Jenni Priestley, partner and Leah Hewish, associate
at Clyde & Co's Australia office report on a recent
decision of the High Court of Australia.
In Commonwealth Bank of Australia v Barker  FCAFC
83, the High Court of Australia has reversed the decision of the
Full Federal Court, and declined to imply a mutual obligation of
trust and confidence into Australian employment contracts.
The Full Federal Court had previously held that the implied term
meant that an employer should "not, without reasonable
cause, conduct itself in a manner likely to destroy or seriously
damage the relationship of confidence and trust between employer
and employee." In a majority judgment, the High Court
found that such a step was the province of the legislature, rather
than the judiciary.
Mr Barker was employed by the Commonwealth Bank of Australia as
an Executive Manager. His employment contract included a clause
allowing termination by written agreement between the parties on
four weeks' notice by either party (or payment in lieu of
notice). In the event of redundancy, the contract provided that
compensation was payable on termination if the employee was not
In 2009, the Bank made Mr Barker's position redundant. He
was informed that he was required to work out the day and then hand
in his work keys and mobile phone, and he then ceased to have
access to his work email, phone or intranet. Although the Bank told
Mr Barker that it intended to redeploy him, communications with Mr
Barker through his work email, including encouraging him to apply
for a vacant position, went unseen by him. Ultimately, the Bank
decided to terminate his employment.
Mr Barker asserted that his employment contract incorporated the
terms of the Bank's "Redundancy, Redeployment,
Retrenchment and Outplacement Policy" and its
"Equal Employment Opportunity Policy", which in
turn contained an implied term of mutual trust and confidence. It
was alleged that the Bank's treatment of Mr Barker immediately
prior to his termination amounted to breach of the implied term,
and therefore of the written employment agreement.
Decision of the High Court
The High Court observed that the particular social context in
which employment law has developed in the UK is distinct from the
development of employment law in Australia, because of the
idiosyncratic application of state and territory laws and
Commonwealth laws to the employment relationship.
The High Court majority was conscious of the significance of a
finding that the implied term formed part of Australian law, and it
found that the implied term of mutual trust and confidence
"imposes mutual obligations wider than those which are
'necessary'". The burden which the term would
place on employees and employers rendered the decision more
analogous to that of law-making, rather than of judicial power and
therefore, a development which is more appropriately controlled by
The majority also observed that the implied term of mutual trust
and confidence in UK employment law was directed towards the
employee-employer relationship, rather than the performance of the
Comfort for Australian employers
The High Court's decision should give Australian employers
much comfort in determining finally that the burden of a nascent
implied duty of mutual trust and confidence does not form part of
employment law in Australia.
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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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