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msi - high court of australiaBy Richard Cowen & Marcelle Webster, Tucker & Cowen, Lawyers, Brisbane.

In the decision of Commonwealth Bank of Australia v Barker [2014] HCA 32, the High Court confirmed that there is no implied term of Mutual Trust and Confidence in employment contracts in Australia.

Background:

Mr Barker was employed by the Commonwealth Bank of Australia as an executive manager. The bank wrote to Mr Barker advising that his position had become redundant and his employment would be terminated in one month if they could not redeploy him to another role within the bank. His employment was later terminated. Mr Barker sued the bank for breach of contract and for misleading and deceptive conduct.

He argued that workplace policies dealing with redundancy formed part of his contract and the bank had breached those policies. He sought, among other things, compensation arising from the Bank’s failure to give proper effect to its Redeployment Policy.

The primary judge held that the policies were not incorporated into his contract, but that his contract contained an implied term of mutual trust and confidence (a term which had never previously been implied in employment contracts in Australia). The essence of the implied term being that “the employer will not, without reasonable cause, conduct itself in manner likely to destroy or seriously damage the relationship of confidence and trust between the employer and employee”.

The primary judge found that in failing to follow its redundancy policy, the bank had breached the implied term of mutual trust and confidence and Mr Barker was awarded $317,000 for damages.

This was an important and controversial decision creating a new basis for employees to claim damages against their employers for breach of contract.

The Full Court of the Federal Court of Australia upheld the decision and the bank appealed to the High Court.

Outcome of the High Court decision:

On 10 September 2014, the High Court set aside the decision as it found no basis, at law, to imply the term of mutual trust and confidence in employment contracts. It held that the implied term of mutual trust and confidence would impose mutual obligations which are wider than those which are necessary for a workable relationship between employer and employee in Australia.

In Australia, the relationship between an employer and employee is already heavily regulated.

What does this mean for employers?:

Whilst employers throughout Australia will be relieved by this decision, it is important that employers treat employees fairly, act in accordance with existing workplace policies and seek legal advice as preventative measure in difficult situations or as and when necessary in order to avoid alternative claims which are available to disgruntled employees.

The Bank appealed the decision and the outcome of the appeal is extremely important for all employers and employees throughout Australia.

The High Court overturned the decision holding that there is no implied term of mutual trust and confidence in employment contracts in Australia.

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