Employee Handbooks, are they contractually binding?

In this post, I will examine the issue of when external documents or policies like employee handbooks are contractually binding on the parties to an employment relationship. What I am referring to here are documents or policies, which are external or outside of the contract of employment such as a leave or redundancy policy. It is important to note that in this post I do not deal with the issue of whether a collective agreement is contractually binding on an individual employment relationship or when and if it is permissible to unilaterally vary the provisions of these documents.  

Often employers rely on what are commonly referred to as Employee Handbooks. These commonly deal with issues like holiday leave, notice of termination of employment, sick leave, redundancy pay, other employment benefits and disciplinary and grievance procedures. Similarly employers may have self-standing policies, which deal with any aspect of the employment relationship. Often the question emerges as to whether any provisions contained in these documents or policies are contractually binding.  There are many good reasons why determining whether or not the contents of such documents are contractually binding. Firstly the question is relevant to determining what all of the terms and conditions of employment are. Secondly, if the provisions of such documents are contractually binding, it may follow that the employer may not then unilaterally alter such provisions and a unilateral variation will therefore constitute a breach of contract. This may attract liability for damages or in cases where the breach amounts to a repudiation of the employment contract, the employer may be held liable for constructive dismissal. This question is also of enormous importance in restructuring situations such as TUPE transfers or internal restructuring. It may also be of importance to the employee who wants to deal with a grievance against another employee. 

The fairly recent decision by the Queens Bench Division in Hussain v Surrey and Sussex HealthCare NHS Trust [2011] EWHC 1670 (QB) provides some important guidelines regarding this issue. This case involved the question of whether some aspects of the NHS Practitioners Disciplinary Procedure were contractually binding. The employee party was a consultant pediatrician who complained that the NHS had unlawfully excluded her from her work and sought to institute disciplinary proceedings against her in contravention of her contract of employment.  A number of previous decisions had dealt with similar issues. However in giving judgment, Andrew Smith, J laid down the following principals:

• The overarching question is to determine whether the objectively evinced intention of both parties is to make the provisions of the extraneous document in question contractually binding or not?;
• In making this determination, there is no single test which is determanative  but a number of indicia have to be looked at;
• There is no numerous clauses or 'closed list' of indicia and not all indicia may be relevant in each case but these indicia include:

1. The importance of the provision to the contractual working relationship. For example a provision relating to remuneration would be apt for inclusion into the contractual relationship. See Keeley v Fosroc International Ltd [2006] EWCA Civ 1277.
2. The level of detail described by the provision. These indicia seem to be more relevant to provisions such as disciplinary procedures. The more detailed the provision the less apt it would be for contractual conclusion.
3.  The level of certainty of what the provision requires. The more general or vague the provision is, the less apt it is to be contractual. 
4. The context in which the provision is found. If the provision is found amongst other contractually binding provisions, it is more likely to be have intended to have contractual status. 
5. Whether the provision is workable in practice or makes business sense. Some provisions are more or less apt to be contractually binding. See Alexander and Others v Standard Telephones & Cables [1991] IRLR 286 (QB)
6. The wording of the provision. If the wording is more peremptory and less directory such as using the word must as opposed to should or may and so forth, this indicates that parties intend to be bound by the provision. 
7. It should be remembered that the fact that a document is referred to or incorporated into a contract of employment, does not mean that all of the provisions in that document are intended to be binding. Thus if it has been found that the document itself is intended to be incorporated into the contract either expressly or by implication, the relevant provisions must also then be subjected to scrutiny as to determine if it was intended to be contractually binding. 
8. Established custom or practice may also indicate the inclusion of a provision as contractually binding. The employer or the industry in which the employer operates may have traditionally have included certain provisions in their terms and conditions of employment. 

In the absence of express wording, there is no simple answer to the question of whether a provision of an extraneous document or policy, practice or procedure is contractually binding and this will be the subject of legal interpretation of the relevant provision of the document in accordance with the relevant principals. I would also go so far as to say the mere fact that a contract of employment or a statement of particulars of employment have referred to another document, does not automatically mean that the parties intended the document to be contractually binding. 

Employers or employees may avoid such indeterminacy by explicitly expressly stating their intentions. If the wording of a contract and or of the 'external' instrument clearly expresses that it is either contractually binding or not, it is unlikely that the contrary will be upheld by the court in a legal dispute.