The verdict is in – there is no implied term of mutual trust and confidence in Australian employment contracts.
A High Court decision has confirmed that there is no implied term of mutual trust and confidence in Australian employment contracts.
The case before the court, Commonwealth Bank of Australia v Barker, looked at whether the company had breached such an implied term by failing to fully explore redeployment options for a senior executive, after telling him that his position was redundant and his employment would be terminated in one month if he could not be redeployed into another position.
The High Court held that a term providing that neither party will, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of trust and confidence between them, did not satisfy the relevant test of "necessity" for it to be implied as a matter of common law in all employment contracts.
Saul Harben, partner and national practice group leader – workplace relations, employment and safety at Clayton Utz, told HC that the decision provided employers with certainty on the matter.
“It’s probably a timely reminder for employers to review their employment contracts to make sure they understand how they operate and what the precise terms and conditions of employment are.”
He said that while the court said there was no implied term of mutual trust and confidence in the employment relationship, if the Commonwealth Government decided to provide for such a term, it could do by amending the Fair Work Act.
“That is not currently part of the government’s agenda in terms of reforming IR in Australia. I would have thought the likelihood of that occurring was pretty low.”
Harben said there was likely to be some sighs of relief from employers at the decision not to incorporate mutual trust and confidence into common law.
The case before the court, Commonwealth Bank of Australia v Barker, looked at whether the company had breached such an implied term by failing to fully explore redeployment options for a senior executive, after telling him that his position was redundant and his employment would be terminated in one month if he could not be redeployed into another position.
The High Court held that a term providing that neither party will, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of trust and confidence between them, did not satisfy the relevant test of "necessity" for it to be implied as a matter of common law in all employment contracts.
Saul Harben, partner and national practice group leader – workplace relations, employment and safety at Clayton Utz, told HC that the decision provided employers with certainty on the matter.
“It’s probably a timely reminder for employers to review their employment contracts to make sure they understand how they operate and what the precise terms and conditions of employment are.”
He said that while the court said there was no implied term of mutual trust and confidence in the employment relationship, if the Commonwealth Government decided to provide for such a term, it could do by amending the Fair Work Act.
“That is not currently part of the government’s agenda in terms of reforming IR in Australia. I would have thought the likelihood of that occurring was pretty low.”
Harben said there was likely to be some sighs of relief from employers at the decision not to incorporate mutual trust and confidence into common law.
