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Review your employee handbook to make sure your company is not in breach of contract

Published on Saturday, 19 Mar 2016

The Background

In search of information on workplace issues, staff members usually turn to the employment contract as a common point of reference. The employee handbook, however, is a close second. In most workplaces, handbooks are distributed at induction and are crucial for defining the expectations, obligations and entitlements of employer and employee. Yet, so often, not enough attention is paid to these documents by either side.

An employee handbook typically outlines company policies – including basic staff entitlements, such as working hours, leave, remuneration and insurance – as well as the employer’s expectations.

Usually, much of this information is also in the employment contract. Unlike those contracts, however, employee handbooks are usually written in layman terms and are often intended to provide guidance and explanation rather than set out legal rights and obligations.

Not all employers are certain whether such guidelines have legal implications, above and beyond the contract. Is the employer taking on new obligations, thanks to its handbook? As with so many aspects of employment law, the answer is case-specific.

It’s important to understand whether the handbook contains any rights or obligations and, if so, how they are expressed.


The Case

There has been a notable shift in the attitude of courts on this topic in recent years. They are seemingly more inclined to hold employers to their word–even if those words are found in the handbook instead of the contract.

Some years ago, a case in Hong Kong saw the court consider whether the employer was required to manage disciplinary issues in a certain way, based on an appendix to the company’s conditions of service – and not the contract.

Ultimately, it was held that the employer was indeed contractually bound by the procedures it had put in place, and was therefore in breach of contract by not applying those procedures correctly.

The lesson here is that internal procedures, or policies, may restrict the employer’s ability to deal with matters based on the circumstances of the situation.

Most importantly, when procedures and policies are contractual via an employee handbook, there is a risk that employees may bring a claim against an employer for breach of contract if the employer does not follow those procedures.

That can mean a lot of time, money and energy spent on procedural matters that could have been easily avoided.


The Solution

How can an employer prepare a handbook that is informative and helpful, without creating additional legal burdens or obligations? Reviewing the employee handbook is a good place to start.

Assess the difference between sections giving rights to employees – such as those on leave and benefits – and those sections which are for instruction only, such as the company mission statement.

In those sections that provide guidelines, rather than explain contractual commitments, ensure that a suitable disclaimer is in place.

Although a disclaimer can be useful, it is not necessarily a universal solution. The courts could still scrutinise the wording of the handbook and find the terms to have contractual force, regardless of the disclaimer.

Some employers may choose to leave things unsaid, such as disciplinary and grievance procedures. This is not advised, as employees won’t have any point of reference or guidance if – or when – they have a relevant matter to deal with.

There is no hard-and-fast rule as to how employee handbooks should be structured, as all details in these foundational documents can have a long-lasting and significant impact on a business.

Employers owe it to themselves to review these documents regularly and ensure they comply with the latest legal developments.

This article appeared in the Classified Post print edition as Don’t judge a handbook by its cover.

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