standards” and the minor heading “Policies and Procedures” that:
“The benefits provided to you under our policies are discretionary in nature and do not form part of your contract of employment.” (Express Term)
The policies provided for a Fair Treatment System (the FTS Policy) of review for employees which enabled employees to seek review of decisions made by the Company, which in this case included the decision to terminate the employment of Mr Robinson.
Mr Robinson’s Application
Following the termination of his employment with the Company, Mr Robinson brought an application under the Fair Work Act 2009 (Cth) (the FW Act) seeking declarations that:
the Fair Treatment System under the FTS Policy was a safety net contractual entitlement under the FW Act.
The Applicant was not given fair treatment or the benefit of the Fair Treatment System; and
The Respondent’s failure to comply with the Applicant’s safety net contractual entitlement was a contravention of the Fair Work Act.
To make determinations on these declarations sought, the Court ordered that a preliminary question be separately determined, which was whether the Employment Contract incorporated the terms of the FTS Policy (the Preliminary Question).
Did the FTS Policy form part of the Employment Contract?
The Court answered the Preliminary Question in the negative and held that the FTS Policy had not been incorporated into the Employment Contract. The Court reviewed leading authorities on the question and applied the principles enunciated in the High Court case of Workpac Pty Ltd v Rossato (2021) 271 CLR 456 (Rossato). In Rossato, the High Court made the following observations regarding principles of contractual interpretation (without limit):
The role of the Court is to enforce binding contractual promises;
The express contractual terms of a contract characterise the legal relationship between employer and employee; and
Express terms of a contract must be given effect unless they are contrary to statute.
In the absence of an argument advanced by Mr Robinson that the Express Term of the Employment Contract was contrary to any statute, the Court applied the principles of Rossato and held that:
the plain meaning of the Express Term was that any benefit provided to an employee under a policy of PIC was not part of the Employment Contract;
the Court would give effect to the Express Term in the absence of an argument advanced by Mr Robinson that the Express term was contrary to statute; and
as a result of the above findings of fact, the FTS Policy did not form part of the Employment Contract.
Effect of the Court’s decision
In finding that the FTS Policy did not form part of the Employment Contract, there was no obligation on the Company to comply with the terms of the FTS Policy. In turn, the Company was not obliged to review the decision to terminate the employment of Mr Robinson under the Fair Treatment System of the policy. On the contrary, the Express Term conferred the Company with a unilateral discretion to vary any of the benefits provided by the FTS Policy to any of its employees, including Mr Robinson. This meant that the Company was not contractually required to provide any benefits of the FTS Policy, and ultimately any benefits under the FTS Policy were not conferred to Mr Robinson.
Key takeaways
Conventionally, employers have sought to enforce the obligations created in workplace policy documents by relying on a breach of a relevant policy as justification for disciplinary consequences against an employee. However, the decision in Robinson v PIC demonstrates an ongoing tendency for employees to argue that workplace policies are in fact incorporated as a term of the contract of employment, and that a failure by an employer to act in accordance with the policy amounts to a breach of contract.
As the case of Robinson v PIC shows, the Courts will seek to give effect to the express terms of an employment contract. For this reason, it is imperative that employment contracts and workplace policies are carefully drafted to ensure that any intention to either incorporate or exclude a workplace policy from an employment contract is clear and unequivocal. Otherwise, ambiguous drafting invites uncertainty around the obligations of the parties under an employment contract which often becomes the source of extensive disputes and ongoing litigation.
If you seek assistance in drafting an employment contract to ensure any workplace policies are unambiguously incorporated or excluded, or require advice regarding your obligations under an employment agreement, contact BlackBay Lawyers for a confidential discussion.
The content in this Article is intended only to provide a summary and general overview on matters of interest. It is not intended to be comprehensive nor does it constitute legal advice. It should not be relied upon as such. You should seek legal or other professional advice before acting or relying on any of the content.
