Summary

  • For the first time, the High Court looks set to directly consider the implied term of mutual trust and confidence in Australian employment law.
  • The issues for consideration will include whether or not the implied term exists in all employment contracts and whether it extends to an employer’s failures in respect of redeploying employees.
  • Employers should look out for a decision towards the middle of 2014.

The High Court has granted leave to appeal a decision of the Full Federal Court finding that the Commonwealth Bank of Australia breached the implied term of mutual trust and confidence for failing to take positive steps to consult with an employee about the possibility of redeployment and for failing to provide the employee with the opportunity for redeployment.1

As discussed in our previous updates on the decision of the Full Federal Court (here) and the decision at first instance (here), the decisions have created a large degree of uncertainty for employers in relation to the implied term of mutual trust and confidence in Australian employment law.

It appears from the oral submissions at the special leave hearing that, broadly speaking, the High Court will likely address two questions:

  1. Is the term of mutual trust and confidence implied into all employment contracts? That is, is the term to be implied into all contracts of employment as a matter of law (as found by the majority of the Full Court), or will the term only be implied as a matter of fact where it is 'necessary' in the particular case (in line with the principles of implication of terms in fact set out in BP Refinery v Shire of Hastings2)?
  2. If the term is to be implied, is an employer’s failure to take certain steps in relation to the redeployment of an employee outside the scope of the implied term? On the basis of the United Kingdom House of Lords decision in Johnson v Unisys,3 in which it was held that the implied term of mutual trust and confidence cannot be inconsistent with an employer’s right to dismiss an employee, such a finding would extend the scope of the implied term.

Given the level of uncertainty in Australian law in relation to the implied term, a clear High Court authority on point will likely be of great utility to employers. Employers should watch for a decision towards the middle of next year.