Employment contracts are often an afterthought for employers - hastily drafted after the employee has started work or an outdated document, signed and never looked at again, despite employee promotions or legal changes.

It's easy to understand why the 'employment contract' has been neglected. Employers are busy keeping up with a changing workplace relations system as well as navigating the many Industrial Instruments and laws which apply, not to mention - getting on with business.

However since the restriction of access to the unfair dismissal jurisdiction we are seeing a new breed of breach of contract claims emerge. Disgruntled employees and ex-employees are claiming 'implied terms' of their employment contract have been breached as an avenue to challenge conduct by their employers.

Some of these employee claims have been successful, highlighting a growing acceptance by the Courts to recognise the implied terms of mutual trust and confidence, good faith and a duty to provide meaningful work. The recognition of these implied contractual terms means  what you don't say in a contract is just as important as what you do.

The decisions discussed below are a reminder of why it is more important than ever to ensure employment contracts are properly drafted and watertight. 

Implied term of mutual trust and confidence
The implied term of mutual trust and confidence places a broad duty on the employer and employee to not, without good reason, act in a manner likely to destroy or damage the mutual trust and confidence between them.

In McDonald v South Australia, the Court found the employer breached the implied term for failing to provide adequate support in the form of training, performance management and supervision to a stressed and overworked teacher.

In Downe v Sydney West Area Health Service, the Court found the employer breached the implied terms of mutual trust and confidence and good faith by:

• continuing a doctor's paid suspension for an indefinite period after an unsubstantiated investigation had been finalised.  
• directing the doctor to work in a different position at a different hospital. It was held that the direction was unlawful as there was no express provision allowing it in the contract.

However the question whether the implied term of mutual trust and confidence exists in all contracts remains unresolved as there have been a number of other decisions which refused to recognise implied terms. 

Implied duty to provide meaningful work
In Downe v Sydney West Area Health Service the Court recognised an implied duty to provide meaningful work to a specialised doctor. This decision suggests there may be an implied duty to provide meaningful work in particular circumstances, for example, where:

• the employee has particular skills or talents which the employee needs to keep in regular activity
• the employee occupies a unique position; or
• an aspect of the employee's remuneration depends on work being performed.

There may also be an obligation to provide work based on express provisions in the employment contract. Contracts should be carefully drafted to avoid this.

Guide for employers?

Get the employment contract right

Employers need to be as specific as possible when drafting provisions to limit a broad reading of an implied term. For example, if there is potential for a change of an employee's location or position, keep the wording of the employee's contract flexible to allow for this..

It is also important to continually update contracts especially when promoting an employee or to ensure legal compliance.

Provide ongoing skills training

Provide ongoing training and re-training opportunities to staff. Specialised employees may have the right to professional development and training and exposure to high quality work.

Ensure inclusion of 'garden leave' and suspension clauses

There is a growing category of employees who have an implied right to meaningful work. For this reason, employers must ensure the inclusion of garden leave and suspension clauses in employment contracts to include explicit contractual rights to rely upon.

Fay Calderone is an Associate wtih MatthewsFolbigg Lawyers. For more information call: (02) 9806 7412 or e-mail: fayc@matthewsfolbigg.com.au