Employment contract: Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCAFC 177

The Full Court of the Federal Court has found that a workplace policy formed part of an employee’s contract of employment and that the employer’s failure to follow the policy amounted to a breach of contract.

The Full Court of the Federal Court has found that a workplace policy formed part of an employee’s contract of employment and that the employer’s failure to follow the policy amounted to a breach of contract.

Ms Romero was employed as a maritime officer with Farstad Shipping under a letter of engagement. The letter stated “all Farstad Shipping Polices are to be observed at all times.” Farstad had a number of policies including a Workplace Harassment and Discrimination Policy which set out how the company expected its employees to conduct themselves in relation to bullying and sex discrimination and the procedures by which employees could report complaints and the way that Farstad would respond to them.  

Between November and December 2011 Ms Romero worked as second officer on one of Farstad’s ships under the Master, Captain Martin. There was a substantial falling out between Captain Martin and Ms Romero. At her request, she was relieved from duty on the ship.

After disembarking, Ms Romero emailed Farstad about her concerns alleging that Captain Martin had subjected her to “relentless and targeted bullying” and stated that his behaviour was a matter for Farstad’s management to address. At approximately the same time, Captain Martin raised questions regarding Ms Romero’s competence, capacity and temperament.

Fardstad treated Ms Romero’s email as a formal complaint under the Policy and commenced an investigation. However, the investigation focused on the questions raised by Captain Martin regarding Ms Romero rather than her allegations against Captain Martin.

Ms Romero commenced proceedings against Farstad for breach of contract alleging that the Policy was part of her employment contract and, by failing to follow the procedures as set out in the Policy, Farstad had breached the employment contract.

The Federal Court of Australia, at first instance, found that the language of the Policy was predominantly aspirational and was insufficiently specific so as to amount to a binding contractual obligation. The Court therefore found that the Policy was not a term of Ms Romero’s employment contract. Ms Romero appealed this finding to the Full Court of the Federal Court of Australia.


On appeal, the Full Court of the Federal Court found that although some aspects of the Policy were merely aspirational, specific obligations “were clearly ascertainable and quite capable of precise identification.”

The Court held that the Policy formed part of the employment contract as:

“The language used in this instance, taking the Policy as a whole, makes it clear that there is an expectation by the company that there will be mutual obligations. In return for the employee complying with the terms of the Policy, the employer gives a responsive assurance that complaints of non-compliance by other employees will be treated in a certain way.”

The Court concluded that Farstad had breached its policy in a number of respects:

  1. Ms Romero made no decision to make a formal complaint and trigger an investigation under the Policy. She specifically stated that Captain Martin’s behaviour was “a matter for Farstad to address”
  2. The procedures adopted by Farstad did not comply with the terms of the Policy.
  3. Farstad failed to fully document the investigation as required by the Policy and instead recorded the details of telephone conversations on post-it notes.
  4. There was a general failure to carefully and systematically investigate the complaints.
  5. Ms Romero was not given notice of the meeting which was held after her email complaint or the purpose of it. Farstad chose to interview Captain Martin prior to interviewing Ms Romero, rather than vice versa.
  6. Ms Romero’s complaint and Captain Martin’s allegations of her competency should have been two lines of separate inquiry.

The Court also considered how it approach matters brought before a Court for a claim of a single, trivial and inconsequential breach of workplace policies or contracts. The Court expected that the “parties to an ordinarily harmonious employment relationship will accept a measure of sensible give and take in their day dealings without resorting” to legal proceedings claiming breach of contract. However, the Court recognised that “persistent and unaccepted, but individually trivial departures from contractual promises could.. be considered to be a substantive breach” of contract.

The matter was remitted to a judge to rehear the question of repudiation of contract and the question of damages. 

llis was actually bullied at work. This will be determined at a Hearing at a future date.

Read the full decision here.