The High Court's decision today in Commonwealth Bank of
Australia v Barker  HCA 32 confirms that there is
no implied term of mutual trust and confidence in
Australian employment contracts.
The High Court held a term providing 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, did not satisfy the relevant test of
"necessity" for it to be implied as a matter of common
law in all employment contracts.
In making this finding, the High Court distinguished the
Australian employment regulatory system from that of the United
Kingdom (where the term is implied) and cautioned Australian judges
that they must "subject [foreign rules] to inspection at the
border to determine their adaptability to native soil"
(including legal principles of other common law jurisdictions like
This decision greatly reduces the level of uncertainty
Australian employers face in their day to day dealings with their
employees. If the Full Federal Court decision had stood, employers
would have had to grapple with a term that existed but could not be
defined with any general certainty, and would be moulded to the
circumstances of each case.
The High Court noted, however, that it is open to the
legislature to enshrine a term of mutual trust and confidence in
legislation. This does not, however, appear to be on the Abbott
Government's industrial relations agenda at the present
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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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.
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