#13077 - Terms Of The Employment Contract - Employment Law

Topic 3: Terms of the Employment Contract

• Interpreting express terms

  • Express terms include:

    • Written terms

    • Oral terms

    • Job descriptions

    • Company policies

  • General Test:

    • Test: The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean (objectively). That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction Toll v Alphafarm

    • A party is generally bound by the document they sign, even if they have not read or understood it Alphafarm

  • Oral Terms

    • When the contract is in writing, the court’s principal focus will be on the words actually used. If there is some ambiguity, it is accepted that the court may look at what the parties have said or done before making the contract Grainger v Roombridge 2009

      • The vaguer the statement, the harder this is to establish Larner v George Weston Foods.

      • However, when an agreement is in writing, It is also common to have regard to the general context or circumstances in which the contract is made, in order to ascertain its meaning AMEC v Shanks 2001

    • Question 1: Is it promissory?

    • Question 2: Is it enforceable?

      • **Where the oral term is inconsistent with a written term of a contract, it has no effect.

    • For an oral term to form part of the contract:

      • For oral terms, if the evidence is sufficiently clear and compelling, it may be accepted that a promise is part of the contract Bruce v AWB

      • The circumstances in question must be known to both parties, as opposed to revealing the intentions or expectations of just one of them Pepe v Platypus Asset Management 2013

      • It has been suggested that, while employment contracts should be ‘construed practically, so as to give effect to their presumed commercial purposes’, any ambiguities in written terms prepared by an employer should be resolved in favour of the employee Carr v Blade Repairs 2010

      • Are the terms representations or promissory?

        • The intention of the parties is crucial. Measured objectively. Saad v TWT Ltd 1998

        • If the letter of offer is broad and describes the job in a broad way, and the terms are not inconsistent, they can be binding Saad

    • Entire Agreement clauses:

      • It is not impossible to get around an ‘entire agreement’ clause McRae v Watson Whyatt 2009

        • The parole evidence rule will not apply if the court finds that additional terms were meant to form part of the K. A K cannot exclude evidence of oral terms Bruce

        • It would appear that contextual evidence is admissible even if the written terms are not ambiguous on their face Stratton Finance v Webb 2014

  • Written Terms

    • Assess the objective intentions of the parties. Where there is more than one possible meaning of a provision, you can have reference to the objective factual framework in which the contract was created. Stoelwinder v Southern Health 2000; Keays v JP Morgan 2012

    • Treat words as adding something, rather than being surplus Stoelwinder

    • If one interpretation of the term renders the term useless, probably the wrong interpretation Stoelwinder.

    • Judges might look to the letter of offer or job description if it is necessary to give content to the contract Keayes v JP Morgan

  • Company policies and procedures

    • Are the company policies or procedures binding?

      • P&P can bind employees as terms of the contract or because they are lawful and reasonable orders that must be obeyed (Topic 4)

      • Where an employee has not expressly agreed to comply with particular policies or procedures, the employer may still be able to argue that such agreement should be inferred.

        • In some cases, the employee may be considered to have consented to abide by certain rules by continuing to work without objecting to them Carus v Eastwood 1875 however Downe v Sydney West area Health Service 2008 indicates that something more than silent receipt is required.

    • Indications that it may form part of the contract:

      • If it refers to the policies and the employee must “abide” by them, they may form part of the contract Riverwood International v McCormick 2000

        • If an employee must “abide” by policies, so to does the employer. The idea of mutual obligation is important Riverwood.

      • If the company has abided by the policies in the past Riverwood

      • Reference made to them in a written contract or letter of offer and make it clear they are part of the contract Cicciarelli v Qantas 2010

        • By signing the contract, or even signing a receipt to indicate acceptance of terms of a handbook, this can be contractual Nikolich

      • The language of the policy is promissory Nikolich v Goldman Sachs 2007

        • Promissory:

          • Bold type.

          • If the policy is central to the company’s expression of “culture” and its approach to staff, it may be promissory. OHS standards to take every practicable step were promissory

        • Representational

          • Descriptive language

          • Can’t make a contractual promise that harassment won’t occur

          • Aspirational

      • Just because there are statutory remedies about the same issue, doesn’t mean you can’t have binding policies about them Romero v Farstad Shipping 2014

  • Are the alterations in the company policies binding?

    • If they are made with consent, yes.

      • Unauthorised variations will generally be treated as a ‘repudiation’ by the employer which will give the employee the option fo ending the contract and suing for damages.

    • Might have a term that allows the employer to alter policies and the employee agrees – employer has discretion to require employees to do things that weren’t in the first K. However:

      • Akmeemana v Murrar 2009

        • Employer can’t alter the base of the contract by way of policy manual. Can’t limit express rights existing in the K at the time of appointment.

        • Employer’s power to change policies is constrained by an implied term that it would act in due regard and would not act capriciously or unfairly. To act in due regard for the purposes of the contract of employment.

        • Can only change if the change can be read consistently with the original contract.

      • Riverwood v McCormick (obiter)

        • Justice North: The agreement to abide by alterations did not create a legally binding obligation on M to accept any unilateral obligation. Any alteration not agreed would not be binding.

        • Justice Mansfield: if the employer was going to take advantage of their right to alter, such alterations are to be constrained by a implied term that the employer would act in due regard for the purposes of the contract of employment.

        • Lindgren (dissenting): Arbitrary obligation will not bind the employee, but employers must retain the right to alter even if they impact the employer. But the term of the K (we abide by even if we change them) must be construed in the context of the K in a whole, and the employer couldn’t force him to submit to a policy that detracted from his rights expressly given to him in the letter.

• Interpreting implied terms

  • Terms implied in fact

    • This is a term that arises due to the particular circumstances of employer and employee. This is not necessarily an oral term, it’s a given, goes without saying. However, to satisfy the court is extremely difficult.

    • In practice, relatively few terms will be implied on this basis, because it is hard to be sure what the parties would necessarily have agreed. What might have seemed obvious to one party will frequently be disputed by the other.

    • Two options:

      • Where the written contract represents the whole bargain:

        • The BP refinery test: the term contended for must be

          • reasonable and equitable

          • necessary to give business efficacy to the contract (no term will be implied if the contract is effective without it. Effective means able to operate not able to operate fairly).

          • so obvious it goes without saying

          • capable of clear expression

          • Must not contradict an express term of the contract

      • Where the contract is part-written, part-oral:

        • The implication of the term must be necessary for the reasonable or effective operation of the K in the circumstances of the case (affirmed in Byrne & Frew v Australian Airlines)

        • We look at the legal operation of the contract, not whether the legal operation favours on or other party Byrne

        • The term must be necessary, not just reasonable. If the contract is capable of being performed on both sides, then the implied...