Australia: When Good Times Turn Bad: The Interaction Between OHS Policies, Grievance Procedures And Contracts Of Employment

All employers are aware of the criminal liability that they are exposed to if a breach of state safety law occurs at their workplace. In addition to this, employers can be exposed to civil liability through breach of the contract of employment if they breach their Occupational Health and Safety (OHS) obligations to an employee. The implementation of grievance procedures can be a crucial step in avoiding civil liability in such circumstances.

How can civil liability arise?

Two recent cases have required courts to examine the impact of an employer's OHS obligations on the terms of a contract of employment. In both Goldman Sachs JBWere Services Pty Ltd v Nikolich1 and McDonald v State of South Australia2 the employer was found to have breached the OHS terms of a contract of employment. In both cases the breach of contract resulted in the employee receiving significant damages in excess of $400,000 for loss of past and future earning capacity. Given the amount of damages awarded it is important for employers to turn their mind to their contractual OHS obligations.

Goldman Sachs JBWere Services Pty Ltd v Nikolich

Terms of the contract of employment

In this case when the employee, Mr Nikolich, accepted Goldman Sachs JBWere's offer of employment he had been provided a policy document entitled, "Working With Us" (WWU). The WWU was over 100 pages and contained information and policies in relation to workplace issues. The court held that certain terms of WWU were in fact terms of the contract of employment. Of particular relevance was the term relating to OHS, which stated that the employer "will take every practicable step to provide and maintain a safe and healthy work environment for all people". Whether the terms of the WWU were to be considered contractual depended on whether a reasonable person in the position of the employee would conclude that the employer intended to be contractually bound by a particular statement. This is an objective test and turns upon the context and language of the particular term.

The employer argued that the statement within the WWU was merely aspirational and not contractual in nature. However, the court found that through the WWU the employer was viewed as holding itself out as having a commitment to provide a caring and safe environment. In this context the fact that the language used was slightly aspirational did not detract from the fact the statement was promissory in nature and therefore a term of the contract of employment. The court noted in this case that even though the term was found to be contractual it did not impose a much greater duty on the employer than the implied term, which applies to all contracts of employment. The implied term that the court was referring to is that an employer will take reasonable care to provide a safe place of work and a safe system of work.

Breach of the contract of employment

Having established that it was a term in the contract that the employer "will take every practicable step to provide and maintain a safe and healthy work environment for all people" it was necessary for the employee to show there had been a breach of that term. Mr Nikolich's supervisor made an unfavourable decision against Mr Nikolich concerning the reallocation of clients. The supervisor then engaged in intimidating and threatening behaviour towards Mr Nikolich on two occasions, which distressed Mr Nikolich. Mr Nikolich made a formal written complaint to the human resource department and whilst the situation was discussed separately with those involved there was no resolution of the situation for nearly four months. The court found that the employer's failure to deal promptly with this serious issue in the workplace was a breach of their contractual duty to take every practicable step to provide and maintain a safe and healthy work environment. In particular, the employer breached their duty by allowing Mr Nikolich to continue working in a small office managed by a person with whom he had come into serious conflict, whose actions he had found extremely intimidating and threatening and with whom he was no longer on speaking terms. This breach of their contractual obligation was found to be the cause of Mr Nikolich's psychiatric injury and therefore, damages for loss of past and future earning capacity were payable by the employer.

How could a breach have been avoided?

Had the employer dealt with Mr Nikolich's formal complaint more efficiently and effectively then it is likely that there would not have been a breach of the term because the employer would be seen to have taken every practicable step. The court also found that an employer could not be taken to promise that harassment or bullying would not occur within the workplace and that a 'commitment' to grievance procedures was not contractually binding. Therefore, the sections of the WWU dealing with harassment and grievance procedures were found to be descriptive in nature and not terms of the contract of employment. This only strengthens the view that had Mr Nikolich's grievance been dealt with in a timely and appropriate manner the breach of contract would have been avoided.

McDonald v State of South Australia

In this case the employer was found to have breached the contract of employment in two ways. The employer breached the implied term that the employer would take reasonable care to provide a safe place of work and a safe system of work. In addition the employer had breached the implied term of mutual trust and confidence. Based upon these two breaches the employee was entitled to treat the contract of employment as repudiated and that he had been constructively dismissed.

The implied term to provide a safe place of work and a safe system of work

The employee, Mr McDonald, was employed to fill a vacancy for Year 12 computing teaching and Year 11 Maths teaching. His appointment coincided with a rapid expansion of the computer technology at the school. The demands for Mr McDonald's time increased and he was working long hours. His role extended to cover management and administration of the computer network, which he was neither qualified nor trained for. He had no past experience in rolling-out new computer systems or hardware. Mr McDonald needed to work overtime and out of hours to keep up with the work. Mr McDonald made written complaints regarding his workload and requesting clarification of the nature and tenure of his position.

The court found that the employer breached its duty of care to provide a safe system of work and to provide for Mr McDonald's safety and welfare in the workplace in the following ways: asking Mr McDonald to manage the IT network without any training and without management; failing to undertake proper planning for the roll-out of new IT; failing to manage Mr McDonald when his workload became too onerous; failing to have a system of line management and proper directions; failing to take Mr McDonald's complaints seriously; and allowing Mr McDonald to shoulder the responsibility for repairing and maintaining a vast computer network in a very large school without any positive instructions as to where his job started and finished. It was clear on the facts of the case that the employer had failed to put any system in place for the roll-out of the new IT network and had allowed Mr McDonald to undertake the roll-out without any support, guidance or training, resulting in Mr McDonald's stress and anxiety related injury.

The implied term of mutual trust and confidence

In addition to having an inadequate system of work in place the employer also failed to implement an appropriate grievance procedure in response to complaints made by Mr McDonald. Mr McDonald first complained in January 2001, and whilst senior management met with Mr McDonald in response they failed to implement any practical changes within the workplace to address the substance of the complaints. In fact, in late 2001 and early 2002 a series of events occurred which discriminated against Mr McDonald, undermined his position and involved harassment and bullying from senior staff.

Mr McDonald then lodged another formal complaint in mid 2002, which the court found still remained unresolved at the time that Mr McDonald's employment ended in April 2004.

The court found that the response of the employer to Mr McDonald's complaints was entirely inadequate and that this amounted to a breach of the implied term of mutual trust and confidence. The employer's assertion that Mr McDonald had failed to use the correct procedures to lodge a formal grievance was found to be irrelevant because the employer was clearly on notice that there were issues in relation to Mr McDonald's employment, which needed to be resolved.

The employer effectively chose to ignore Mr McDonald's complaints in the hope that they would go away and whilst the employer had detailed policies regarding grievance resolution, these were not implemented.

How could a breach have been avoided?

Had the employer followed its own detailed policies regarding the resolution of grievances it is likely that the breach of the implied term of mutual trust and confidence could have been avoided. Whilst the breach in relation to safety could only have been avoided by having a safe system of work in place, it is likely that the escalation of the situation was largely a consequence of the failure to deal with Mr McDonald's early complaints. Had his initial complaint relating to his work load, job description and tenure been dealt with appropriately it is likely that the stress and anxiety he would have experienced would have been minimal, there would have been no breach of mutual trust and confidence and any liability for damages payable would have been greatly reduced.

  • Review all policy documents that are provided to potential and existing employees as the terms of these documents may be considered terms of the contract of employment if their language is contractual in nature. In particular, consider sections relating to occupational health and safety, harassment and grievance procedures.
  • Ensure there is a detailed policy in effect in relation to grievance procedures and that this policy provides for timely resolution of serious grievances.
  • Ensure that employees who are required to implement the grievance procedures (i.e. human resources and senior management) are familiar with the procedures and understand the importance to employees' health and safety.
  • In the event that a complaint is received do not rely on the form of the complaint, instead look to the substance of the complaint and determine whether it should be treated as a formal grievance under the grievance procedures.
  • Implement grievance procedures when a grievance arises.


1. [2007] FCAFC 120.

2. [2008] SASC 134.

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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