The High Court has decisively determined that the Australian common law does not imply a term of mutual trust and confidence into employment contracts.
The High Court’s decision overturns the previous decision of the majority of the Full Federal Court, which had found that the Commonwealth Bank was in breach of the implied term when it failed to take positive steps to redeploy Mr Barker, an employee who had been made redundant.
Mr Barker was employed in the role of Executive Manager with the Commonwealth Bank of Australia. In March 2009, the Bank wrote to Mr Barker, notifying him that his position was to be made redundant with immediate effect.
Mr Barker was advised in writing that his employment would cease one month later on 2 April 2009, unless he was successfully redeployed prior to then.
In accordance with the Bank’s policy, the letter said:
“It is the Bank’s preference to redeploy you to a suitable position within the Bank and we will explore, in consultation with you, appropriate options.”
The Bank’s HR department made a number of attempts to contact Mr Barker about redeployment opportunities through his work email and mobile phone. These attempts were unsuccessful, as, by that stage, Mr Barker no longer had access to his work email or mobile phone. By the time this mistake was realised, Mr Barker had only one week left in his employment.
The Bank elected to extend Mr Barker’s employment by one week, until 9 April 2009. However, Mr Barker was not redeployed and his employment ended on that date.
Mr Barker sought, amongst other things, compensation for the damage suffered as a result of the Bank’s failure to give proper effect to its Redeployment Policy.
Full Federal Court:
The majority of the Full Federal Court confirmed the original decision of the trial judge. It held that by failing to take positive steps to redeploy Mr Barker, the Bank had breached the term of mutual trust and confidence which was implied into the employment contract. As a result of the Bank’s breach of this implied term, Mr Barker was awarded $317,000 in damages.
The Bank appealed this decision in the High Court of Australia.
The central question on appeal was whether under the common law of Australia there is a term of mutual trust and confidence to be implied by law in all employment contracts.
The High Court:
All five High Court Justices who heard the appeal rejected the existence of such an implied term.
The judges included, Chief Justice French and Justices Bell, Keane, Keifel and Gageler.
Chief Justice French and Justices Bell and Keane said their rejection of the implied term “should not be taken as reflecting upon the question whether there is a general obligation to act in good faith in the performance of contracts”. Justice Keifel said the question had not been resolved in Australia.
What Does This Mean for Employers?
The High Court’s finding that a duty of mutual trust and confidence is not implied under Australian common law means that employers do not owe employees a duty of trust and confidence unless this is expressly provided for in the employment contract, or where the particular circumstances of the employment relationship give rise to such an implication.
Until now, many employment law practitioners have proceeded on the assumption that the implied term exists in Australian law, as it does in the UK, and the High Court’s judgment will no doubt impact on many cases currently before the courts.
Commonwealth Bank of Australia v Barker  HCA 32 (10 September 2014)
Sunday, September 14, 2014
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