The Federal Court has awarded an employee $317,500 in damages for breach of an implied term of mutual trust and confidence in his employment contract by the employer.

The employee was made redundant following an internal restructure. He was told by his employer that its preference was to redeploy him but, if that were not possible, he would be retrenched in approximately four weeks’ time. During that period, the employer made little effort to meaningfully engage with the employee to investigate redeployment options and, after five weeks, retrenched him. The employee claimed, amongst other things, that his employer had breached his employment contract by failing to follow its redeployment policy prior to retrenching him.

The Court held that:

  • the employer’s redeployment policy did not form part of the employee’s contract, primarily because the policy contained an express statement that it was not to be incorporated into employees’ contracts;
  • a term of mutual trust and confidence is to be implied by law in all contracts of employment, unless excluded by the terms of the contract itself;
  • a “serious breach” by the employer of its redeployment policy was capable of constituting a breach of the implied term, even though it was not incorporated in the contract;
  • the employer’s “almost total inactivity within a reasonable period” was a serious breach of the redeployment policy and therefore a breach of the implied term; and
  • a breach of the implied term is capable of and did sound in damages. Here, the damage was the loss of a chance of redeployment.

Barker v Commonwealth Bank of Australia [2012] FCA 942