High Court - there is no “term as to trust and confidence” implied into employment contracts
On 10 September 2014, the High Court overturned Federal Court decisions which allowed the general implication into employment contracts of a term requiring the employer to act so as to avoid damaging the relationship of trust and confidence with the employee.
In the case of Barker v Commonwealth Bank of Australia, the bank had managed a redeployment process following on Mr Barker’s redundancy in a very slapdash manner. The Bank sent communications to Mr Barker about redeployment opportunities – but only by way of his work email address which had been disconnected on the date of his redundancy.
Mr Barker argued, and two levels of the Federal Court agreed, that
- the Bank was under a general obligation to avoid damaging the relationship of trust and confidence with him as an employee
- in this case that required the bank to take positive steps to give Mr Barker the benefit of its redeployment program
- and failing to do so resulted in damages exceeding $300,000.
These decisions adopted an approach taken by English courts in a different industrial relations context, and by a somewhat adventurous use of the rules regarding implication of terms into contracts.
The High Court overturned these decisions and held that the Bank was not liable to Mr Barker except for a small amount due under his contractual notice entitlements. The High Court relied on conventional analysis of when a term should be implied into a contract because of necessity, and decided that there was no necessity in this case, and also that implication of such a broad and uncertain term would have uncertain consequences both for employers and employees, and was therefore a matter for legislation rather than lawmaking by the courts.
The possible existence of an implied term as to trust and confidence has caused much speculation among employers and employment lawyers, because it potentially opened up a wide range of situations in which an employee could sue for damages for breach of contract. However, the High Court’s decision makes quite clear that this term will not be routinely implied into contracts of employment.
For more information on employment contracts please contact our experienced employment lawyer:
Stephen Booth, Principal
Phone: +61 2 9895 9222