Harlow v Artemis International Corporation Ltd

An employment handbook incorporated by contract may contain contractual terms even though it is described as a collection of policies. The question is whether the particular provision is apt to be contractual, assessed from the incorporating words, the provision’s language and context, and its importance within the employment bargain. Extrinsic evidence may identify documents referred to in a contract, but evidence of the parties’ subjective views about legal effect is inadmissible when construing incorporated written terms. A redundancy policy containing a payment formula and expressed in terms of what the employer would pay was apt to create a contractual entitlement. Alternatively, a consistent and reasonably expected practice may support an implied contractual term.

Christopher Harlow claimed £61,798.03 from his former employer, Artemis International Corporation Ltd, as an enhanced redundancy payment. His employment letter incorporated the employer’s staff handbook. He contended that the handbook included the company’s redundancy policy and that the policy formed an express or implied term of his contract.

Artemis argued that the relevant handbook comprised only a separate document, that the redundancy policy was non-contractual, and that the employer’s practice and wording indicated discretionary or ex gratia payments. The principal issues were whether the electronic handbook could be identified by extrinsic evidence, whether the policy was apt to be contractual, and whether a similar term arose from custom and practice.

1. Identification of the incorporated documents. The employment letter referred to the staff handbook without making its contents clear. Extrinsic evidence was admissible to identify the documents to which the parties referred. That was evidence identifying the written agreement, rather than evidence of subjective intention used to construe it.
2. Express term. The relevant handbook comprised the HR Policies and Procedures folder on the employer’s intranet, including the redundancy policy. Whether a handbook provision is contractual depends on the incorporating words and the provision read in context. A document’s description as a policy does not prevent contractual effect where its nature and language are apt to impose an obligation.
3. The redundancy provisions were important to the employment bargain and were expressly connected with the preservation of redundancy rights. They appeared alongside other employment benefits and contained a calculation formula. The wording that the employer would make an additional payment was not, in this employment context, a sufficiently clear indication of discretion. Clauses 3, 5 and 6 of the policy were therefore contractual terms.
4. The employer’s alleged unilateral changes to redundancy practice did not deprive the claimant of his contractual rights. Continued employment, with knowledge that the employer asserted a variation, did not by itself amount to acceptance where the change did not immediately affect the employee.
5. Alternative implied term. The court would alternatively have found an implied term arising from custom and practice. Relevant matters included publication of the policy, the duration and consistency of the practice, the number and manner of payments, the communication of the policy, employee expectations, written incorporation and consistent application. The evidence established a reasonable expectation that long-term employees would receive payment under the current policy.
6. The claim succeeded. Judgment was entered for the claimant.