The Case

Romero v Farstad Shipping (Indian Pacific) Pty Ltd (2014)

While at sea, Lisa Romero, a second officer with Farstad Shipping (Indian Pacific) Pty Ltd (Farstad), had a conflict with her ship’s captain, Captain Martin.

When Ms Romero arrived onshore, she sent an email to Farstad about Captain Martin, indicating, among other things, that she felt bullied. She stated that Captain Martin’s behaviour was something for Farstad management to address.

Despite Ms Romero not requesting an investigation, Farstad undertook one. In so doing, it also considered Captain Martin’s complaint that Ms Romero was incompetent.

Farstad had the Workplace Harassment and Discrimination Policy (the Policy) in place and Ms Romero’s contract contained the statement: “Farstad Shipping Policies are to be observed at all times”.

Ms Romero alleged that Captain Martin’s treatment of her at sea, and the treatment she received from Farstad human resources personnel following her complaint, constituted a breach of the Sex Discrimination Act 1984 (Cth) and of her employment contract.

The Verdict

The Full Federal Court found that no sex discrimination occurred. However, it did determine that Ms Romero’s employment contract had been breached because Farstad had not complied with the Policy, which was incorporated into the employment contract.

The Policy was found to be incorporated because:

• Ms Romero’s contract expressly stated: “Farstad Shipping Policies are to be observed at all times”;
• the Policy stated that it applied to all employees, contractors and visitors;
• Farstad employees were trained in the Policy’s operation and were subsequently required to sign it; and
• neither Ms Romero’s contract nor the Policy said that the Policy was not contractual in nature.

The Court found that, while aspects of the Policy were “merely aspirational”, it also contained specific obligations that were contractually binding.

The Court then considered whether Farstad had properly complied with the policy. The Policy stated that Farstad would do certain things, such as handle complaints promptly, with confidentiality, impartiality and with sensitivity to a complainant’s needs. The Policy also stated that the employee should decide whether a complaint will be investigated.

The Court found that Farstad had failed to comply with its obligations under the Policy and had therefore breached Ms Romero’s employment contract. It did this by:

• investigating the allegations when Ms Romero had not officially made a complaint or requested that the allegations be investigated;
• failing to properly document the investigation as required by the Policy; and
• failing to carefully and systematically investigate the matters raised by Ms Romero, and instead “rolling up” her allegations with Captain Martin’s complaint (in doing so, it demonstrated “partiality” towards Captain Martin).

The Lesson

Be careful when drafting new employment contracts and workplace policies, to ensure that a failure to follow the terms of a workplace policy will not constitute a breach of an employment contract.

Review the employment contracts you have with current employees, and your current workplace policies, to check for any incorporation issues. Ideally, your employment contracts and policies will contain a statement to the effect that the policies are not incorporated into employment contracts. If such a statement does not exist, and you have a clause in your policies and/or employment contracts that requires compliance with your workplace policies, then an incorporation issue may arise.

You should also build in some flexibility to enable you to depart from the terms of the policy if you wish.

If you want to vary current employees’ contracts to avoid any incorporation issues, offer a benefit (such as an additional bonus or a pay rise) in exchange for the new terms. If you do not, the variation may not be enforceable.

In Romero, the Full Court was very critical of Farstad’s investigation. As such, when undertaking an investigation in your business, ensure that you comply with your workplace policies and that you are fair, reasonable and impartial.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.