Is an employer entitled to unilaterally change the terms of its staff handbook? It depends upon whether the handbook forms part of an employee’s contract of employment, as a recent case demonstrates.
Department for Transport v Sparks and others
The Claimants worked for different agencies within the Department for Transport (DfT). The DfT’s staff handbook contained an absence management procedure which had trigger levels, setting out how many days’ absence would trigger a formal absence management procedure. The trigger point ranged from 8 to 21 days depending upon the department. The DfT wished to harmonise the policy across all departments and reduce the trigger point to 5 days.
Part A of the handbook, which included the absence management provisions, stated that any terms which were “apt for incorporation” into the employee’s contracts of employment would be contractual. A further provision in the handbook entitled the DfT to unilaterally change the terms of employment following a consultation process. If a consultation process failed to achieve agreement, the DfT would only be entitled to change the terms if those changes were not detrimental to the employees.
The DfT consulted the employees about the proposed reduction to the absence trigger point. Following unsuccessful negotiations, the DfT proceeded to unilaterally change the absence trigger point, reducing it to 5 days.
The employees applied to the High Court for a declaration as to their contractual rights.
The High Court held that the provisions for absence management contained in the staff handbook were incorporated into the employees’ contracts and therefore, the DfT was not entitled to unilaterally change the terms of the handbook. It was held that the DfT could only change the terms if the changes were not detrimental to the employees. The proposed change would be detrimental to employees as they could now take fewer absences before a formal absence management procedure was triggered.
The High Court declared that the new procedure was not binding on the employees.
The DfT argued that the absence management provision contained in Part A of the handbook was not apt for incorporation into the contract of employment and therefore they could unilaterally change it. The DfT appealed to the Court of Appeal.
Court of Appeal (CA)
The CA dismissed the appeal and focused on the question of whether or not the provision was “apt for incorporation” into a contract of employment by looking at the language of the staff handbook and employment contracts.
The CA found that the absence management provision contained in Part A of the staff handbook read as if it was contractual and that it was “capable of having a life of its own.”
The CA agreed with the High Court and dismissed the appeal – the policy had contractual effect and could not be unilaterally changed.
Whilst opinions vary on whether staff handbooks should be contractual or non-contractual, what they shouldn’t be is ambiguous. In other words, the handbook should either state categorically that it does not form part of an employee’s contract of employment or that it does.
From an employer’s perspective, it is usually better to have a non-contractual handbook, providing guidance to managers and staff, which can be updated or amended as necessary. This also avoids potential breach of contract claims if an employer contravenes the provisions of any contractual policy.
As this decision highlights, the courts will be reluctant to allow an employer to unilaterally vary the terms of a contractual handbook.
If you have any queries relating to staff handbooks, unilateral variation or employment contracts please contact Joanne Holborn, Tom Scaife or Caroline Rayner on 01228 552600 or 01524 548494.