Commonwealth Bank of Australia v Barker  FCAFC 83
In a recent decision, the Full Court of the Federal Court has confirmed that it is an implied term of every employment contract that an employer must not behave in a way which is likely to seriously damage or destroy the relationship of trust and confidence between the employer and the employee without reasonable cause.
But what does this mean? It seems that the answer is "it depends".
For over 27 years Mr Stephen John Barker was a loyal employee of the Commonwealth Bank. Straight out of high school, he started in a junior position. On 2 March 2009, as an executive manager, he was called into a meeting and handed a letter. It said that his position was to be made redundant, from sundown. It also said:
"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."
Despite this preference, the Bank instructed Mr Barker to empty his desk, hand over the keys and mobile phone, and go home where he would spend a four week notice period. He was logged off the intranet and no longer had access to work emails.
But no-one seems to have told poor Ms Breccia, the human resources manager, who sent Mr Baker various emails and called his mobile to discuss potential redeployment. She eventually worked it out herself and managed to contact him close to the scheduled termination date. Ms Breccia suggested he apply for an alternative role and the Bank agreed to extend the employment to allow this to happen. Mr Barker didn't apply because, it seems, he believed that the role was not good enough. His employment came to an end. He sued
Breach of the Implied Term of Trust & Confidence
Despite the Bank's late but earnest attempt to redeploy Mr Barker, the majority of the Federal Court held that the Bank's redeployment initiative was so flawed that it breached an implied term of trust and confidence. The Court held that due to the nature of the employment relationship, this term would be implied into the employment contract as a matter of necessity. However, what it meant in practice would need to be moulded to suit the circumstances.
In Mr Barker's case, it meant that the Bank had to consult with Mr Barker about the possibility of redeployment and provide him with a proper opportunity to apply for alternative positions in the Bank. This was because of the following factors:
- It was a big Bank with a big workforce and lots of job opportunities.
- Mr Barker had been there a very long time.
- Mr Barker's employment contract expressly stated that he would only receive redundancy benefits if the company was unable to redeploy him in an alternative position in keeping with his skill and experience. It contemplated a redeployment process.
- Mr Barker had been informed that he would be consulted about redeployment opportunities in writing.
Instead, the Bank failed to contact Mr Barker and consult with him for a reasonable period, and as a consequence the Court found that he had lost a valuable opportunity of being redeployed within the Bank.
Express Exclusion of Redundancy Policy
The Bank had in place a written policy dealing with redeployment, but the Court rejected an argument that a failure on the Bank's part to follow the policy entitled Mr Barker to damages. This was because the policies did not form part of the contract. The policy manual said so in black and white, and there was nothing else to suggest otherwise. The express statement in the manual was enough to prevent a finding that the redundancy policy was contractual and binding.
The Full Court of the Federal Court went further and found that the Bank also had not breached the implied term of trust and confidence by not following the redundancy policy. The implied term could not be used to enforce the policy through the back door, because this would be inconsistent with the express statement that it was not contractual.
Limitations of the Implied Trust and Confidence Term
The Court did recognise that the term could not be applied in relation to steps which are inextricably bound up with dismissal. Such an approach would be inconsistent with the statutory unfair dismissal regime and previous case-law. However, in the present case, the failure to follow the redeployment steps were distinct from the act of termination itself.
What compensation did he get?
Mr Barker was awarded compensation. This was assessed by taking into account a 25% chance that if a proper redeployment process was carried out, he would still be in a bank job until retirement age (which was assessed at being about 60). This amounted to $335,623.57. He was not compensated for hurt feelings, distress or loss of reputation.
What does this all mean for employers?
- DRAFT CAREFULLY!
The principal lesson in the case is that employers need to draft their employment documents - contracts and policies - carefully. The key factor which allowed for the implication of the term in the present case was that the employment contract expressly contemplated that a redeployment review would occur. In contrast, the express statement in the Bank's policy manual that its policies were not contractual, blocked these policies from forming part of the employment contract.
The Court also affirmed that the term of mutual trust and confidence could not be implied where the parties had expressly excluded it or it was inconsistent with an express term of the contract.
- WALK YOUR TALK
A secondary lesson is that a breach of the implied term may arise where an employer makes a representation to an employee that it will take a particular course of action, but fails to follow through without good reason and an escape clause.
Examples may include the following:
- An employer makes changes to a published discretionary bonus criteria several weeks before the end of the bonus year; or
- An employer does not follow a conduct investigation procedure which it has set in stone.
WATCH THIS SPACE
The decision is likely to run to an appeal, and employers should keep their ear to the ground for any further developments. For what it's worth, we don't believe this will be the last word on the implied term.