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Excerpt from this article first published in Human Resources Magazine, Issue 136 - 30 August 2007
The appeal decision of the Full Federal Court in Goldman Sachs JB Were Services Pty Ltd v Nikolich has confirmed that statements of a promissory nature in an employer’s policies may be enforceable as terms of the employment contract. A majority of the Court upheld the original decision of Justice Wilcox, in awarding more than $500,000 damages for psychological injury arising from a breach of such a term. The case illustrates the potential exposure of employers to claims for substantial damages for breach of contract when company policies are not followed.
Mr. Nikolich was employed as an investment advisor for Goldman Sachs JB Were Services. During his employment, a decision to re-allocate clients from Mr. Nikolich’s team to other financial advisors led to a dispute between Mr. Nikolich and his supervisor. Mr. Nikolich complained that he was intimidated and threatened by his supervisor, causing him stress.
The Company’s HR Manager investigated the complaint. Over 4 months passed before the manager concluded her investigation, determining that: the client re-allocation was appropriate; the supervisor made no attempts to threaten or intimidate Mr. Nikolich; and the Company had addressed the situation in the most appropriate way, as it had provided directions regarding any future transfer of clients and the supervisor had stepped down from his managerial role. No further action was taken. During this period Mr. Nikolich became very stressed. He later developed a depressive disorder and was unable to work. Unable to return to work, his employment was terminated.
Mr. Nikolich alleged that his mistreatment by the supervisor and the mishandling of his complaint caused his depressive disorder. He commenced proceedings against the Company on a number of grounds, including breach of contract.
Before commencing his employment Mr. Nikolich received a letter of offer of employment (contract) and a lengthy policy document entitled “Working with Us” (WWU). When signing his contract, Mr. Nikolich was also required to read and sign certain forms in connection with WWU. Mr. Nikolich argued that the Company was contractually bound to follow its own policies and that provisions in WWU formed part of his contract. He submitted that the Company had breached the contract by breaching those sections of WWU relating to health & safety, harassment and grievance procedures.
Justice Wilcox held that parts of WWU dealing with health & safety, harassment and grievance procedures contained explicit promises which were terms of Mr. Nikolich’s contract. He found the Company’s failure to take immediate action to resolve the conflict between Mr. Nikolich and his supervisor breached those promises and, accordingly, breached the contract.
Each appeal judge gave a separate judgment. All of the judges held that the harassment and grievance sections of WWU were not contractual. They variously found the language of the sections to be “descriptive” and of an aspirational nature, containing “words of information, encouragement and perhaps education” - reflective of the Company’s commitment to provide support - and not “a contractual undertaking by Goldman that none of its employees will ever harass, humiliate or intimidate another”.
However, all of the judges found that the statement - “JBWere will take every practicable step to provide and maintain a safe and healthy work environment for all people” formed part of Mr. Nikolich’s contract. Chief Justice Black held that the statement was not an aspirational statement, stating: “the language used, taken in the context as a whole, points to the statement embodying a contractual obligation”. He found the Company’s delay in taking prompt and adequate action in response to Mr. Nikolich’s complaint constituted a breach of this obligation. Justice Marshall agreed. Justice Jessup did not consider that the Company breached this obligation.
Richard Taylor
Special Counsel
