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Staff handbook provisions incorporated into contract of employment

The Court of Appeal has found that the absence management provisions contained in a company’s staff handbook were incorporated into employees’ contracts of employment and so could not be changed unilaterally by the employer (Sparks & Others v Department for Transport).

Employers should carefully consider what policies are classed as contractual or non-contractual so they can ensure necessary flexibility.

Background

The absence management procedure for the Department for Transport (“DfT”) was contained in “Part A” of the staff handbook which was expressly stated to be incorporated into the employees’ contracts. This set out “trigger points” for action in relation to employee absence.

DfT was seeking to standardise its absence management procedure across all of its agencies. The new standard version would mean that a new lower “trigger point” would be introduced at which informal absence procedures would begin. This would have a detrimental impact on employees and, on the basis the policy was contractual, required their agreement following consultation to effectively change their terms and conditions.

Following a failed consultation with the employees, the DfT announced that the new stricter procedure and more demanding trigger point would be introduced in any event.

The employees applied to the High Court for a declaration of their contractual terms.

Decision

It is established law that a contract may only be varied in accordance with its terms or as agreed by all parties. Accordingly, it was held that the new absence management procedure which the employer unilaterally imposed after consultation had failed was not contractually binding on the employees as there was no agreement between the parties.

The Court of Appeal upheld the High Court’s decision and declined to overturn the declaration that the employees’ original contractual terms must be reinstated.

Summary

It is advisable that employers review their policies and procedures and ensure it is clear which parts of their handbooks are intended to be contractual or non-contractual. Employers should also ensure that handbooks include appropriate variation provisions where documents are stated to be contractual to ensure appropriate mechanisms are in place to ensure flexibility.

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