A decision in the Federal Court this week serves as a timely reminder to all employers to ensure workplace policies are drafted in ways that do not unwittingly create exposures to legal claims by staff.

The Place For Policies

Done correctly, workplace policies are great tools for regulating workplaces and ensuring good workplace practices. Well-drafted policies set clear expectations and processes for all workplace participants, and allow employers of all sizes to be flexible over time as their workplaces evolve.

As opposed to employment contracts – which at best are administratively burdensome to amend, and at worst incapable of amendment – there are largely no limits to the “tinkering” an employer can do to their policies. And this is vital in an environment as dynamic as a workplace – where not only is the law in a constant state of flux, but so are the issues within the workplace to which employers need to respond.

So the last thing employers should want to do is to be creating contracts when they think they are creating policies.

Are Policies Contractual?

Fortunately for the employer in Romero v Farstad Shipping (Indian Pacific) Pty Limited this week, the Federal Court ultimately held that the policies in question did not create a contractual obligation. But they had to defend themselves all the way to a final hearing to find out. The applicant, a former employee, had complained of bullying by her boss and asserted amongst other things that the bullying itself, as well as management’s subsequent handling of her complaints, constituted a breach of its Workplace Harassment and Discrimination Policy – which she in turn alleged was incorporated into her contract of employment. If it was incorporated, then she was entitled to sue for breach of contract if the employer had breached the policy by not living up to the various statements (often sweeping) that were included within it.

As already flagged, the Court reviewed the wording and context of the policy as a whole and determined on balance that it was largely “aspirational” in scope, did not have the sufficient specificity to give rise to contractual obligations.

However ever since the Riverwood International decision in 2000, and particularly since the significant award of damages in Nikolich in 2007 (where Mr Nikolich was awarded nearly $500,000 after parts of his employer’s “Working With Us” policy were held to have created contractual obligations), loosely drafted policies are often ticking time bombs. In Romero, the judge highlighted this very real uncertainty by noting:

The issue of whether a company’s policies form part of its contracts of employment with its staff is a vexed one and depends largely on the circumstances of any given case.

Are Your Workplace Policies OK?

The good news is that there are sound legal means of reducing and even eliminating this risk entirely, depending on the precise circumstances of a policy and what the employer is seeking to achieve. Getting policies drafted correctly in the first place, or having them “sound-checked” by a good employment lawyer, are almost always cost-saving steps in the longer run. And it is equally useful to regularly audit and review the policies already in place with both a lawyer and HR professional to not only reduce legal risk, but ensure the policies are doing all they can to help get the most out of a workforce.