Rights and obligations under workplace policies

Employees are generally bound to abide by their employer’s workplace policies and procedures. This can be done, for example, via express terms in the employment contract or as a reasonable and lawful direction. However, workplace policies often purport to place obligations on the employer as well.

In this blog, we explore the following:

1. defining “workplace policy”;
2. employee obligations regarding workplace policies;
3. consequences if an employee breaches a workplace policy;
4. when a workplace policy becomes contractual; and
5. the consequences of a policy being contractual vs non-contractual.

What is a workplace policy?

A workplace policy is a document that generally deals with the employer’s practices, requirements and procedures.

The legal definition and function of policies is, however, a little more complicated.

At law, workplace policies have usually been seen as written directions given by an employer to its employees. However, in certain circumstances, a workplace policy may also place obligations on an employer if it can be argued that the parties intended for the policy to create mutual obligations of a contractual nature.

Are all employees bound to follow their employer’s workplace policies?

The simple answer is yes. All employment contracts contain an implied clause that an employee must obey the lawful and reasonable directions of their employer.

Given that policies at law are usually construed as written directions given by an employer to its employees, this means that employees are contractually bound to follow the lawful and reasonable policies of their employer.

What if an employee breaches a policy?

A breach of policy may constitute misconduct arising from a failure to follow a direction given by an employer. This could lead to a disciplinary process with consequences up to and including dismissal.

To ensure that employees are aware of all workplace policies and procedures, employers sometimes require employees to sign policy documents to confirm that they have read and understood them. They will also ensure regular training into the relevant subject matter of relevant policies.

However, a lack of training or failing to have read a workplace policy is not necessarily a complete defence to an allegation that the employee has breached the policy.

When might a workplace policy place obligations onto an employer?

A workplace policy may place obligations onto an employer if it can be said to have been ‘incorporated’ into the employment contract.

If an employee can successfully argue that the policy has been incorporated, then a breach by the employer of its own policy would constitute a breach of the contract and provide a cause of action for the employee for damages.

When is a policy incorporated into a contract?

Unfortunately, the answer to this question is not straightforward and will depend on a close analysis of the employment contract and the wording of the policy itself.

In short, a policy may be incorporated into an employment contract if:

1. it is explicitly incorporated through a contractual clause; or
2. a reasonable person would have understood that there was a common intention by the parties to the contract that the policy was incorporated at the time that the contract was entered into.

Explicit incorporation

In some cases, an employment contract may explicitly state that an employee must follow the employer’s policies or that those policies have contractual force. Depending on how this is phrased in the contract, it may establish that the policies themselves are contractual in nature.

For example, in Elisha v Vision Australia Ltd [2024] HCA 50, the employee’s contract stated:

‘Your engagement will be governed by the terms of this letter and the [Award].

…

In addition, Employment Conditions will be in accordance with regulatory requirements and Vision Australia Policies and Procedures. Breach of the Polices and Procedures may result in disciplinary actions.’

In that case, it was held that a policy titled ‘Vision 2015 Disciplinary Procedure’ was incorporated into the contract, and so the employer’s breach of that policy was held to be a breach of contract – leading to a significant award of damages to the employee.

A reasonable person would consider a workplace policy to be incorporated

In some cases, the court will ask itself if a reasonable person, having considered the employment contract, the language of the relevant policy, and any relevant surrounding circumstances, would consider that there was a common intention by the parties that the policy be contractual.

The question for a court is what the words and conduct of the parties prior to the formation of the contract would have led a reasonable person in the position of the other party to believe; not what the subjective beliefs or understandings of the parties about their rights and obligations actually may have been.

For example, if the terms of a workplace policy are ‘promissory’, in the sense that an employer is promising to act in a particular way, then it is more likely that those terms may be incorporated into the employment contract. On the other hand, if a policy is stated in terms that are ‘merely aspirational’ (that an employer hopes to uphold certain standards) or ‘advisory’ (advising an employee or employer on how to act), then it is less likely that the parties intended for it to be contractual in nature.

What if a contract explicitly states that policies and procedures are not incorporated?

If an employment contract contains a clause to the effect that an employer’s policies and procedures are not incorporated into the employment contract, this presents a significant (possibly insurmountable) hurdle to an argument that a policy is contractual in nature.

For example, in Robinson v Pilbara Iron Company (Services) Pty Ltd (No 2) [2023] FedCFamC2G 593, the employment contract contained an express provision that:

‘The benefits provided to you under our policies are discretionary in nature and do not form part of your contract of employment.’

Judge Lucev concluded that the plain meaning of the express term (and hence the intentions of the parties) was that a policy called the ‘Fair Treatment Systems Policy’ did not carry contractual weight or impose any mutual obligations onto the employer.

Consequences of a policy being contractual vs non-contractual

As outlined above, employees are required to follow their employer’s policies, assuming the terms of the policy in question are lawful and reasonable.

On the other hand, if the terms of a policy are incorporated into the contract (thereby being ‘contractual’ in nature), then those terms might bind the employer as well. In this case, an employee may be able to bring a breach of contract claim against the employer if the employer breaches a term of their policy that is incorporated into the contract.

Seek legal advice from a lawyer experienced in employment law

If you have a contractual dispute with your employer, it is important that you seek legal advice from an employment lawyer.

Hall Payne Lawyers are highly experienced in employment and contract law and can provide you with legal advice about your rights and obligations.

Contacting Hall Payne Lawyers

You can contact us by phone or email to arrange your consultation; either face-to-face at one of our offices, by telephone or by videoconference consultation.

Phone: 1800 659 114
Email: general@hallpayne.com.au