Staff handbooks can be very useful for both employers and employees.  It is vitally important, however, that employers make it clear to their staff that handbooks do not form part of their employment contract. 

Terms of a contract can only be amended with the agreement of the parties and so if an employer stated that its staff handbook was contractual, the terms would be binding and would be difficult to change without the employees’ agreement.  For example, a contractual staff handbook that sets out a disciplinary procedure would force the employer to follow that procedure precisely or risk a finding that it breached its contractual policies, which in turn may increase the chances of a tribunal finding that a dismissal was procedurally unfair.

The point that an employer cannot unilaterally change a staff handbook was recently re-iterated in the High Court case of Sparks and the Department for Transport (Dft) 2015.  In this case there were seven employees, each of whom was employed by a different agency of the DfT.  Each agency had a departmental staff handbook, which was a standard document across the whole of the DfT. 

Provisions concerning the number of days’ absence allowed before a process was triggered (8 days to 21 days) were the same in all handbooks.  The handbooks stated that these terms were incorporated into the Dft’s contracts of employment. 

The DfT wanted to change the absence management policy.  Following unsuccessful negotiations, it sought to impose new standardised attendance management procedures across all agencies.  Under the new procedure the first trigger point would be activated at 5 days, or upon 3 occasions of absence within a rolling 12 month period.  At that point, an informal review meeting would be held; the procedure would become formal after the second trigger point and could ultimately lead to dismissal.

The provisions of how terms in the handbook could be varied were not entirely clear but they did state that the DfT would need to go through a consultation process.  In the event that the consultation process failed to reach an agreement, the provisions stated that unilateral changes could only be made if they were not detrimental to the employee.

The claimants asked the High Court to decide whether the DfT had the right to make these changes on the basis that: 

1. The terms of their contracts were as set out before the change; 
2. The new procedures did not vary the original terms and were not contractually binding;
3. The DfT committed an anticipatory breach of contract by imposing the new procedures;
4. If the DfT applied the new procedures in any individual case, they would commit a breach of contract.

The High Court decided that the original terms were incorporated in the employees’ contracts and, therefore, the DfT was not entitled to change them unilaterally.  

Although this decision is fact specific, employers who refer to terms in the staff handbook as forming part of the employment contract, should be absolutely clear about which terms are intended to be contractual and which are not. 

In our view, it is much wiser for an employer to have the contractual terms set out in a contract of employment and to use the staff handbook for all policies, rules and procedures that are not contractual.  It should be stated unequivocally in the staff handbook and/or in the contract, that the terms of the staff handbook are not contractual.

By making it clear that the staff handbook is not contractual employers have the freedom to vary a policy or introduce new disciplinary rules policies (e.g. to deal with social media issues) without the consent of its employees. 

Reggie Lloyd
01206 217347
​reggie.lloyd@birkettlong.co.uk