A recent Court of Appeal decision has held that the employer could not change an absence management policy in a staff handbook without the employees’ consent, because the policy formed part of the contract of employment. Pam Sidhu, Head of Employment, considers the law in this area and the important practical implications for employers.
Pam Sidhu comments: “This case was decided on its specific facts, but the clear message to all employers is that they should carefully review their staff terms and conditions, as well as policies. In general, I would advise employers to make expressly clear that all or at least certain parts of the staff handbook are non-contractual. This needs to be made very clear, otherwise there is a risk that employers will not be able to change policies and procedures without employees’ consent”.
In general, employment contracts may only be amended in accordance with the terms of the contract or with the agreement of the parties. In deciding whether a proposed change will constitute a variation of an employment contract, it is first of all necessary to identify the contract terms in question. Some terms may be incorporated into the contract from sources such as staff handbooks. Terms deriving from such sources will only be incorporated if the wording of the employment contract provides for their incorporation. The particular term must also be “apt for incorporation”. Any provisions that set out guidance or general procedures are unlikely to be considered to be apt for incorporation.
Where there is a dispute as to the construction or interpretation of a contract, the parties may apply to Court for a declaration. In the case of Department for Transport v Sparks and others  the Court of Appeal was asked to consider whether the High Court had correctly held that provisions in a staff handbook relating to absence management had been incorporated into employees’ contracts.
The claimants worked for separate agencies for which the Department for Transport was responsible, e.g. the Driving and Vehicle Licensing Agency and the Highways Agency. The Department for Transport’s staff handbook, which was applicable to all of the employees, allowed each agency to adopt their own terms and conditions regarding leave, attendance and discipline. Part A of the handbook (containing employment terms and conditions) was intended to be incorporated into staff contracts, where it was apt to do so.
Paragraph 10.1.18 of the handbook provided that an employee who took short periods of absence as sick leave exceeding a specified period, would trigger an attendance management procedure. The procedure consisted of an informal stage, followed by formal stages, which potentially lead to written warnings and dismissal. The employer announced a new standardised, more stringent, attendance management procedure across all its agencies, due to discrepancies in the number of days absence required before the formal absence procedure could be triggered. Under the new procedure, a process would be triggered after five days or three occasions of absence within a rolling 12 month period.
The High Court judge found that paragraph 10.1.18 was incorporated into the employment contracts, meaning that the Department for Transport was not entitled to change those terms unilaterally. Although many provisions contained in Part A of the handbook were deemed to be inapt for incorporation, paragraph 10.1.18 was clearly and precisely set out, with clear trigger points setting out what would happen if the procedure was applied. The issue was whether the provision was a legally enforceable contractual term or a mere note of guidance and good practice of no legal force.
The Court of Appeal dismissed the Department for Transport’s appeal, holding that the provision in the staff handbook relating to absence management, including a “trigger point” (being a number of absences) which could lead to formal absence management, had been incorporated into employees’ contracts of employment. The new policy was, therefore, not effective to vary the contractual terms of the employment contracts and was not contractually binding on employees.
The Court held that the introductory words of the handbook in the parts covering the employer/employee relationship had a “distinct flavour of contractual incorporation” subject to the question of the aptness of any provision for incorporation. These and the terms of the provision itself indicated that it was designed to confer a right on employees over and above the good practice guidance in the policy section of the handbook. The Court, therefore, found no reason to depart from the High Court judge’s findings.
In reaching its decision, the Court of Appeal reviewed several authorities and noted helpful guidance as to the approach to be adopted in deciding whether terms have been incorporated. The Court observed that whether a provision in a staff handbook had been incorporated into individual employment contracts would always turn upon the precise terms of the particular documents in each case. The language of the employment documents as a whole would be the starting point in making the decision as to whether the provision was apt for incorporation. Each set of employment documents will differ, meaning that each document will have to be analysed in accordance with its own terms. The proper effect of the document will have to be considered as a whole.
Pam Sidhu, Head of the Employment Team, comments that “this decision highlights that each case will turn on its particular facts. In spite of this, it is helpful to have a Court of Appeal decision highlighting useful authorities and endorsing the High Court’s approach in examining the particular facts of the case”. Pam Sidhu advises that employer are likely to be better served using a completely non-contractual staff handbook, providing greater clarity and being easier to vary.
For further information or to discuss any employment law issues, please contact Pam Sidhu or any member of the Employment team on 0121 233 4333.