Further Confirmation of Trust and Confidence... But This Time With Damages

Introduction

Last week in a single member decision of the Federal Court in Barker v Commonwealth Bank of Australia, the application of an implied term of trust and confidence in contracts of employment was confirmed. The existence of an implied term of trust and confidence in Australia has been unclear until recently, where a number of decisions have confirmed its relevance. This decision however, also confirms the type of damages that may be awarded as a result of a breach of the term. The following article summarises the decision and outlines its implications.

Background

Mr Barker had been employed by the Commonwealth Bank of Australia (CBA) for 27 years and most recently in the position of Regional Executive.

The CBA had in place a redeployment policy which stated the process which was to be followed when it was seeking to redeploy an otherwise redundant employee.

In February 2009, the CBA undertook a restructure, under which Mr Barker’s position became redundant.

On 2 March 2009, Mr Barker met with his General Manager and was advised that his position was redundant. In a letter provided to Mr Barker during the meeting, he was advised that:

• his position was redundant effective that day;
• the CBA’s preferred option was to redeploy him into another suitable position within the CBA which the CBA would explore in consultation with him;
• the CBA would begin the redeployment process on that day;
• if a suitable position could not be identified, that he would be "retrenched" and paid redundancy entitlements in accordance with his contract of employment.

Mr Barker was placed on paid leave during the period of redeployment and he advised that the onus was on him to seek redeployment as much as it was on the CBA. Mr Barker was advised that if redeployment failed, he would be terminated on 2 April 2009.

Mr Barker was then asked to pack his belongings and leave that day, hand in his access card, mobile phone and keys. Mr Barker’s access to his work emails and the intranet was terminated.

Due to the cancellation of Mr Barker’s work email and a miscommunication within the CBA, no further communications regarding redeployment were undertaken by CBA until 23 March 2009 where the CBA by email confirmed its preference to redeploy Mr Barker. On the same day, Mr Barker received another email from the CBA suggesting a role that it considered he should apply for.

Mr Barker’s redeployment date was extended to 9 April 2009 to allow him to ‘participate in the redeployment process.’

Findings

Mr Barker argued that the CBA had:

breached the contract of employment as it had incorrectly selected him for redundancy and in general, failed to adhere to its redeployment policy; and

• made representations that were misleading or deceptive in relation to the future employment of Mr Barker in breach of the then Trade Practices Act 1974 (Cth); and
• breached its implied duty of trust and confidence.

Mr Barker’s first two arguments failed. However, on the third count, the Court found that the duty of trust and confidence is implied into contracts of employment but "only operates where a party does not have reasonable and proper cause for his or her conduct and the conduct is likely to destroy or seriously damage the relationship of confidence and trust between employer and employee." In making this finding it was not necessary that the redeployment policy be incorporated in the contract of employment.

As the CBA did not adhere to its redeployment policy by taking positive steps such as consulting with Mr Barker, discussing retraining, providing advice about redeployment options and processes or developing or implementing a redeployment plan, it had breached its duty of trust and confidence.

Although Mr Barker also did not undertake positive steps towards redeployment, due to the manner in which the CBA notified him of the redundancy - that is, to finish work that day and hand back all of his equipment and, its failure to act in a pro-active manner to redeploy him, he was entitled to consider that the CBA was not genuinely seeking to redeploy him.

The Court also made the point that the duty of trust and confidence does not apply at the point of dismissal. However in this case, this exclusion did not apply as the CBA breached its duty prior to terminating Mr Barker.

Mr Barker was awarded damages for past and future economic loss of $317,500. No damages were awarded for hurt, distress or loss of reputation.

Summary

This case remains indicative of the current trend to recognise the duty of trust and confidence within Australian employment agreements. Employers should:

• regularly review and update policies and procedures to ensure their accuracy and relevance and ensure managers are appropriately appraised and trained in them;
• regularly review and update contracts of employment to ensure their relevance and interaction with implied terms; and
• seek legal advice prior to implementing major changes to employees or in the workplace generally.

If you would like more information about the case, 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.