Don’t bank on mutual trust and confidence!
In 10 September 2014, the High Court of Australia ruled that at common law, there is no implied term of mutual trust and confidence Australian employment agreements. The decision in Commonwealth of Australia v Barker [2014] HCA 32 overturned the majority decision of the Full Federal Court which originally held that the Commonwealth Bank breached an implied term of its employee, Mr Barker’s, employment agreement when it failed to take positive steps to redeploy him following his redundancy.
Facts
In this case, Stephen Barker (Barker) was employed by the Commonwealth Bank (Company) as an Executive Manager (he had been working for them since 1981). He was made redundant on March 2009, when the Company notified him that his position was no longer needed and that he would be made redundant, effectively immediately. Barker was told by the Company, that in accordance with Redeployment Policy, it was their preference to redeploy him to a suitable position within the Company but if they could not do so, his employment would cease on 2 April 2009.
The Company’s HR Department attempted to contact Barker on several occasions to explain redeployment options however given Barker could no longer access his work email or phone he did not become aware of this.
Barker had one week left to go on his employment contract when the Company realised. They extended his contract by one week but he was not redeployed and his employment ceased.
Issue at trial
The issue to be determined was whether Barker’s employment contract contained an implied term of mutual trust and confidence and whether the Company had breached this term in their approach to redeploying him. The Court upheld this argument and awarded damages for lost opportunity as well as for hurt, distress and loss of reputation.
Full Federal Court
The Full Federal Court held that the Company had breached an implied term of mutual trust and confidence in Barker’s employment contract as they failed to take positive steps to redeploy him after his redundancy. The Company’s Redeployment Policy was not held to form part of Barker’s contract of employment.
Appeal
On appeal, the High Court unanimously decided that there is no an implied term of mutual trust and confidence under common law. It was their view that if the employment relationship is to be construed as one akin to a partnership and of common interests, this should be determined by the legislature and not the courts.
Implications
Their decision leaves unresolved the question of whether employers and employees are constrained by a general requirement to act in good faith in their contractual dealings and leaves open the possibility that an implied term of mutual trust and confidence could possibly be implied in fact in employment agreements if the conduct of the parties so indicates.
The decision means that unless it is expressly stipulated in an employment agreement, employers and employees do not owe each other a duty of trust and confidence in their employment dealings.
If you have any queries regarding this case please feel free to contact Michael Bishop.
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