09 Aug High Court says NO to Mutual Trust and Confidence in Employment
In a landmark decision, the High Court of Australia has found that there is no common law duty of mutual trust and confidence implied into all Australian employment contracts.
What is an implied term?
In summary, all employees in Australia have an employment contract. The terms of this contract may be express and/or implied.
The express terms are those terms expressly agreed between the employer and employee as set out in the written contract of employment. For example, these may include the employee’s position, salary, hours of work, notice of termination period, and location of work.
The implied terms are the terms which the law says form part of the contract of employment even though they are not expressly stated. They are read into a contract either by rule of law in all cases or by virtue of the factual circumstances of a particular case.
Examples of terms which are implied into all Australian employment contracts include a duty for employers to provide a safe working environment, and a duty for employees to act honestly and faithfully.
What did the High Court find?
In the recent case of Commonwealth Bank of Australia v Barker  HCA 32, the issue in contention 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 them.
Such a term has been implied into employment contracts in the United Kingdom for many years and there has been uncertainty regarding whether such a term existed in Australia.
The High Court has now determined that no such duty exists in all Australian employment contracts. Such a duty may, however, be implied into a particular employment agreement depending on the circumstances.
What does this mean for employers?
The High Court’s decision has largely been hailed as a victory for employers because to date many employees have sought to rely on the alleged duty of mutual trust and confidence to support legal action against their employers. The decision therefore removes a ground on which employers may be exposed to legal action from their employees. The decision also means that employers are not subject to an additional implied duty with which they must comply when dealing with their employees.