The High Court has decisively determined that the Australian common law does not imply a term of mutual trust and confidence into employment contracts.
The High Court's decision overturns the previous decision of the majority of the Full Federal Court, which had found that the Commonwealth Bank was in breach of the implied term when it failed to take positive steps to redeploy Mr Barker, an employee who had been made redundant.
Mr Barker was employed in the role of Executive Manager with the Commonwealth Bank of Australia. On 2 March 2009, the Bank wrote to Mr Barker, notifying him that his position was to be made redundant with effect from the close of business that day.
Mr Barker was advised in writing that his employment would cease one month later on 2 April 2009, unless he was successfully redeployed prior to then.
In accordance with the Bank’s policy, the letter went on to say:
“It is the Bank’s preference to redeploy you to a suitable position within the Bank and we will explore, in consultation with you, appropriate options.”
The Bank's human resources department proceeded to make a number of attempts to contact Mr Barker about redeployment opportunities via his work email and mobile telephone. These attempts were unsuccessful, as, by that stage, Mr Barker no longer had access to his work email or mobile telephone. By the time this mistake was realised, Mr Barker had only one week left in his employment.
The Bank elected to extend Mr Barker’s employment by one week, until 9 April 2009. However, Mr Barker was not redeployed and his employment ceased on that date.
Mr Barker sought, among other things, compensation arising from the Bank’s failure to give proper effect to its Redeployment Policy.
Decision of Full federal Court
The majority of the Full Federal Court confirmed the original decision of the trial judge. It held that by failing to take positive steps to redeploy Mr Barker, the Bank had breached the term of mutual trust and confidence which was implied into the employment contract. As a result of the Bank's breach of the implied term, Mr Barker was awarded over $300,000 in damages.
The Bank appealed this decision in the High Court of Australia.
Outcome of Bank's High Court appeal
The central question on appeal was whether under the common law of Australia there is a term of mutual trust and confidence to be implied by law in all employment contracts. All five High Court Justices who heard the appeal rejected the existence of such a term.
What the High Court's ruling means for employers
The High Court's finding that a duty of mutual trust and confidence is not implied under Australian common law means that employers do not owe employees a duty of trust and confidence unless this is expressly provided for in the employment contract, or where the particular circumstances of the employment relationship give rise to such an implication.
Many employment law practitioners have proceeded on the assumption that the implied term exists in Australian law, as it does in the United Kingdom, and the High Court's judgment will no doubt impact on many cases currently before the courts.