The Case

James v Royal Bank of Scotland (2015)

Mr James was CEO of ABN AMRO. He was made redundant when ABN AMRO was taken over by the Royal Bank of Scotland (RBS). RBS offered Mr James a redundancy payment of $2.93 million in exchange for signing a deed of release.

Mr James refused to sign the deed, stating that he had a contractual entitlement to the redundancy payment under the ABN AMRO redundancy policy. When Mr James would not sign the deed, RBS withdrew the offer to pay him under the policy.

Mr James argued that the redundancy policy formed part of the terms and conditions of his employment. He argued that the policy was incorporated by reference because his employment contract stated: “You agree to be bound by the policies of ABN AMRO as may exist from time to time”.

RBS argued that although the policies of ABN AMRO were binding on Mr James, they were not binding on RBS. Mr James argued that if the policy was binding on him, it was also binding on RBS (since it had taken over ABN AMRO) unless there was an express term to the contrary.

The Verdict

The Supreme Court of NSW held that the terms of the redundancy policy were incorporated into Mr James’s employment contract due to:

• the inclusion of the clause, “You agree to be bound by the policies of ABN AMRO as may exist from time to time”; and
• the absence of an express provision to the contrary.

The Court held that, if ABN AMRO intended its employees to be bound by the policy, it must also be bound by the policy and, since RBS had taken over ABN AMRO, the policy was binding on RBS.

The Court ordered RBS to pay Mr James $2,932,692.31 plus interest.

The Lesson

Be careful to ensure that your employment contracts contain a clause excluding the incorporation of workplace policies.

It is also important to ensure that workplace policies are drafted in such a way that they do not form part of employees’ contracts. An explicit statement to this effect should be included in the policy and the terminology used should be non-contractual in nature.

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.