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Contract
  • Published:
    29 April
  • Area of Law:
    Employment

Staff handbook: contractual or non-contractual

In the case of Department for Transport v Sparks and others [2016] EWCA Civ 360, the Court of Appeal has upheld the High Court’s finding that an absence management policy contained in a Staff Handbook had contractual effect.

The handbook was divided into two sections, the first of which stated that all policies which were “apt for incorporation” would be incorporated into the employees’ contracts (and included the absence management procedures). The second section contained guidance documents and was not intended to be incorporated into contracts.

The Department for Transport (DFT) unilaterally sought to make changes to its absence management policy following unsuccessful negotiations with employees’ trade unions. The High Court held that the DFT was not entitled to unilaterally change the terms of the handbook as the absence management procedure was incorporated into the employees' contracts of employment. Therefore, it could only make changes to it if they were in accordance with the handbook's variation provisions, which permitted variation providing the changes were not detrimental to employees. In this case, the changes were detrimental.

What does it mean for businesses?

The case is an important reminder for employers to clarify exactly which terms in a staff handbook are intended to be contractual and which are not, to avoid any confusion. While there may sometimes be valid reasons for having some contractual policies, it is preferable for employers to use a non-contractual staff handbook, which will be easier to amend. Also, any attempt by employers to reserve the right to unilaterally vary employment contracts will be carefully scrutinised by the courts. The Judge also made it clear that employers need to retain previous versions of electronic handbooks when updating and was very critical of the DFT for failing to do so.

For more information on the issues raised above or any other employment related matter, please contact a member of the Employment Team.

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