Non-contractual handbook’s enhanced sick pay provisions were incorporated into contract

Watkins v Journeys Toward Recovery ET/1606842/10

Date added: 4 May 2011

unlawful deductions from wages | sick pay | incorporated terms | staff handbook

This case is a good example of how the terms of a staff handbook that is stated to be non-contractual can still be incorporated into an employee’s contract of employment. 

Practical tips

Many employers set out their rules for employee benefits in handbooks that are stated to be non-contractual, and are under the misapprehension that this means they can vary or withdraw those benefits entirely at their discretion. 

As this case demonstrates, just because a document is stated to be non-contractual, does not make it so. Employers should be careful, when providing a discretionary benefit, not to make it contractual either by implication or incorporation. 

Mr Watkins worked as a director at Journeys Toward Recovery. His contract of employment, which he signed around April 2005, provided:

  • for enhanced sick pay, at the company’s discretion, in “exceptional or deserving” cases; and
  • that the company could make reasonable minor contractual changes by way of notice to employees, or significant changes by one month’s written notice and full consultation and negotiation. 

The contract referred generally (and specifically, in the sick pay provisions) to the company’s staff handbook, and stated that this was non-contractual, although proposed changes to it would be subject to consultation and negotiation. The company’s staff handbook reiterated that it was non-contractual, and stated that it “explains in detail certain conditions of service”. Under the sick pay section, the handbook set out an entitlement to enhanced sick pay. 

In 2006, Mr Watkins, with board approval, used a consultant to review the company’s contracts and handbook. Although he did not specifically object to the new sick pay provisions within the new draft handbook, he gave evidence that he did not agree to its terms, and that board approval for the draft handbook was never obtained. Mr Watkins did not sign any documents expressly accepting changes to his terms and conditions. From 16 July 2010, he went on sick leave due to depression, and remained absent until his resignation on 2 September 2010. Mr Watkins was not paid enhanced sick pay for this period of absence, and brought a tribunal claim for unlawful deduction from wages. 

The tribunal held that the sick pay provisions in the staff handbook were incorporated into Mr Watkins’ contract of employment. It found that a general statement that the handbook was not contractual was not sufficient when it contained key terms and conditions not included in, but expressly referenced in, the contract. It found that, in April 2005, the intention of the parties was that the sick pay provisions in the handbook would be legally binding. The terms were “apt for incorporation” into Mr Watkins’ contract of employment. 

The tribunal further held that, contrary to the company’s argument, there had been no variation of the contractual enhanced sick pay entitlement. It found that Mr Watkins did not agree either expressly or by implication to any variation that meant that the sick pay provisions of the handbook would be removed, even though he did not expressly object to the new sick pay provisions in the proposed draft handbook, for which board approval had not been obtained. The tribunal upheld Mr Watkins’ unlawful deduction from wages claim, and awarded him the net sum of £2,175.29. 

View the full transcript of the case 

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