In Commonwealth Bank of Australia v Barker [2013] FCAFC 83, the High Court of Australia has reversed the decision of the Full Federal Court, and declined to imply a mutual obligation of trust and confidence into Australian employment contracts.

The Full Federal Court had previously held that the implied term meant that an employer should “not, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.” In a majority judgment, the High Court found that such a step was the province of the legislature, rather than the judiciary.

Background

Mr Barker was employed by the Commonwealth Bank of Australia as an Executive Manager. His employment contract included a clause allowing termination by written agreement between the parties on four weeks’ notice by either party (or payment in lieu of notice). In the event of redundancy, the contract provided that compensation was payable on termination if the employee was not redeployed.

In 2009, the Bank made Mr Barker’s position redundant. He was informed that he was required to work out the day and then hand in his work keys and mobile phone, and he then ceased to have access to his work email, phone or intranet. Although the Bank told Mr Barker that it intended to redeploy him, communications with Mr Barker through his work email, including encouraging him to apply for a vacant position, went unseen by him. Ultimately, the Bank decided to terminate his employment.

Mr Barker asserted that his employment contract incorporated the terms of the Bank’s “Redundancy, Redeployment, Retrenchment and Outplacement Policy” and its “Equal Employment Opportunity Policy”, which in turn contained an implied term of mutual trust and confidence. It was alleged that the Bank’s treatment of Mr Barker immediately prior to his termination amounted to breach of the implied term, and therefore of the written employment agreement.

Decision of the High Court

The High Court observed that the particular social context in which employment law has developed in the UK is distinct from the development of employment law in Australia, because of the idiosyncratic application of state and territory laws and Commonwealth laws to the employment relationship.

The High Court majority was conscious of the significance of a finding that the implied term formed part of Australian law, and it found that the implied term of mutual trust and confidence “imposes mutual obligations wider than those which are ‘necessary’”. The burden which the term would place on employees and employers rendered the decision more analogous to that of law-making, rather than of judicial power and therefore, a development which is more appropriately controlled by the legislature.

The majority also observed that the implied term of mutual trust and confidence in UK employment law was directed towards the employee-employer relationship, rather than the performance of the employment contract.

Comfort for Australian employers

The High Court’s decision should give Australian employers much comfort in determining finally that the burden of a nascent implied duty of mutual trust and confidence does not form part of employment law in Australia.