In a recent decision in the Supreme Court of Victoria –
Zafiriou v Stain-Gobain Administration Pty Ltd  VSC
377, Justice Karin Emerton found in favour of the employer in
relation to a number of alleged breaches of an employment agreement
and various implied employer duties, importantly discussing whether
employer policies are incorporated into the employee's
The facts of the case were relatively complex but essentially
concerned a long serving senior executive who originally commenced
service with a predecessor company owned by a family and continued
as an employee after that company was acquired by the Employer
The Employee (Zafiriou) claimed that his employment was
terminated because his position was made redundant rather than for
performance reasons – the latter being the Employer's
position. In addition he claimed that there was an existing process
set out in a disciplinary policy promulgated by the Employer which
required certain procedures to be followed before he could be
terminated. Finally he also sought to claim that the duty of mutual
trust and confidence had been breached by the Employer and that he
was entitled to extensive damages as a result of all of these
Policy did not apply
In finding that the Employer was authorised to terminate the
Employee by the provision of prescribed notice in accordance with
his employment agreement, her Honour held that the process set out
in the disciplinary procedure did not apply to senior executives
notwithstanding a provision in his contract of employment. Her
Honour made this finding by relying on the principles set out in
the cases of Riverwood International Australia Pty Ltd and
Nikolich v Goldman Sachs JB Were Services Pty Ltd. Her
Honour held that the incorporation of a policy or procedures in an
employee's contract of employment depended on the terms and
nature of the policy, the language which is expressed and its
practical operation to support the inference that the parties
intended it would have contractual effect.
Moreover, her Honour held that the Employee had not been made
redundant in so doing relied on various common law decisions such
as Fosters Group Ltd v Wing and Hodgson v Amcor which
established the principle that an employee would not be redundant
where duties remained to be performed after termination of his or
her employment. Her Honour confirmed that in her view based on the
evidence of the Chief Executive of the Employer the Employee had
been dismissed for performance reasons primarily because he was
unwilling and unable to participate in management changes required
to improve the performance of the Employer.
Mutual trust and confidence
In regard to the trust and confidence claim, this claim was
dismissed on the basis that her Honour held that the implied duty
of trust and confidence does not apply in regard to the manner of
dismissal of an employee. She further held that even if there was
such an implied term it would not have been breached having regard
to the express contractual power for the Employer to terminate the
Employee's employment agreement with notice.
Take care drafting employment agreements and incorporation
This case is a timely reminder that a mere reference to the
application of policies and procedures being included in the
contract of employment does not necessarily mean that such policies
and procedures were intended by the parties to form part of the
contract of employment.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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The case is positive news for employers facing a compensation claim for a stress-related injury from disciplinary action.
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