Generally
Broadly speaking, the onus rests upon the employer to prove the contracted terms. This includes policy manuals, handbooks and the like. For such a document to create a contractual term, it must be proven as such, or shown to be implied.
Workplace Standards or Substantive Rights
There is a difference between a policy manual setting out required standards of workplace conduct and one which purports to introduce a substantive term into the relationship. This distinction was noted in an Alberta decision in 2017. 1
The manual which introduces such workplace standards reflects the employer’s right to manage its workplace. Such a document will not require fresh consideration as it need not fit into the contractual analysis:
In other words, the determinative issue in each of the cases cited by Mr. Smith was not whether the employer could legitimately manage day-to-day employee conduct in the workplace. Such policies are unlikely to require fresh consideration unless they alter a fundamental term of the employment agreement. The practical reality is that employers must be able to properly manage their workplace through employee conduct policies, including due to changes in the legislative regime governing employers. Requiring fresh consideration every time a workplace policy is introduced or modified would make employee management unworkable
On the other hand, where such a document introduces substantive changes to common law rights, the usual rules of contract formulation will apply.
Workplace Standards
An example of the former was found in the above 2007 Alberta decision. The terms of the policy manual were used to support allegations of improper workplace conduct leading to termination of employment. In this case the manual was seen to be an effective guideline of expected behaviour, given that it was reasonable, clear, well distributed and consistently enforced: 2 3
For the reasons that follow I find that the internet usage policy and anti‑harassment policy were reasonable, unambiguous, well published, consistently enforced, and that the Plaintiff knew or ought to have known of their content, including the consequences of their breach. In sum, Nova has discharged the onus of showing that these policies were enforceable. The business conduct policy reiterates the mandate set out in the anti‑harassment policy. It, too, was an enforceable policy.
[68] I also find that the very existence of the anti‑harassment policy constituted a warning that transgression could lead to termination.
A 2010 case in British Columbia reviewed the “handbook” which contained various employment terms, one of which was the expected standards of behaviour. 4 The employee had received a written warning of improper conduct, which, when applied to the manual, meant that termination may result. The court found that there was no evidence that the plaintiff was aware of the handbook or even if so, that she had agreed to its terms. The issue of consideration to support this document as a contractual term was not discussed. The court did note that certain sections of the document were unlikely intended to have contractual force. 5
This is also an example of a situation in which the policy manual was did not meet the test of “reasonable, clear, well distributed and consistently enforced”.
This principle is now well established. The employer has the right to set the “ethical, professional and operational standards” for the workplace, presuming this qualifier has been met. This falls well into the ambit of the employer’s management rights. 6
No only has the employer the implied right to set workplace standards, it is mandated to do so by statutes requiring an electronic monitoring policy, the right to disconnect, and workplace violence and harassment policies.
Substantive Terms
On the other hand, a manual or policy document which allegedly changes fundamental aspects of the working relationship must pass the test of consideration for a contract to be established. 7 Consideration is often considered as the missing link to establish a contract in this context, but all rules of contract formulation will apply.
The decided cases tend to deal with substantive terms which have been included in the manual, such as one which limits the severance claim that can be made on termination. The analysis, in the broadest framework, is to examine the manual as a contractual term in this context, which then must follow the usual tests of the formation of an enforceable contract.
The draftsman’s solution to the issue is to allow the manual to accompany the offer of employment and then make it apparent that acceptance of employment is subject to the terms of the manual or alternatively, be sure that the manual is appended as a specific term of the written contract.
Seminal Decision 1984
McLachlin J., then a trial judge of the B.C. Supreme Court, 8 considered the issue of the policy manual in the 1984 decision of Rahemtulla v Vanfed Credit Union. The manual had been provided to the plaintiff several days after she had commenced employment. It proposed, amongst other terms, to limit the sum due on a termination without cause.
In determining that there was no contract formed incorporating the manual, the court found that the normal steps of contract formation, including consideration, must be shown. This case has become a leading authority on this subject. The court stated:
However, quite apart from this, if the terms of the policy manual are to be binding, it must be concluded that they have contractual force. The usual elements of a contract must be established: a concluded agreement, consideration, and contractual intention.
[19] The agreement consists in "an outward expression of common intention and of expectation": Anson's Law of Contract, 24th ed., p. 23. Inward concurrence of intention is not enough for the formation of a contract; there must be an outward manifestation of assent by each party such as to induce a reasonable reliance in the other: S. M. Waddams, the Law of Contracts (1977), p. 18. Both offer and acceptance must be communicated by one party to the other.
[20] The evidence in the case at bar does not establish that the parties expressed a common intention to be bound by the terms of the policy manual. The usual method of indicating assent to written documents is by signature; this was not done. Nor was assent manifested by conduct. It may be that the defendant's assent can be inferred from the act of giving the manual to the plaintiff. But, while the plaintiff may have privately accepted the terms of the manual, there is no evidence that this acceptance was ever communicated by her to the defendant. Communication of assent cannot be inferred from the fact that the plaintiff continued to work after being given the manual. She had contracted to work for the defendant prior to receiving the manual. The fact that she continued to fulfil this obligation after being given the manual cannot be taken as an assent to its terms.
[21] For similar reasons it may be questioned whether there was valid consideration for the promise the plaintiff is alleged to have made to be bound by the policy manual. Performance of an existing duty is no consideration: Stilk v. Myrick (1809), reflex, 2 Camp. 317, 170 E.R. 1168 (N.P.); Swain v. West (Butchers) Ltd., reflex, [1936] 3 All E.R. 261 (C.A.). The defendant's obligation to employ having arisen before delivery of the policy manual, its performance of that obligation cannot constitute consideration for any new terms imposed on the plaintiff by the manual.
The judge also noted that the intent to create a binding agreement was lacking:
[22] Finally, it may be doubted whether the parties intended that the policy manual should constitute a binding legal contract between them. It is stated to be for the purpose of acquainting employees with aspects of the defendant's history, policies, working conditions and employee benefits. Its tone, in large part, is informational. Moreover, at p. 4 the manual expressly disclaims any pretension to comprehensiveness, stating that many aspects of employment are not covered. The conduct of the parties with respect to the manual — in particular the defendant's act of giving it to the plaintiff with the bare instruction that she read it — supports the conclusion that it was intended as an informational guide, not a binding contract.
[23] For these reasons, I conclude that the policy manual is not a binding contract. It therefore falls to the court to determine the appropriate notice period.
The same ratio followed in the 2001 Alberta Queen’s Bench decision of Turner v Uniglobe, in which the plaintiff signed an acknowledgement that she received the policy manual 13 years into her employment history. This was also a case dealing with a termination provision in the manual. It was not enforced as there was no contract established.
This identical issue again arose in Starcevich v Woodwards, a decision of the B.C. Supreme Court in 1991, which once more resulted in a conclusion that the manual term did not form a binding contract. This case also involved a severance term.
This reasoning was further followed in the Saskatchewan Queen’s Bench decision of Fox v Silver Sage Housing, a 2008 decision. In this case, the plaintiff was presented with a contract by which he agreed to be bound by the terms of "personnel regulations", a document which was not provided to him. These regulations limited his claim on termination to the statutory minimum. The court followed the decision of McLachlin J. and used common law to determine the notice period.
A similar case in Alberta considered a new term imposed into the working relationship, which was a non-compete term. While the court found it unenforceable for other reasons, it also added that it would have failed for lack of consideration. 9
A further example of the policy document amending substantive terms and hence being subject to contract scrutiny was found in an Alberta decision in 2023. 10 In this case, the handbook purported to define the company’s right to construct the employee’s absence from work for more than three consecutive days, without contacting the employer, as a resignation. This was considered as a remarkable departure from common law rights and one which required consideration, which was lacking. Marion J. stated:
In my view, the addition of an employment policy like the Resignation Clause in the Handbook, which either deems someone to have resigned or gives an employer the right to consider someone as having resigned, even when the employee may not subjectively intend to resign, or even when it is not objectively clear and unequivocal that they intend to resign, is a fundamental change to the employment relationship and removes the employee’s common law rights. In my view, it is akin to a provision that reduces or limits the amount of notice required to dismiss and, therefore, the requirement for fresh consideration is pronounced.
Controversial Terms
One example of a term which may be a revision to common law rights is a provision in a manual which deals with the employer's right to conduct an investigation of an alleged wrongdoing. The policy, for example, may deny the alleged offender the right to legal counsel or may allow the employer the right of suspension pending the results of the investigation.
The issue will become whether such a term removes implied common law rights. The analysis will then follow as to what such existing common law rights were and the impact of the manual upon them.
This issue was referenced, albeit parenthetically, in a recent Ontario Court of Appeal case in which the employer had effected a suspension without pay pending an investigation. 11 The reasons of Nordheimer J.A. referenced the term in the policy manual dealing with this issue in this manner: 12
Given the content of the appellant’s policies and Handbook, which the parties seem to have treated as forming part of the contract of employment, the appellant had the contractual right to suspend the respondent.
This does suggest, subtly, that an argument to the contrary may have been made. Certainly a term which states that such a suspension may be made without pay would be contrary to common law and require a contracted term to succeed.
Other examples may be a manual which defines just cause for termination, or provides the employer the right to lay-off by statute without recourse to the common law right of constructive dismissal.
Each case must be examined to determine if the manual removes common law protections or even previously negotiated contractual ones.
Manual Offers Attractive Terms
The converse situation may arise in which the manual or other employer document offers a term which is more generous than the anticipated common law claim. This submission was made by the plaintiffs in Kornerup v Ratheon, a 2007 trial decision of the British Columbia Supreme Court.
The plea was based not on a manual but rather, in essence, a representation made by the employer at a “Town Hall” meeting that its practice of paying severance based on a formula of one month a year would apply to employees in the event of a lay-off. Certain writings followed which confirmed the oral representations.
The end result was that the Court of Appeal found that the normal test of a valid contract applied and dismissed the action as the plaintiffs failed to prove consideration was provided.
This issue is reviewed here in more detail.
The argument of promissory estoppel was not advanced. Where the plaintiff can show detrimental reliance, all remaining indicia of an estoppel are present.