Staff Handbooks

by Joanne Stronach

Whether it's a printed booklet or entirely on-line, the staff handbook is now a familiar document to workers and employers.  Although it's not a legal requirement to provide a staff handbook, there are some documents employers are required to give employees, regardless of the company's size. The required documents are: a copy of the company's health and safety policy, details of the discipline and grievance procedures and a contract of employment. It is also advisable to provide an Equal Opportunities Policy. (Although it's not needed by law, in cases of discrimination, it's a document which the Tribunal always asks for. Companies without one are immediately on the back foot - they are unable to say that they have taken all reasonable steps to prevent discrimination without one.)

So, you don't need to have a handbook but most companies find that it's a convenient and practical method of ensuring that all employees have accurate and up to date information about company policies.  At Burnetts, we encourage all our clients to put their policies in writing.

The staff handbook has long been viewed as an important document. Preparing and updating the staff handbook can be a full time job for human resources professionals, but after two recent Appeal cases, the contents of the staff handbook have been given new significance.

Contractual or not?

Sometimes provisions in the handbook are expressly incorporated into employees' contracts.  On other occasions they detail policies and procedures only and are expressed not to form part of the contract of employment but are for guidance purposes only.  The difficulty, of course, is deciding on which side of the line a particular provision falls.

Two recent cases indicate that the Courts are increasingly likely to find that provisions in the handbook can create contractual rights. Even if the handbook expressly states that it was "for information purposes only and does not form part of your contract of employment" this statement is a matter to be taken into account only - it is not conclusive.

In the first case of Keeley v Fosroc International Ltd the staff handbook was expressly incorporated into individual contracts and provided that in a redundancy situation employees were entitled to receive an enhanced redundancy payment from the company.  However, no method of calculating such payment was given.  The question before the Court was whether this statement was sufficient to create a legally binding right.  The Court of Appeal held that it was enough to create a legally binding right despite the absence of any calculation method.  The handbook clearly referred to an "entitlement" which the Court distinguished from anything that was procedural, aspirational or discretionary such as the parts of the redundancy policy that dealt with the selection of employees.  They considered that aspects of the remuneration package such as redundancy compensation or paid time off to look for work elsewhere were contractual.

In addition, the Court decided that the remuneration part could be incorporated into the contract even if it was expressed to be for information or explanation only or expressed to be discretionary.

It's understood that Fosroc International has made an application to appeal to the House of Lords.

Ripening Rights

This view has been supported in a later Employment Appeal Tribunal case called Peries v Wirefast Ltd.  In this case Mr Peries claimed that he was contractually entitled to 12 weeks "re-deployment pay" and the services of a professional outplacement adviser.  This was on the basis that those items were provided for in a staff handbook which he said had contractual force.  An Employment Tribunal dismissed that claim initially and he appealed.  At the appeal the employer argued that the appeal should be dismissed as the handbook expressly stated that it was "for information purposes only and does not form part of your contract of employment." 
The Employment Appeal Tribunal rejected this argument and said that such a statement is a matter to be taken into account when deciding whether a document has contractual status, but it was not conclusive. 

The Employment Appeal Tribunal also decided that something that starts off as a concession can ripen by custom and practice into a contractual right.  In the Tribunal's view if a document says that it is for information purposes only and does not form part of a contract of employment and may be subject to change, that does not preclude a policy emerging based on custom and practice that hardens into a contractual entitlement.

Practical Implications

It would now appear, based on the findings of these two cases that even vague statements in a handbook, which would normally have appeared to be unenforceable can become a contractual entitlement.  What is more worrying is that an actual statement that the terms of the handbook are not part of the contract of employment would also appear not to be determinative of the issue. 

One possible solution may be to separate out parts of the handbook which actually establish employee rights and preface that part of the handbook with an express clause stating that those parts are contractual but adding a further statement to the rest of the handbook denying that it forms part of the contract.  Much will depend on the shape and style of the staff handbook.

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New Compensation Limits

The maximum compensatory award for unfair dismissal rises to £60,600 for dismissals after 1st February, 2006.

There are also changes to the limit on the amount of a week's pay that can be taken into account when working out redundancy entitlements.

From next month, the limit of a week's pay increases from £290 to £310. 

Joanne Stronach is a Partner at Carlisle solicitors, Burnetts. She works exclusively in employment law.

For more advice on staff handbooks or other employment matters contact Burnetts' Employment Law team on 01228 552222.

Jan 2007