A ground breaking decision of the Federal Court has demonstrated the willingness of the courts to interpret workplace policies and culture statements as binding contractual obligations. Disgruntled employees can now take action against their employer claiming breach of contract by an employer’s breach of existing internal policies.
Prior to the decision in Nikolich v Goldman Sachs J B Were Services Pty Ltd (Nikolich), the focus in most employment disputes was the common law contract of employment. As a result of the decision in Nikolich (which was upheld on appeal), there is now a firm precedent that workplace policies are to be incorporated into the express and/or implied terms of an employment contract. This has significant consequences for employers as the effect of an organisation's failure to comply with internal polices is no longer confined to the impact on employee morale and job satisfaction but can result in costly litigation and significant awards in favour of an employee when such policies are loosely worded or have been thrown together simply to pad out an induction handbook.
Mr Nikolich had reason during the course of his employment with Goldman Sachs J B Were Pty Ltd (Goldman Sachs) to lodge a complaint that he had been ‘bullied and harassed’. During the proceedings, he alleged that Goldman Sachs did not follow the written workplace policies it had in place which, amongst other things, dealt with ‘Harassment’, ‘Health and Safety’, ‘Integrity’, ‘Termination of Employment’ and ‘Support for Personal Issues’. Mr Nikolich claimed that the alleged harassment and incompetent handling of his grievance caused him to suffer from depression, resulting in periods of extended absence from his place of work and ultimately his dismissal by Goldman Sachs.
In judgment, Goldman Sachs was criticised for not adhering to the relevant grievance procedure as it was written and judicial comment was made that Mr Nikolich’s complaint was handled ineptly and it was in clear breach of its own policies which Goldman Sachs should have anticipated to be mutually binding on both parties.
A further shock to those familiar with this jurisdiction is that perhaps for the first time within the auspice of an employment law matter, an Australian court awarded general damages for the "pain and suffering" experienced by an employee during the period of employment.
What Does This Mean for Your Workplace?
It is likely that this decision will forge a new direction in employment law. Accordingly, it should act as an impetus for all businesses to review workplace policies, in particular those relating to grievance procedures and guidelines for the investigation of harassment and discrimination complaints. It is not uncommon for these policies to have been drafted by predecessors to current management and an audit will reveal any hidden dangers. It is also important that businesses do not over react and attempt to simplify their operations by abandoning existing workplace policies. Their existence not only reflects the standards of a workplace but ensures that procedures and decision making are not an arbitrary exercise of authority. A balance needs to be struck between the implementation of an effective and legally compliant policy whilst not committing the business to any unachievable practices. In particular the following questions should be asked:
- does the business have the personnel to realistically follow any guidelines in place?
- are the guidelines enough to be able to handle a sensitive claim such as discrimination?
- do the policies follow the entire process from complaint to resolution or are there gaps?
It may also be timely to review employment contract templates in place. To minimise a business’ exposure to this new frontier of litigation, it is imperative that all employment contracts draw a distinction between policies that are intended to be guidelines only or those that are legally enforceable.
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