Company Policies and How they Relate to General Laws

Guiding Principle

Most companies will have developed their own “Company Policies”, which may include standard terms and conditions of sale, but also HR policies, etc. Most of us will have been in a situation where the “Company Policy” allegedly overrules everything else, another company’s company policies, general laws and quite often even common sense. This should be reason enough to look at “Company Policies” in a little more detail.

A. What are Company Policies?
In a nutshell, Company Policies are operational rules, which a commercial entity adopts for itself. These rules can deal with virtually everything and are most commonly aimed at streamlining certain company related processes. One of the most common types of Company Policy is probably Standard Terms & Conditions of Sale. These are the conditions based on which the company in question aims to do all of its sales. Doing so significantly streamlines the sales process, because the parameters of each sale, small or large, are the same and no time needs to be wasted (in theory, at least) on negotiating the same terms over and over again.

Not much else applies to other Company Policies, such as HR policies, for example. If such HR policy states, for example, that overtime is compensated at a certain rate or that X amount of holidays are granted in addition to mandatory public holidays, this applies to all employees equally. Hence, Company Policies are usually a pretty useful tool.

What all Company Policies have in common, however, is that they are rules, which a company puts on itself. It is the company as such, which decides to operate by those guidelines.

B. What are General Laws?
Again in a nutshell, laws are rules, which are put in place by the government of the country in which said laws will apply. Such government’s task is to represent all people who are living in the relevant country, including individuals and corporate entities. That being said, laws generally apply to everybody living and operating in said country.

C. Relationship of Company Policies and General Laws
To put it very simply, no company as a mere legal construct could even exist in the absence of general laws providing the legal basis, which determines the most basic rules of operation of such company (i.e. form of company, how it will be managed, whether or not its liability is limited, etc.). Like a young child’s decisions will not overrule its parents’ word, Company Policies are acceptable only as long as they stay within the boundaries of liberty granted by general laws. Whenever a Company Policy contradicts any general law, the law and not the Company Policy applies, just like parents’ decisions overrule their child’s decision until the age of 18.

It might be helpful to also look at the topic from another angle: laws are made by persons who have been given authority to do so. Usually, such authority has been given to the lawmaker by the people of the country in question. Hence, in one way or the other, it is the people as such deciding on the rules by which the people wish to be governed.

If Company Policies are put in place by a company’s management, but general laws are made by all the people in a country, it should become pretty crystal clear that general laws, by necessity, overrule Company Policies each and every time.

D. Summary
Company Policies are certainly a very useful tool to have. The widespread misconception of Company Policies overruling general laws is nothing but just that, however, a widespread misconception. Whenever there is a conflict between a Company Policy and general laws, the general laws will win. No exception.

Author: Dr. Michael Krämer

Senior Lawyer