Court of Appeal decides employer could not impose new absence management rules

Warnings and dismissal trigger points in the staff handbook were contractual

Recently the Court of Appeal had to decide, in the case Department for Transport v Sparks, whether a provision set out in an employee handbook, or in an employment policy, can have the same effect as an employment contract term. This would mean that the employer was bound by the provision, and would be in breach of contract if it decided not to comply with it.

In this case the employer imposed a new absence management procedure after it failed to achieve the change through negotiations. The new procedure changed the points at which various warnings, and ultimately dismissal, were triggered and these were less favourable to employees compared with the procedure that had been in place before. The employees complained.

High Court‎
The staff handbook allowed the employer to make changes to the employees’ terms and conditions, but the court decided this power to vary the terms did not entitle the employer to impose the new absence procedure. This was because the variation provision explicitly did not permit a change that was detrimental to the employees, such as the new, more onerous absence procedure.

But there was another issue to consider: whether the original sick pay provisions were contractually binding. The High Court held that certain aspects of the original sick pay provisions – such as guidance on self-certification for sick leave and provisions concerning occupational health referrals – were not contractual. However, the provisions triggering warnings under the original‎ procedure were found to be contractual, because they were clear, precise and potentially had serious consequences for employees. The court thought the variation clause was contractual, too, for the same reasons, even though it did not actually entitle the employer in this instance to make the proposed changes because they were detrimental.

Court of Appeal
The Court of Appeal has now upheld the original High Court decision that ‎the sick pay provisions which the employer tried to change were contractual. In reaching this decision, the court applied a long established approach. When determining the contractual status of provisions which are not expressly incorporated into an employee’s contract of employment, a court has to consider:

  • the character of the document in question
  • the importance to the employer and the employee of the provision that is being contested
  • whether, as the jargon puts it, the provision is ‘apt for incorporation’ because, for example, it is expressed in a way which is appropriate for contract terms (the courts have referred to this as “the language of entitlement”).

The Court of Appeal rejected the argument that the provisions in question were not contractual because they constituted procedural guidance and were among material which was not contractual. The description of the provisions in question as “terms and conditions”, and the fact that they gave employees the right not to have the employer’s absence management procedures applied until the relevant trigger point was reached, were particularly important to the court in reaching this conclusion.

This case is a useful reminder that describing documents as “policies” is not enough to avoid those documents potentially being contractual in effect, although this will depend on their content and how they are drafted.‎ An employer that commits to prescriptive provisions, which can be seen as conferring entitlements on employees, can expect to be held to them contractually by a court. This is an issue which is wider than the specific sick pay provisions discussed in this case since other employer policies – such as disciplinary, grievance and performance management procedures – could also have the same status in an employment relationship as a contract of employment.

The issue has important practical implications. If an employer tries to change a contractual policy, its employees may be entitled not to comply with the new policy, and claim constructive dismissal or even damages for breach of contract. For example, if a performance management process is contractual, and is not followed in a case of poor performance, the employee involved will be able to seek damages for the period of additional employment which he or she would have had prior to dismissal, if the proper process had been followed.

In order to reduce the risk of disputes of the sort which arose in the Sparks case, employers should not only consider how detailed each of their policies needs to be: they should also consider whether they should make it explicit that a particular policy is non-contractual, and can be varied at the employer’s discretion, including being withdrawn or not applied in individual cases‎.


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