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Incorporating policies into employment contracts: think twice!

A Contract of Employment is a legally binding agreement designed to provide both parties security and protection throughout the employment relationship. Incorporating policies into employment contracts under the perception their inclusion ensures employee compliance is a commonly held practice amongst employers.

While most employers recognise the importance of formally documenting the rights and obligations of each party, few recognise the hazards when company policies are specifically incorporated into a Contract of Employment.

Bottom line? Employers expose themselves to potential legal risks when workplace policies are incorporated into a contract of employment.

If a contract of employment requires an employee to observe a policy – and the language in the policy can be interpreted to create mutual obligations on the employer and employee – an employer can be exposed to claims for breaches of the employment contract for failing to or not adequately complying with its own policy.

Is the risk significant? Click here for a summary of a Full Court decision to award an employee damages in excess of $500,000 as a result of the employer failing to comply with its own HR policy.

So what’s the best approach around incorporating policies into employment contracts? As with any risk management strategy, it’s better to identify and eliminate the hazard right from the start as opposed to dealing with consequences once they arise.

Employers should carefully consider whether they wish to incorporate any internal policies and procedures into an employee’s contract of employment. Contract wording should be precise to provide accurate effect to the employer’s intention. Unambiguous contractual wording minimises the chances that a court will have to provide their own interpretation as to what might have been the parties’ intention.

Wording in the contract should clearly state that employees have an obligation to be familiar with company policies and procedures but these workplace policies do not form part of the contract. Clarifying the employer’s expectations that workers observe company policies ensures such policies take the form of directions and, as most employers know, employers can direct employees at any time to comply with reasonable and lawful directions.

Knowing exactly what Contract of Employment content is right for your business can be tricky. A well worded contract, tailored to your business, provides employers the protection they’re entitled to while clarifying expectation from employees.

Bare Bones Consulting specialises in employment documents tailored to your business, operating environment and strategic objectives. We make things easy…and we go the extra mile to ensure what we deliver is an effective, value for money HR solution you understand.

Why not give us a call? Your initial consultation is free…and that’s cheaper than any visit to court. Objection overruled!

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Note: Bare Bones Consulting provides HR services for employers. Employees seeking advice on workplace concerns should contact the Fair Work Infoline on 13 13 94.