Employers should comply with their employment policies, even if
they do not form part of their employment contracts, otherwise they
may be exposed to claims for breach of the implied term of trust
and confidence. The Federal Court recently ruled a Bank breached
the implied term of mutual trust and confidence by not complying
with its policies and awarded a former employee $317,500 in
The employee contended his employment contract with the Bank
included as terms, HR policies and the implied term of mutual trust
and confidence. The policies issued by the Bank included those
relating to 'redundancy, redeployment, retrenchment and
outplacement'. The employee also argued that the Bank breached
its own policies and the implied term of mutual trust and
The employee had been employed by the Bank for 27 years when on
2 March 2009 his position was made redundant. He was given
indicative retrenchment figures, which were calculated on the
assumption of an exit date of 20 March 2009. The employee was
subsequently told the Bank's preference was to redeploy him and
failing that, his exit date would be 2 April 2009. He claimed his
redundancy and lack of deployment was contrary to the policies
issued by the Bank. The policies contained a statement which said
that they did not form part of any agreement or contract entered
into by the Bank.
It was held that the policies were not implied as a matter of
fact or expressly incorporated into the employee's employment.
However, Justice Besanko found the implied term of mutual trust and
confidence applied and ruled that a 'serious breach' by the
Bank of its own policy would be sufficient to breach the implied
term. Justice Besanko held the employee was entitled to damages for
the loss of chance to be redeployed due to the Bank's breach of
the implied term of mutual trust and confidence by acting in
'serious breach' of its redeployment policy.
The Court considered the Bank had not raised the possibility of
an alternative role with the employee until more than three weeks
after it had advised him of the impending redundancy. As a result,
the judge held the Bank's 'almost total inactivity within a
reasonable period' meant the breach of the redeployment policy
was serious enough to breach the implied term of mutual trust and
Justice Besanko considered the following conduct to be in breach
of the policy and, therefore, the implied term of mutual trust and
Failure to consult with the employee
Failure to discuss with the employee the possibility of
retraining or redeployment, and
Failure to develop or implement a redeployment plan.
What does this mean?
This decision illustrates that workplace policies issued by
employers, which may not form part of the employment agreement,
still need to be applied and actioned by employers. Serious breach
of these policies can result in a breach of an implied term of
trust and confidence.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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