Back in December (
here) we couldn't contain our excitement about the
Commonwealth Bank marching off to the High Court to challenge a
decision of the Full Federal Court (Jessup J in dissent) which
found that an implied term of mutual trust and confidence exists in
every employment contract in Australia. As we said then, this
question has plagued employment law for far too long. No more
though! The High Court has spoken, unanimously declaring that there
is no proper basis to imply the "mutual trust and
So what is this term of "mutual trust and confidence"
all about and what was the question for determination by the High
Court? "Whether, under the common law of Australia,
employment contracts contain a term that neither party will,
without reasonable cause, conduct itself in a manner likely to
destroy or seriously damage the relationship of trust and
confidence between them."
This might sound like a sensible proposition, but there is one
small matter that needs to be considered first – the law.
The law dictates that, in order to imply a term into a contract,
it must be "necessary". In other words, the transaction
that is the subject of the contract will be futile without the
existence of the implied term.
Although there will be plenty of naysayers, according to the
High Court, an implied term of mutual trust and confidence is
simply not necessary in employment contracts. It may be reasonable,
but it's not necessary.
While employers can breathe a collective sigh of relief that the
High Court has completely shut the door on the implied term of
mutual trust and confidence, it's worth noting that it sneakily
left the door ajar on the operation and scope of the duty of good
faith: "The question whether a standard of good faith
should be applied generally to contracts has not been resolved in
Australia. Neither that question, nor the questions whether such a
standard could apply to particular categories of contract (such as
employment contracts) or to the contract here in issue, were raised
in argument in these proceedings. It is therefore neither necessary
nor appropriate to discuss good faith further, particularly having
regard to the wider importance of the topic."
And so a measure of uncertainty remains. Guess that will be the
next ripe hunting ground for an enterprising employee. Watch this
We do not disclaim anything about this article. We're
quite proud of it really.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).