22 April 2016

The Court of Appeal has held that an absence management policy could have contractual effect.

In Department for Transport v Sparks the Court of Appeal had to determine whether the Staff Handbook that detailed a procedure for absence management was contractual or not and whether or not the actual procedure contained within the Handbook was itself part of the contract. This is an important question since if a particular procedure or policy is of contractual effect, the parties should ensure they follow the provision. Failure to do so could amount to a breach of contract.

These cases obviously depend upon their individual facts and the specific wording in question. In this particular case the contract specifically stated that terms and conditions of employment were to be found within the relevant policy. The question for the court was whether the procedure that was set out was “apt for incorporation” ie of a nature to be considered contractual and binding such that the procedure was part of the contract. If the procedure was contractual, managers required to wait until certain trigger points had been reached before taking disciplinary action in relation to absences.

The Court looked at the entire factual matrix and concluded that in the particular circumstances the procedure was indeed contractual. The Court noted that while it may be desirable (from an industrial relations perspective) for absence matters to be discretionary (and not subject to contractual obligations), that by itself would not prevent the particular provision from becoming contractual if that was the intention of the parties (as determined by the court). Conversely if the procedure was clearly stated to be a framework (rather than a prescriptive guide) that was unlikely to be of contractual effect.

While the facts of that case may be unusual, the case provides a timely reminder to ensure that the terms and conditions that apply to staff are carefully considered. Contracts and policy documents should be regularly updated. Employers should carefully consider whether policy documents and procedures are intended to be contractual or not and make sure that this is clearly evidenced. Where procedures do become contractual, employers should ensure that the procedures are not breached. Breaching the contract could lead to employment claims and disputes, including potentially constructive unfair dismissal.

As ever failing to prepare is preparing to fail! Contact your BTO employment law specialist for advice or to discuss your employment documentation.

Contact: David Hoey, Partner dho@bto.co.uk T: 0141 221 8012