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Workplace policies: Aspiration or obligation?

Submitted By Firm: Corrs Chambers Westgarth

Contact(s): John Tuck

Author(s):

By Tracy Caspersz (Counsel) & Michael Barnes (Graduate Lawyer)

Date Published: 2/1/2015

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Whether a workplace policy is simply ‘aspirational’ or contractual in nature can be problematic. Much will depend on the language in question.

In Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCAFC 177 (22 December 2014), the Full Court of the Federal Court of Australia (Allsop CJ, Rares and McKerracher JJ) allowed an employee’s appeal, holding that the policy under consideration was not merely ‘aspirational’ but rather contained mutual obligations that were capable of precise identification.

Romero highlights the need for those who write policies to carefully consider the language that they use, and the ramifications of employers not complying with the terms of their policies.

Facts

The respondent (Farstad) employed the applicant (Romero) as a maritime officer under a letter of engagement dated 10 January 2011, which stated that ‘all Farstad Shipping Policies are to be observed at all times.’ Farstad published and promoted several policies, including a Workplace Harassment and Discrimination Policy. The Policy set out the behaviour expected of employees in relation to bullying and sex discrimination. It also set out procedures by which employees could report complaints, and the manner in which Farstad would respond to complaints under the Policy.

From 23 November to 4 December 2011, Romero worked as a second officer aboard one of Farstad’s supply vessels, the Far Swan, under the ship’s master, Captain Martin. Romero was relieved from duty, at her request, following a substantial falling out with Captain Martin.

Three days after disembarking the Far Swan, Romero sent an email to Farstad alleging that Captain Martin subjected her to ‘relentless and targeted bullying’, but stating his behaviour was ‘a matter for Farstad management to address’.[1] Farstad treated the email as a formal complaint under the Policy and commenced an investigation, purportedly in accordance with the Policy. However, Farstad’s investigation centred on questions raised by Captain Martin as to Romero’s competence, capacity and temperament, rather than her complaints.[2]

The litigation

Romero lodged a complaint in the Australian Human Rights Commission asserting that Farstad had treated her less favourably by reason of her sex, in contravention of the Sex Discrimination Act 1984 (Cth). No resolution was reached in the Commission. Romero then pursued the complaint against Farstad in the Federal Court.

Justice Marshall at first instance held that there was no sex discrimination. However, Romero also argued that the Policy formed part of her contract of employment and that Farstad breached or repudiated her contract by not complying with it, thereby causing her loss and damage.[3]

Justice Marshall[4] held that the Policy's terms were neither expressly nor impliedly incorporated into the contract of employment. He applied Goldman Sachs JBWere Services Pty Ltd v Nikolich (2007) 163 FCR 62, holding that:[5]

As was the case in Nikolich, there is much in Farstad’s Policy that could be described as “aspirational“. The fact that new Farstad employees are made to sign the Policy is not decisive in rendering it a contractual document (see Nikolich at [121]). There is nothing in the Policy itself which suggests that its terms are terms of Farstad’s contracts of employment with its employees or are otherwise expressly or impliedly incorporated within them. There is quasi-contractual language on the first page of the Policy, saying that Farstad “will… handle complaints, meet all legal and statutory obligations and ensure employees… are not disadvantaged in their employment conditions or opportunities“. However, such language is insufficiently specific so as to amount to a binding contractual obligation. It has a predominantly aspirational quality. I find that it is not specifically incorporated as part of Ms Romero’s contract of employment.

In any event, Justice Marshall was not satisfied that Farstad had breached the Policy.[6] He emphasised that employers, in conducting an investigation, are ‘obliged to act in a practical manner, and not to embark on a judicial hearing or police style examination of the circumstances.[7]

Romero appealed against these findings concerning the Policy. The Full Court allowed the appeal, holding that the Policy formed part of the contract of employment, and that Farstad breached the Policy in the manner in which it acted on receipt of her complaint.[8] Whether this amounted to a repudiation of the contract and associated questions, including the issue of damages, were remitted for further hearing.

The decision on whether the Policy formed part of the contract

In the meantime, the Full Federal Court’s decision is instructive as to when a policy will form part of a contract of employment. In determining this, the focus will be on the parties’ objective intentions, involving: ‘ ... consideration not only of the text [of the contract], but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.[9]

In Romero, the Full Court held that the Policy formed part of the employment contract as:[10]

The language used in this instance, taking the Policy as a whole, makes it clear that there is an expectation by the company that there will be mutual obligations. In return for the employee complying with the terms of the Policy, the employer gives a responsive assurance that complaints of non-compliance by other employees will be treated in a certain way.

The Full Court took into account surrounding circumstances including that:

  • the Policy was the subject of an education program at the time of, or contemporaneous with, the offer of employment;
  • Farstad provided the Policy to Romero;
  • Romero was required to sign the Policy;
  • the benefit in the Policy was a benefit ordinarily conferred in employment contracts; and
  • there was regular reinforcement of this and other company policies on an ongoing basis.[11]

Also relevant, in the Full Court’s view, was the actual employment context including the need to avoid problematic situations arising for Romero if bullying and discrimination were not precluded; and the importance, in the operation of ships, of maintaining a calm environment from a safety perspective.[12]

As to Justice Marshall’s finding at first instance that the Policy was ‘aspirational’ and, for that reason, did not form part of the contract, the Full Court accepted that some aspects of the Policy were only aspirational, but emphasised that:[13]

... the specific obligations considered in this case were clearly ascertainable and quite capable of precise identification. There is thus no uncertainty or vagueness as to what the relevant terms of the Policy mean. Many enforceable contracts contain provisions that can be described as aspirational.

The decision on whether Farstad breached the Policy

The Full Court held that Farstad breached the Policy in a number of respects. At the outset, Farstad misunderstood its own Policy by treating Romero’s email as a formal complaint when the email did not refer to the Policy.[14]

In any event, Farstad breached the Policy by purporting to conduct an investigation into Romero’s complaint when, in fact, its main investigation was into Captain Martin’s allegations about her competence, capacity and temperament.[15] Farstad should have dealt with the two issues separately.[16] This was despite ‘ ... indications from the internal documents and communications to Ms Romero that Farstad thought it was complying with the Policy and discharging its functions with care and urgency.[17] Farstad also breached the Policy by failing to properly document the investigation and follow the procedure in the Policy, having decided to treat Romero’s email as a formal complaint.[18]

Implications for employers

  • If a contract of employment requires an employee to observe a policy, and the language in the policy is sufficiently certain to create mutual obligations on the employer and employee, the employer may be in breach of the contract if it does not comply with its obligations under the policy.
  • This may be so even if other parts of the policy do not create mutual obligations and are only aspirational.
  • Therefore it is important that those involved in drafting workplace policies carefully choose their language to avoid unintentionally imposing obligations on an employer.
  • Employers should also comply promptly and fully with the terms of their own policies.

 


 

  [1] Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCAFC 177 [74].

  [2] Ibid [73]-[81].

  [3] Ibid [5]-[8].

  [4] Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCA 439 (6 May 2014).

  [5] Ibid [30].

  [6] Ibid [31]-[32].

  [7] Ibid [32], quoting Gera v Commonwealth Bank of Australia Ltd (2010) 201 IR 26, 36-37.

  [8] Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCAFC 177 [11].

  [9] Ibid [34]-[36], quoting Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 [40].

  [10] Ibid [56].

  [11] Ibid [60]: ‘None of those matters, taken alone, may be decisive, but the cumulative effect of those features of this  relationship point towards the incorporation of the Policy into the contract of employment.

  [12] Ibid [61].

  [13] Ibid [58].

  [14] Ibid [95].

  [15] Ibid [73]-[81], [99], [102].

  [16] Ibid [82], [102].

  [17] See Ibid [101].

  [18] Ibid [98]-[99].

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