In a recent decision in the Supreme Court of Victoria – Zafiriou v Stain-Gobain Administration Pty Ltd [2013] 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 employment agreement.
Facts
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 (Stain-Gobain).
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 claims.
Findings
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.
No redundancy
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.
