Australia: When Is An Employment Policy More Than Just A Policy?

Jenni Priestley, Partner and Leah Hewish, Associate at Clyde & Co's Australia office report on a recent decision of the Supreme Court of New South Wales.

Two former directors of ABN AMRO Australia Holdings Limited (AAAH) have claimed employment entitlements they argued were owed to them on the basis of policies in place at the time they were made redundant. In a wide-ranging judgment1, the NSW Supreme Court considered the issue of the contractual force of company employment policies in Australia.

The Court's finding that a redundancy policy formed part of Mr James' employment contract will be of interest to Australian employers, who may be prompted to review the interplay between their employment contracts and employment policies.

The Redundancy Policy

Mr Angus James was the CEO of an ABN AMRO Group company. In October 2008, ABN AMRO Group was sold to a consortium, including Royal Bank of Scotland plc (RBS), which gained control of AAAH.

AAAH had a "closed" redundancy policy in place. The redundancy policy was kept by HR and while employees knew of its existence, it was not available on the company's intranet and its contents were never published.

The redundancy policy stated that it provided "...principles and guidelines to follow in the event that an individual or group of staff is made redundant", and stated that "In all cases where redundancy arises, staff will be treated fairly, equitably and consistent with the organisations values."

Specifically, the redundancy policy stipulated that redundancies were to be calculated in accordance with the policy to include accrued contractual and statutory entitlements, a severance payment and, depending on the circumstances, an "ex-gratia payment" based on the average of the prior two years' bonuses.

A "communications pack" was also developed to allay the concerns of the employees of AAAH following the takeover. That pack included the following response in relation to FAQs about employee conditions:

Q: Will there be redundancies?

" the case of redundancy, the consortium has guaranteed to all staff that all existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional..."

The communications pack was announced to all staff of AAAH, but did not result in any publication of the redundancy policy to staff.

Incorporation of the redundancy policy into Mr James' contract

Mr James claimed that the redundancy policy was incorporated into his contract of employment and so he was owed a severance payment and an ex-gratia payment equal to the average of the bonuses he received for the previous two years.

His contract of employment specified, in relation to the policies of the company, that he "...agree[d] to be bound by the policies of ABN AMRO as may exist from time to time." It also expressly stated that ABN AMRO was able "to vary, change or terminate existing policies" as its prerogative.

The Court found that the redundancy policy had contractual effect as between Mr James and his employer as it was incorporated into his contract of employment. The judge observed that, while the language of the contract clearly showed that the intention was to impose an obligation on Mr James to obey company policies as they exist from time to time, the parties could not have intended that the company would not also be so bound. He said:

"To my mind, the undertaking by the employee to be bound by the employer's policies as they exist from time to time makes sense only if, implicitly at least, the employer also undertakes to be bound by, or to observe, the terms of those policies."

It was held that the language used in Mr James' employment contract, whereby he agreed to be bound by the company's policies, suggested that he agreed to be bound because the policies form part of the contract of employment. The Court determined that the company policies, and specifically the redundancy policy, equally bound the employer as the obligations that policy set out were not unilateral.

Specifically, the redundancy policy was drafted in terms of imperatives placed on the company in circumstances where an employee was made redundant. For example, it stipulated the "Process and Procedures" to be followed, the functions of the HR team in preparing the calculations, the benefits to be provided and the terms of the letter to be sent to the employee in the case of redundancy.

Another factor considered by the Court was that, because of his position, Mr James knew of the existence of the redundancy policy and had some knowledge of its substance, including specifically that it provided for an ex-gratia payment in some circumstances.

The evidence revealed that there was not only a practice of affording an ex-gratia payment to redundant employees, but also a presumption of making such a payment for senior employees. The result was an award to Mr James of close to AUD 3 million by way of redundancy payment.

The conundrum of company policies

This decision demonstrates the fine balance employers face in attempting to create and impose obligations on employees through written company policies without inadvertently creating a situation where those same policies are deemed to have contractual force with a detrimental result for employers.

The lesson for employers to take from this judgment is two-fold:

First, employers should take the opportunity to review standard clauses in offer letters and contracts of employment to check that, where reference is made to company policies, their intention in relation to compliance with those policies is unambiguous.

Secondly, employers should consider the content of their existing internal policies and whether there are aspects of those policies that, if enforced, could be costly for the business. The tendency in recent years has been for Australian employers to draft very detailed and prescriptive policies and company manuals – this case suggests that if there is a possibility that those policies may (although this was not the intention) be held to have contractual force it may in some cases be that less detail is actually better than more.

In the case of both employment contracts and policies, clear and careful drafting of key documents can go some way to protecting the employer's interests and avoiding unintended consequences.


1. James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland [2015] NSWSC 243

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.