Changes to Workplace Contracts Decided by the High Court

In September 2014, the High Court of Australia handed down a milestone decision in Commonwealth Bank of Australia v Barker (2014) HCA 32. The High Court decided that workplace contracts in Australia do not have an implied term of mutual trust and confidence.

An implied term is a term which binds the parties to a contract even though that term was not expressly agreed by the parties at the time of entering into the contract.

Brief Background

Barker was a senior staff member within the Commonwealth Bank of Australia (Bank), having begun with them in 1981. In 2009, Barker was advised that his position had been made redundant and as a result, his position would be terminated.

Barker alleged that when the Bank gave him notice that his position was being made redundant, the Bank had failed in its implied duty of mutual trust and confident to properly consider whether Barker could be redeployed elsewhere in the Bank’s enterprise.

Justice Besanko, who was the trial judge who heard the dispute at first instance, had to decide primarily whether the Bank had an implied obligation to not, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between the Bank and Barker.

Justice Besanko decided that there was an implied duty of trust and confidence under Australian law, the Bank had breached that implied term and Barker was awarded over $300,000 for past and future economic loss as a result of this breach.

The Bank then appealed that decision to the Full Federal Court but it was unsuccessful in its appeal with the Full Federal Court upholding Justice Besanko’s decision.

The Bank then appealed again to the High Court of Australia. As mentioned above, the High Court disagreed with the decisions made by the previous two courts and ruled that no implied duty of trust and confidence exists under Australia law.

The Effects

This decision is a win for businesses. That is because historically a wide variety of actions or decisions made by the business owners, which were not to the liking of staff, could be argued to be a breach of this implied term.

This decision however means that both parties do not have an unlimited ability to treat one another in a manner which could be taken as exhibiting a lack of trust or confidence. There are still an array of legislative provisions which have the possibility to render unlawful any behaviour which exhibits acting in a manner that is destructive of trust and confidence relationship between the parties. Such provisions include the unfair dismissal provisions, the general protections provisions and the anti-bullying provisions under the Fair Work Act 2009 (Cth), as well as the raft of State and Federal anti-discrimination laws, and health and safety laws.

There are also a number of other implied terms that still apply in employment contracts such as the business owner’s implied duty of care, the worker’s duty to obey the lawful reasonable instruction of the business owner, the worker’s duty to cooperate with the business owner in the operation of the business and the worker’s duty of fidelity.

The other thing to remember about this decision is that the High Court stated that the implied duty is not implied by ‘law’ into a contract. However, such a term could feasibly be implied by ‘fact’. For example, if there are contractual obligations on the parties to treat each other with respect and demonstrate high levels of trust in their interactions with each other, and such obligations are specified in the contract or the company’s policies, then it is possible that an implied term of trust and confidence could be held to apply by ‘fact’ in certain circumstances (although this will not be common).

On the other hand, the business is no longer entitled to lawfully terminate a job by alleging that the worker breached this implied term of trust and confidence (unless there is a legal argument that such a term could be implied by fact).

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