Can staff handbooks be contractual?

When an employee starts work with an employer, the employee will usually be given a copy of their contract of employment. In many cases, they will also be given a copy of the employer’s staff handbook. The contents of staff handbooks vary from employer to employer, but they will often contain further details of the terms and conditions set out in the contract of employment, together with the employer’s policies on (for example) redundancy, guidance notes and suggestions for good practice on the part of both employer and employee.

What may not be appreciated by both employers and employees is that part or all of a staff handbook may form part of the contract of employment, and therefore be legally enforceable in courts and tribunals. Whether this is so will depend on whether the contracting parties (i.e. the employer and employee) intended part or all of the staff handbook to form part of the contract of employment. In order to discover whether this is what the parties intended, it is necessary to consider several factors:

  1. The importance of the handbook to the working relationship between the employer and the employee.
  2. The certainty of the provisions of the handbook. If the handbook is written in vague or general terms, it is less likely to form part of the contract of employment.
  3. The compatibility of the provisions of the handbook with the contract of employment. If the contract of employment and the handbook contradict one another, the contract of employment will override the handbook.
  4. The “workability” and business sense of the provision. The parties will not be taken to have intended to include provisions in the contract of employment that are unworkable or do not make business sense.

The courts have repeatedly stressed that the employment documents (i.e. the contract of employment and the handbook) must be read as a whole, and that whether or not a handbook or parts of a handbook form part of the contract of employment will ultimately depend on the precise terms of those documents. Therefore, previous court decisions on differing sets of employment documents are of limited assistance.

However, the key question to be asked in cases such as this was set out by Lord Woolf in Wandsworth LBC v D’Silva. In determining whether a handbook will form part of the contract of employment, employers and employees should ask themselves whether the handbook (or the relevant part of the handbook) is to be read as conferring rights on the employee or as setting out no more than good practice which the employer is intended to follow. If it is the former, then the handbook (or the relevant part) is likely to form part of the contract of employment. If the latter, it is less likely that the handbook will form part of the contract of employment.

This is a difficult and technical area of law, and it will not always be possible for the question above to be definitively answered in a particular case without the intervention of a court or tribunal. However, employers can minimise the risk of costly legal proceedings by being certain, when drafting staff handbooks, whether they are intending that handbook to be a contractual document or merely a statement of good practice.

Similarly, employees would do well to ask for early clarification from their employer as to what the employer considers the status of the staff handbook to be. It is not suggested that these practices will remove the need for court proceedings entirely, but they can assist employers and employees in constructively reaching a common understanding of the contents of the employee’s contract of employment.