Federal Court upholds Nikolich

by 21 Aug 2007

EMPLOYERS SHOULD ensure that representations made in letters of offer, employment contracts, HR policies and even corporate values and mission statements are consistent with the real experience of their workplace, after a landmark full Federal Court decision in Goldman Sachs JBWere Services Pty Ltd v Nikolich[2007] FCAFC 120.

The decision upheld the earlier ruling in Nikolich v Goldman Sachs JBWere Services Pty Ltd [2006] FCA 784, in which Peter Nikolich was awarded more than $500,000 for psychological injury resulting from a breach of his employment contract.

Importantly, the basis for the decision in Nikolich was the employer’s own policies, said Gareth Jolly, a partner with Minter Ellison.

“It is part of an increasing willingness of courts to regard policies as being incorporated into contracts and for high sounding statements of principle not only to be regarded as being enforceable terms, but also capable of giving rise to significant damages,” he said.

Employers are already starting to see more and more of these claims, he noted. “With WorkChoices largely overriding the NSW unfair contract jurisdiction for employees, employers have tended to assume that if an employee does not have access to unfair dismissal and has a contract with a notice of termination provision, they are relatively safe from claims. Unfortunately, this is simply not the case.”

It was important that employers obtain proper advice early about exposure to legal claims, preferably before a dismissal, he said.

In light of the full court’s decision, Jolly said companies should be reviewing both their contracts and policies (including codes of conduct and ethics policies) as a matter of urgency. Among other things, it is necessary to ensure that companies are not contractually bound by their own policies, and that the policies themselves are properly worded, he said.

“This means avoiding sweeping statements of principle (such as ‘all employees will be treated fairly’) which are realistically impossible to comply with and could very well be regarded as imposing enforceable obligations,” he said.

For a full rundown on the full Federal Court’s decision, see next issue’s instalment of employment law news.


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