In Department for Transport v Sparks and others  EWCA Civ 360, the Court of Appeal had to decide whether a provision in a staff handbook concerning absence management had been incorporated into employees’ contracts of employment so could not be changed without employees' agreement. That provision included a ‘trigger point’ at which the Department for Transport (the Department) could take action in connection with an employee’s persistent short-term absence.
It is a well-recognised principle of common law that a contract may only be varied in accordance with its own terms or as agreed by the parties. That principle applies to all contracts, including contracts of employment. Accordingly an employer cannot simply change an employee’s contractual terms without their agreement.
However, the terms that form part of an employee’s contract of employment can often be less clear. While the terms set out in a written contract of employment will clearly form part of the employee’s agreed terms, terms may also be incorporated from other sources, such as a staff handbook. For such provisions to have contractual effect, the wording of the contract must provide for incorporation and the particular provisions must be “apt for incorporation”. It follows that documents setting out best practice and guidance for dealing with particular matters will not ordinarily be held to be contractual.
This case concerned seven claimants employed by different agencies for which the Department was responsible. Each agency had its own staff handbook, which stated: "The [Handbook] … sets out many of your terms and conditions. It is the intention … that all of the provisions of the [Handbook] which apply to you and are apt for incorporation should be incorporated into your contract of employment."
The handbook was divided into two parts: Part A and Part B. Part A was expressed to contain terms and conditions which, if they applied to the employee and were apt for incorporation, would be incorporated into the employee’s contract of employment. Part B was expressed to contain procedures and guidance relevant to the employment relationship.
The provision that was in issue in the present case was contained in Part A and stated: "10.1.18 Where in any 12 month period you have taken a number of short-term absences as sick leave which together exceed 21 working days, your line manager will discuss your attendance record with you. Only if you have exceeded these ‘trigger points’ and, consequently, your line manager perceives a problem with your attendance will he or she take the matter forward in accordance [with the attendance procedure]."
The Department sought to make changes to the terms of the handbook. The handbook provided that the Department had to undertake consultation regarding changes to employees’ terms and conditions. It also provided that if agreement was not reached through consultation, the Department could only make changes unilaterally if they were not detrimental to the employees.
In July 2012, following unsuccessful attempts to negotiate changes, the Department informed the trade unions that it would be imposing a new attendance management procedure across all agencies. Under that new procedure, the trigger point for action was lowered to five days’ absence, or three occasions of absence in a rolling 12 month period.
The claimants applied to the High Court for a declaration as to their contractual terms.
High Court decision
The High Court decided that the provisions relating to attendance set out in Part A of the handbook had been incorporated into the employees’ contracts of employment and it was not open to the Department to change those terms unilaterally without the employees’ agreement.
The High Court found that it was the intention of the Department that the whole of Part A of the handbook was contractual. While many of the provisions contained in that Part could not be contractual (ie where they were clearly intended as guidance only), the relevant provisions concerning absence management were sufficiently clear and precise to be incorporated.
The High Court also concluded that the Department was not free to impose its new attendance management procedure on the basis that the changes were detrimental to employees, who could face formal action at a much earlier stage due to the new trigger point. Accordingly the changes were not permitted under the terms of the handbook and the High Court made a declaration that the terms of the claimants’ contracts were as set out before the purported change.
Court of Appeal decision
The Department appealed to the Court of Appeal, which conducted a thorough review of the case law in this area. The Court of Appeal dismissed the appeal and provided helpful guidance as to the approach to be adopted when considering whether particular terms have been incorporated into a contract, including:
- Whether a provision has been incorporated into individual contracts of employment will always turn on the precise wording of the employment documents in each case.
- The key question is whether a provision is ‘apt for incorporation’ and the starting point has to be the language of the documents as a whole.
- Where a document is incorporated by general words, it is necessary to ask whether any particular provision or part of the document is apt to be a term of the contract.
- Each set of employment documents will differ and each has to be analysed according to its own terms. What another court thought of another set of documents will have little bearing, even if dealing with a similar subject matter.
- It would not be inconsistent for sickness management procedures to be largely matters of guidance and good practice, but for certain provisions to have contractual effect, if that was the proper interpretation of the documents as a whole.
In this case, the introduction to the handbook and the section dealing with health both had a “distinct flavour of contractual incorporation”. The terms of the provision itself also clearly conferred a right on employees over and above the guidance in the handbook (ie the right not to be subjected to formal action until a particular trigger point had been reached). Accordingly the Court of Appeal saw no reason to depart from the High Court's decision.
Cases of this kind are specific to their own facts and therefore a judgment in one case will not necessarily influence the interpretation of employment documents in another case, even if the two are similar. This decision does, however, provide a useful reminder of the general principles when considering whether a particular provision forms part of an employee’s contract of employment.
Employers who do not wish to get caught up in issues of this kind would be well advised to review policies and procedures and ensure that their contractual (or non-contractual) status is clearly expressed, or alternatively to introduce a fully non-contractual handbook with all contractual terms dealt with in the written contract of employment. That said, employers will need to tread carefully when seeking to refresh outdated policies and procedures that may have become contractual, or they too could end up in hot water.