Implied term of trust and confidence: where to from here?

It was only fairly recently that it was authoritatively determined that there is an implied term of trust and confidence underpinning all employment relationships in Australia. Why does it matter to employers? Well, it works one way. It is an obligation on all employers not to conduct themselves (without reason) in a way that is likely to destroy or seriously damage the employment relationship.  It fundamentally tips the balance of the traditional master/servant relationship back towards the servant.

Whether or not there is an implied term of trust and confidence in Australian employment relationships has been an uncertain area of the law in Australia for some time. There have been a number of decisions that have (rather frustratingly for employment lawyers) proposed different approaches to the issue.  However, in August last year, the full Federal Court handed down its first decision on point, in the case of Commonwealth Bank of Australia v Barker [2013] FCAFC 83.

Mr Barker had worked in various capacities for CBA for over 20 years.  His position was made redundant as part of a wider company restructure.  He was told that he would be entering a period of redeployment within the Bank as part of their redundancy policy but he was directed to remain at home during this time. His company mobile was taken from him and access to his company emails was cut (unbeknownst to the redeployment officer allocated to his case).  Unable to make contact with Mr Barker during redeployment (not surprisingly!), Mr Barker’s employment was terminated 5 weeks later. Mr Barker argued that the Bank took no active steps to find him an alternative position during such period, in breach of the policy and that he was entitled to damages for his economic loss flowing from this.

The majority of the full Federal Court found that there is an implied term in all employment contracts in Australia (whether verbal or written) that an employer “will not, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee”. The majority found that CBA’s failure to consult with Mr Barker and inform him of available employment options had amounted to a breach of the implied term given the circumstances of the case. Mr Barker was awarded approximately $335k in damages.

As an employer, it is probably relatively easy to understand why CBA is in the process of appealing the decision to the High Court of Australia! It’s probably not the amount of damages (as I would imagine the legal fees will well exceed this amount), but it is the precedent that this sets for the rest of the Bank’s employees, and ultimately, anyone else who employs employees in Australia.

Photography / David Wall

Photography / David Wall

If the High Court upholds the decision, there are still so many questions that need answering.  Will the High Court find that a serious breach of a workplace policy will be a breach of the implied term? Can employers expressly exclude such a term from written employment contracts? Will the term only apply up to the actual point of dismissal (like in England?)

If the High Court overturns the decision, it would certainly be seen as a win for employers.

Until we know one way or another what the High Court in this country thinks of the implied term of trust and confidence, employers should be extremely cautious when conducting investigations, disciplinary processes, redundancies and redeployment.  Employers will need to ensure HR managers, operations managers and line managers understand the implications of their actions during these processes and employers will need to make sure they can, and do at all times, comply with their workplace policies.

If your business needs assistance with any employment issue, contact THE WORKPLACE.

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