Australia: The (potential) deceit of the policy manual

"Those are my principles, and if you don't like them... well, I have others." - Groucho Marx

As an HR professional, you value your integrity, right? Without that, your credibility with staff disappears. A core aspect of integrity is honesty - if your word cannot be relied upon, then you lose the trust of staff.

But here's the problem, as an employee of the company (particularly if you are a senior manager), your primary allegiance is to the company. This can lead to some tricky situations, because plainly, the interests of the company and individual staff members do not always align.

One area where this becomes apparent is in the proliferation of employee policies and procedures within a workplace. These documents are expanding exponentially. They often impose a raft of obligations on employees and also describe benefits available. They may cover promotion procedures, what parental leave payments will be made, the wellness program, approaches to flexible working arrangements and even the discretionary bonus scheme...

So the question is: Can employee policies and procedures be relied on by employees?

The answer to this question must surely affect how you describe the policies and procedures and their effect when presenting these documents at induction (or otherwise), if you want to maintain your credibility with staff. You may currently be inducting new staff into these policies and procedures (sometimes even requiring written acknowledgement by the employee), perhaps presenting them as infallible documents against which the employee will be held accountable and upon which they can rely.

And yet the helpful answer as to whether employees can rely on them, coming from appellate courts in Australian this year, is (drum roll) – perhaps Yes, perhaps No, or Not necessarily.

Perhaps No

In recent judgements, the courts have held that, at the heart of the nature of a policy document, is the employer's right (routinely exercised) to alter these policies and procedures at any time to suit their operations - without the consent of employees. And this implied right applies equally to policies which relate to benefits and on which an employee may seek to rely, as well as those which impose obligations. Not so good for the employee – or for your credibility if you had indicated otherwise.

Perhaps Yes

When it comes to the law, there is always an exception – and in this case the courts have really muddied the waters. In a series of cases (Riverwood International v McCormick, Goldman Sachs JBWere v Nikolich and Romero v Farstad Shipping1), the courts decided (based on the contents of the particular employment contracts - the terms of which were unremarkable) that at least some of the employee policy and procedure documents were contractual and, therefore, could not later be altered by the employer without the individual employee's consent.

This approach is good for the employee and protects your credibility (as the HR manager) from being undermined by unilateral changes being made by the employer to the policies and procedure documents you explained at length.

But Not Necessarily

Yet, very recently this year, based on terms in employment contracts that looked suspiciously similar to the terms considered by the different Full Federal Courts in Riverwood etc, the NSW Court of Appeal and the Full Federal Court have come to a different view. In McKeith v RBS Group and Westpac v Wittenberg2, they held that the policies and procedures were not contractual and, therefore, could be changed by the employer without the need to consult staff.

So, what should an HR professional do?

Can you say with confidence that the benefits outlined as available to staff in the policies and procedures manual can be relied on to be available in 3, 5 and even 10 years? It's an important question because it goes to the heart of the trust relationship between you and your staff.

We like to think that our 'word is our bond'. However, whether you can make promises to interviewees or staff about benefits available under your company's employment policy and procedure manual will often depend on your company's general counsel or external lawyers' opinion on the matter. Do they consider that the company's employment policy and procedure manual can be changed on a whim by the company? Frankly, they will often not even know themselves. Who can blame them when various constituted Full Federal Courts seem to make it in conflict with itself?

There is a sharper edge to this for you as a HR professional. Under the Competition and Consumer Act, you can be personally liable to a penalty if you are found to have:

"... in relation to employment that is to be, or may be, offered by the person or by another person, engage[d] in conduct that is liable to mislead persons seeking the employment as to:

  • the availability, nature, terms or conditions of the employment; or
  • any other matter relating to the employment."

So, if you present the company's employment policy and procedure manual to staff and it contains offers of generous redundancy schemes or advantageous metrics for the discretionary bonus scheme, and your company subsequently retracts or diminishes those benefits without an employee's consent, you can be left exposed.

Yet, ultimately, the quandary it poses for you as an HR professional is as much an ethical one as a legal one.

When a benefit previously afforded under a policy and procedure disappears, how does that sit with you as a person who values honesty?

The assurances of your current MD or Group HR Executive are of no value, because they could be gone in 2 years. The new management team parachuted in by venture capitalists who have since purchased a sizeable holding in the company, may have a very different approach to honouring these commitments:

'Unless it's in a contract, no one has to be responsible for it – really'.

So, be careful how you 'sell' those staff benefits on offer by the company but that sit outside the employee's contract of employment. Pepper your description of the benefits with the words 'currently', 'at the moment' and even 'may be subject to change'. Often, the company's employment policy and procedure manual will contain statements that its contents may be changed without agreement or even consultation with the staff – perhaps point this out.

Your credibility is tied irrevocably with your name. Protect it from being undermined by those you are seeking to serve, because, adapting the words of Arthur Miller's tragic protagonist, John Proctor, in the iconic play 'The Crucible':

'It is your name and you shall have no other!'

For more information please contact:

Warwick Ryan, Partner
Phone: +61 2 9233 5544

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.

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