The recent Federal Court decision of Commonwealth Bank of
Australia (CBA) v Barker  FCAFC 83 sets important new
precedent for employment law. For the first time in Australia, an
implied term of mutual trust and confidence has been incorporated
into an employment contract, and damages awarded for a breach of
The implied term of mutual trust and confidence has been
recognised by UK courts since the 1970s, but until now has not
found a home in Australian common law. In this watermark case, the
court upheld this implied term and stated that an employer was
required to not, without reasonable cause, 'conduct itself in a
manner likely to destroy or seriously damage the relationship of
confidence and trust' between the employer and employee.
Barker was an executive manager at CBA. Barker's employment
contract required CBA to consider redeployment opportunities prior
to termination. When CBA moved to make Barker redundant, not only
did they fail to consider redeployment opportunities, but they
withdrew his email and phone facilities without notifying the
redeployment officer. The redeployment officer had made a number of
unsuccessful attempts to contact Barker by those means.
The court held that the implied term of mutual trust and
confidence existed as part of Barker's employment contract. CBA
had breached this implied term when it failed to consider
redeployment opportunities and withdrew Barker's email and
mobile phone facilities, damaging the relationship of confidence
that existed between the bank and Barker.
Barker was awarded $335,623 in damages for breach of the implied
Lessons for employers
Employers should be careful to consider the employment of an
employee beyond the mere contractual terms. Any behaviour that is
likely to destroy or damage the employment relationship may expose
the employer to a breach of mutual trust and confidence.
It is important to remember that this duty is a mutual one,
where both the employer and employee owe the duty to one another.
This means that where an employer expressly negates their duty of
trust and confidence, the employee will have no corresponding duty
(ie faithful service, non-compete and confidentiality obligations)
unless it forms part of their contract. Accordingly, employers
should think carefully before attempting to exclude their implied
duties to an employee.
In general, this decision serves as a timely reminder for
employers to ensure their actions when dealing with employees are
fair and reasonable. In particular, employers should comply with
reasonable consultation and notice periods and ensure they observe
their own policies and procedures when managing employee
transitions and workplace change.
This publication is intended as a general overview and
discussion of the subjects dealt with. It is not intended to be,
and should not used as, a substitute for taking legal advice in any
specific situation. DLA Piper Australia will accept no
responsibility for any actions taken or not taken on the basis of
DLA Piper Australia is part of DLA Piper, a global law firm,
operating through various separate and distinct legal entities. For
further information, please refer to www.dlapiper.com
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