In the decision of Romero v Farstad Shipping (Indian Pacific) Pty Ltd (22 December 2014), the Full Court of the Federal Court held that an employer breached a contract of employment with its employee by failing to comply with the terms of its own HR policy and procedure. In doing so, the Court affirmed previous case law that policies and procedures may be incorporated into employment contracts as determined objectively by an assessment of the parties’ intentions, the terms of any relevant policy and the surrounding employment circumstances.
Ms Romero, who was a sailor, had a number of heated exchanges with the Captain of her ship while at sea. After returning to land, Ms Romero sent an email to her managers raising concerns about how the Captain had treated her. Ms Romero referred to ‘bullying’ but left it open for Farstad, her employer, to decide how to deal with the general matters raised by her.
Farstad’s Workplace Harassment and Discrimination Policy (Policy) outlined its position on discrimination, harassment and bullying. The related Harassment and Discrimination Complaints Procedure (Procedure) provided different ways for how Farstad would deal with formal and informal complaints and specifically provided that it was the employee’s decision as to how to proceed. In formal investigations, the Procedure provided considerable detail about how an investigation should be conducted, the role of Contact Officers and how records of interview should be taken. Separately, Ms Romero’s contract of employment provided that Farstad’s policies were to be observed at all times.
After receiving Ms Romero’s email, Farstad immediately commenced a formal investigation which encapsulated both the Captain’s allegations about Romero’s competence as well as the general concerns of Ms Romero. In its investigation, Farstad representatives:
Ms Romero claimed that the Policy and Procedure formed a part of her employment contract and Farstad’s breaches of the Policy and Procedure therefore amounted to breaches of the employment contract leading to damages.
At first instance, Justice Marshall held that the Policy was of an aspirational nature and therefore did not form part of Ms Romero’s employment contract.
The Full Bench disagreed. It found that the Policy (and Procedure) did form part of Ms Romero’s employment contract, including as a result of the:
The Full Bench then concluded that the Policy had been breached by Farstad, particularly in its:
The Full Bench declared that Farstad had breached Ms Romero’s contract of employment and remitted the question of damages to a judge of the Court for trial.
The question of whether an employment policy is binding or not on an employer is a significant one which arises frequently. Employers should therefore tread carefully as they can be subject to significant damages orders for failing to follow their own procedures and policies.
It is recommended that employers take this opportunity to revisit their employment contracts and employment policies and procedures, particularly those relating to bullying, harassment, discrimination and investigations. Employers ought to ensure that:
Posted on: 16 March 2015