James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland [2015] NSWSC 243 

Case Link

In a recent NSW Supreme Court decision, a Chief Executive Officer who was made redundant has been awarded almost $3 million after the Court accepted that the employer’s redundancy policy was binding on his employer.

The CEO, who had been made redundant as a result of his employer, ABN AMRO Holdings Limited, being taken over by an international consortium, argued that the redundancy policy formed part of the terms of his employment because his employment contract stated: “You agree to be bound by the policies of ABN AMRO as may exist from time to time.”

The Court found that it did not make sense to suggest that the redundancy policy was binding on the CEO but not the employer, unless there was an express statement in the employment contract to that effect. Interestingly, the Court came to this view even though the policy was not readily made available to employees.

The Court awarded the CEO $2,932,692.31 plus interest as a result.

Lessons for Employers

In Commonwealth Bank of Australia v Barker [2014] HCA 32, the High Court held that an implied term of mutual trust and confidence is not incorporated into every employment contract, and accordingly in that case the Commonwealth Bank did not breach that term by failing to comply with its redundancy policy.

However, this NSW Supreme Court decision reveals that employers must still be careful about ensuring that their employment contracts are properly worded, to avoid being deemed to have incorporated the policies into the contract.

Employers can require an employee to comply with a policy without necessarily also making that policy binding on the employer. However, this requires careful drafting.

Even then, employers must also be careful about what is and what is not included in their policies.

Even if the policies do not form part of the employment contract, they can still land an employer in trouble. For example, an employer’s failure to adhere to certain policies (such as a grievance management or disciplinary policy) may expose the employer to a successful bullying or unfair dismissal claim. Personnel policies should therefore be regularly reviewed to ensure they are appropriate for an employer’s particular circumstances.