Contractual/Non-Contractual Terms

Contractual and non-contractual terms.

In looking at the “employment package”, confusion can easily arise between benefits to which employees are contractually entitled and benefits that are discretionary i.e. the employer can choose whether or not they will apply in a particular instance.

Clearly identifying contractual and non-contractual benefits helps to reduce confusion.

The wording associated with any benefits can also be misleading. The use of such words as “entitled” has led to courts or tribunals deciding that the term should be construed as a contractual right (Court of Appeal: Keeley v Fosroc International Ltd 2006). It is not wise, for example, if sick pay is intended to be discretionary for the employer to then make a statement in the handbook such as “employees with less than two years service are entitled to two weeks sick pay…..” The words “...are entitled to...” would probably mean that, irrespective of the employer’s intention, sick pay would be construed as a contractual right.

To avoid confusion, handbooks should be divided into sections with a clear statement as to which section includes contractual rights and which section includes discretionary benefits. As a further safeguard, non-contractual benefits should not be described as “entitlements”.

When the staff handbook contains any contractual rights, the Jersey Employment Tribunal has advised that employees should have easy access to this as failure to do so may fail to fulfil the requirements of Article 3 of the Employment (Jersey) Law 2003.

It is important to remember that not all the terms that are required to be set out in the Written Statement of Employment need to be contractual. For instance whilst there is a requirement to state arrangements for disciplinary and grievance procedures, JACS advice would be to clearly state these are non contractual. In other words, the procedures indicate how discipline or grievances will be dealt with, but the fact that they are non contractual means that the procedure need not be followed to the letter.

Finally, it should be noted that if an employer wants to change a contractual entitlement, such changes should be agreed with the employee following a period of consultation - see varying a contract.