In Keeley v Fosroc International Ltd the staff handbook, which was incorporated by reference into an employee’s contract, included a phrase which stated that in the event of redundancy an employee would be entitled to receive an enhanced redundancy payment from the company. The handbook did not specify how the payment would be calculated but stated that “details will be discussed during both collective and individual consultation”. The Court of Appeal held that the enhanced redundancy provision in the staff handbook was more than merely an aspirational statement and was a term capable of having contractual effect.

Although staff handbooks are usually presented as a collection of policies, if by their nature and language it is appropriate for them to be contractual terms they can be viewed as such. This case is in line with recent decisions to the effect that policies and statements contained in staff handbooks are capable of being contractual terms if properly incorporated into an employee’s contract of employment. Employers will need to look closely at their handbooks to ensure that they are not inadvertently including contractual terms on which an employee can later rely.

We often come across instances where handbooks are expressly incorporated into the terms and conditions of employment. This can be advantageous to an employer in cases of non-compliance by the employee, as such non-compliance could be regarded as a breach of contract. Equally, the employer could find themselves in breach of contract. Changing handbook provisions which are incorporated into the contract can also be problematic as mutual agreement is required to a change terms and conditions. A balance between contractual and non contractual provisions in a handbook is something that should be considered. However, this case shows the need for careful drafting in order to avoid any non contractual handbook provisions being implied into the contract.

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