Beware of Contractual Handbooks

10 June 2016

Department for Transport v Sparks & Ors [2016] EWCA Civ 360 

A Court of Appeal decision relating to the High Court’s judgment that absence management provisions set out in a staff handbook had been incorporated into employees’ contracts.

The handbook was expressly stated to be incorporated into the employees’ contracts both in the employment contracts and the handbook itself. There were two sections to the Handbook, part A and part B. General statements suggested that Part A formed part of the terms and conditions of the contract, whereas part B was merely guidance. However, there were also specific parts of part A which were stated to be merely guidance.

The handbook provided that the employer had to consult before changing the employee’s contractual terms, and if such consultation failed, variations could only be made unilaterally when they were not detrimental to employees. Following an unsuccessful consultation, the employer attempted to make such unilateral changes to the absence management provisions, altering certain ‘trigger’ days at which specific disciplinary procedures could be invoked.

Dismissing the appeal, the Court of Appeal agreed with the High Court that even though parts of section A were expressly stated to be guidance, this did not prevent those provisions that were sufficiently clear and precise and apt for incorporation from being incorporated as terms of the contract. As such, the relevant provisions were contractual, and the variations could not be made, as they would clearly have been detrimental to the employees. Whether to incorporate terms as contractual depended upon the particular documents in the case. Where a document was incorporated by general words, it was still important to have regard to the specific parts of that document to see if they were apt for incorporation.

This is a lesson to all employers of the dangers of having handbooks which are expressed to be contractual. It makes it clear that, from an employer’s perspective, it is more helpful to keep a clear divide between what is considered a contractual term and what is merely guidance, and this can be best done by keeping the employment contract and handbook entirely separate.  If part of the handbook is going to contain terms and conditions of employment and hence be contractually binding, then the policies and procedures section of a handbook should always be described as non-contractually binding, in order to enable the employer to make changes and avoid the unfortunate situation which arose in this case. 

Further information

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