On 10 September 2014 the High Court of Australia delivered its
highly anticipated judgment in Commonwealth Bank of Australia v
Barker  HCA 32 (10 September 2014)
The Barker case concerned an appeal from the decision of the
Full Court of the Federal Court of Australia in which it was held
that Australian employment contracts included an implied term of
mutual trust and confidence.
The primary question raised by the appeal to the High Court was
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 the employer and
employee (the Implied Term of Trust and
Put simply, the facts of this matter concerned an employee whose
position with the Commonwealth Bank was made redundant. The
employee argued that the Bank breached his written employment
agreement which resulted in him losing the opportunity to be
redeployed by reference to an Implied Term of Trust and Confidence.
The primary judge applied the Implied Term of Trust and Confidence
and held that the Bank breached this term by failing to take steps
to comply with its own redeployment policy. On appeal, the Full
Court upheld the primary judge's award of damages on the basis
that the implied term of Trust and Confidence required the Bank to
take steps to consult with the employee and inform him of suitable
employment options, and that term had been breached.
In the proceedings before the High Court, the parties focused on
the issue of whether the implied term of Trust and Confidence was
"necessary" in the sense that without it, the rights
conferred by the employment agreement could or would be rendered
worthless or seriously undermined. In this respect the employee
relied substantially upon the decision of the House of Lords in the
United Kingdom in Malik. Ultimately it was held by the
Court (in three separate judgments) that the implied term of Trust
and Confidence should not be accepted as applicable to employment
contracts in Australia. The Court noted that it may be open to
legislators to enshrine the implied term of Trust and Confidence in
statutory form and leave it to the Courts, according to the
processes of the common law, to construe and apply it.
In its decision the Court noted the inherent ambiguity
associated with such a term, and suggested the implication of such
a term would propose potential inconsistencies with the established
statutory unfair dismissal regime.
The decision is a significant win for employers. Had the Implied
Term of Trust and Confidence been recognised as applicable to
Australian employment contracts, it would have enabled employees to
bring an additional cause of action in relation to alleged breaches
by employers of their obligations during, and on termination of, an
employee's employment. For example, the failure by an employer
to pay a discretionary bonus to an employee could have been argued
to constitute a breach of the Implied Term of Trust and Confidence.
Fortunately for organisations, that avenue has now been closed by
the High Court.
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.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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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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