Harassment policy found to be contractual and binding on the employer

In an employment contract with its employee, a Ms Romero, the company Farstad Shipping (Indian Pacific) Pty Ltd (Farstad) referred to its workplace policies in these words:

All Farstad Shipping Policies are to be observed at all times.

The harassment policy (the Policy) contained wording which included a commitment by Farstad that it would handle complaints:

… with confidentiality, impartiality and sensitivity to the complainant’s needs.

The Policy also stated that Farstad would not commence investigations about a matter without a formal complaint and employee consent to the investigation other than in a matter where very serious allegations were involved.

Ms Romero, who was an officer on a Farstad ship, expressed in an email to management, her concern about the conduct of the ship’s captain in which she said that the:

Captain’s inappropriate behaviour needs to change but this is a matter for Farstad management to address.

Although open to interpretation, the email from Ms Romero to Farstad did not expressly request that Farstad investigate her concern.  Farstad nevertheless proceeded with a formal investigation without Ms Romero’s consent and included in the process, the counter complaint by the ship’s captain about Ms Romero’s competency and temperament.

On appeal to the Full Federal Court, the Court¹ in December 2014 found that the Policy was not just a direction from Farstad to Ms Romero.  The Court found that the Policy was in fact contractual and binding on Farstad.  The Court said that:

While some parts of the Policy may have been aspirational and some parts directive, Farstad’s obligations in relation to dealing with serious complaints of sex discrimination and bullying were contractual promises given in exchange for employees being obliged to comply with the behavioural requirements imposed on employees by the Policy.

Implication for employers

The Full Bench found that the conduct of Farstad was repudiatory in nature.  The outcome of this case illustrates how easily workplace policies can be found to be contractual and thereby open the employer up to Court process for not implementing their own policy (as Farstad did in this instance by investigating contrary to the Policy) and prospective damages.

The case highlights the importance of clear drafting in employment contracts that might refer to the workplace policies.

Unclear drafting of an employment contract that does not expressly state that policies are not contractual, can be a millstone around the neck of an employer.  The language of an employment contract is paramount to reducing the risk that a policy can be found to be contractual and binding on both employee and employer.

For further advice on this topic, please contact Lavan Legal's Employment and Workplace Relations Team.