Procedures, Handbooks & incorporation into your employee contracts

There is a legal requirement to provide employees with minimum terms of employment, known as Section 1 terms. In addition an employer is required to have a disciplinary and grievance procedure in place or at least refer to such procedure in the Section 1 terms.

In addition to the minimum legal requirements it is advisable for employers to also have a staff handbook which covers various other policies, rules and procedures. The size of the staff handbook will depend on your requirements and the type of business you are in, but I strongly advise having something set out in writing.

When preparing your employment contracts and handbooks I recommend that you ensure that your handbook is not contractual and does not therefore form part of the employees terms of employment.

If a procedure or policy is contractual, there is a legal obligation to follow the procedure and adhere to what it says. It also means that it is harder to change the procedure in the future or amend as your business changes.

This case is an appeal against the decision of the High Court relating to whether handbook terms were contractual or not.

I reported on the High Court decision in February 2015 (you can read the report here).

The Law

When you agree contract terms with an employee you are bound to keep to those terms unless the contract allows for you to vary the terms or the employee agrees to the variation.

In the event that you breach the terms or try to vary them without the employee’s agreement then you will be in breach of contract and the employee will have a claim for damages for your breach and/or for constructive unfair dismissal.

The Facts

In this case a group of employees of the Department for Transport applied to the High Court for a declaration that the staff handbook was incorporated into their employment contracts (as above). The High Court agreed that they were incorporated, and that the Department for Transport (DfT) could not vary the terms without agreement from the employees.

The DfT appealed the decision to the Court of Appeal in respect of the short-term absence management policy.

The effect of the absence management policy was to restrict disciplinary action for short-term absence to a trigger of 21 days in a 12 month period. If contractual the DfT could not deviate from this without being a breach of contract.

For the employees this was an important term of the Handbook as it meant that the changes proposed by the DfT would trigger the absence management policy and formal sanctions sooner than under the existing procedure.

The Decision

The Court of Appeal did not agree with the DfT and dismissed their appeal against the decision of the High Court.

The Court considered various previous cases which have developed in this area of law and gave some helpful guidance for employers on whether terms of a staff handbook are incorporated into individual employee contracts, including:

• The issue will always depend on what the precise terms are of the documents;
• The wording of the documents as a whole;
• The contractual intention of the documents.

In this case the wording of the Handbook was such that the Court were clear that the absence management procedure was incorporated into employee contracts.

Points to Note

An interesting point that came from this judgement was that the Court were critical of the fact that the Handbook and Procedures had been changed and there had been various versions created, but not all of the versions had been retained and so were not available for consideration.

It is therefore recommended that you keep copies of earlier versions of Handbooks and Procedures.

This case also highlights the importance of ensuring that your Handbook and Procedures are separate documents to employment contracts and that you expressly state that they are not contractual.

If you are using a contract template you have obtained online or from a previous job or business then I strongly recommend that you have the documents reviewed now, before you need to rely on them.

Action to Take

1. Check what your contracts and handbook says about the terms;
2. If your handbook is contractual and you want to make changes to existing staff terms, ensure that you seek advice before doing so;
3. If your handbook is contractual consider making changes now for new staff before providing them with a contract;
4. If you are unsure about the implications of this case on your business contact me for a free no-obligation discussion alison@realemploymentlawadvice.co.uk

Case Name

Department for Transport v Sparks and Others – Court of Appeal