The Duty of Trust and Confidence has no place in Australian employment law
Recently the High Court of Australia held that Australian employment contracts are not subject to the implied mutual duty of trust and confidence.
Background
The Commonwealth Bank of Australia appealed the decision of the Full Federal Court (http://nationalworkplacelawyers.com.au/8/News/view/113/Implied-term-of-trust-and-confidence-confirmed-by-appeal-court) which had previously found that there exists in employment contracts in Australia an implied duty of trust and confidence.
The High Court was asked to answer the following question:
"..[whether] ....under the common law of Australia, employment contracts contain a term 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."
The High Court found that such a term does not exist for the following reasons:
- the term has evolved out of the statutory environment of UK employment law which is not relevant to Australia;
- courts should not trespass on the role Parliament by creating such a term - if such a term should exist it should be determined by the legislature;
- the court was not satisfied that contracts of employment would be "rendered nugatory, worthless or ....... be seriously undermined" without such a term;
- the contract of employment is not futile without the term; and
- there is already a duty to co-operate which applies to all contracts including contracts of employment which imposes an obligation on "each party to a contract to co-operate in the doing of acts necessary to performance, or to enable the other party to secure a benefit provided by the contract".
Notwithstanding the High Court found that although the implied duty of trust and confidence does not form a term of Australian contracts of employment, it recognised that there may be a "general obligation to act in good faith in the performance of contracts".
As a consequence the High Court overturned the decision of the Full Federal Court and Mr Barker the former employee, was found not to be entitled to damages for the non compliance by the Commonwealth Bank with its own processes in connection with Mr Barker's redundancy.
Lesson
Although the High Court has found that there is no implied duty of trust and confidence in employment contracts, employers should still act with caution when making decisions that may affect their employees.
Irrespective of the High Court's decision, there are a number of statutes which, in some instances, regulate the employment relationship including unfair dismissal laws, discrimination, and general protections laws. There are also still some common law avenues available to aggrieved employees. So whilst the High Court decision is certainly a plus for employers - a considered approach to dealing with employees is still required.
If you would like more information about the case or the matter generally, please contact National Workplace Lawyers on +61 2 9233 3989.
National Workplace Lawyers
Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.
18 September 2014 back to news feed | back to top
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