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Australia – High Court Now Likely To Rule On Status Of Implied Term Of Mutual Trust And Confidence.

26 September, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Dispute Resolution

 

In Commonwealth Bank of Australia v Barker [2013] FCAFC 83, a majority of the Full Federal Court found that an employer breached the implied term of mutual trust and confidence by failing to take positive steps to consult with an employee about the possibility of redeployment and by failing to provide the employee with the opportunity for redeployment.


The majority found that the employer’s actions breached the implied term in circumstances where the employee’s contract of employment contemplated (although did not require) redeployment of a class of employees that included the relevant employee. 


The decision represents the first binding decision of an appellate court in Australia recognising the implied term and has therefore clarified a number of aspects of the implied term including that:

 

  • the term will be implied into all employment contracts as a matter of law; 
  • the scope of the implied term will depend on the nature of the relevant employment relationship and the terms of the particular employment contract in question; and
  • a breach of the implied term will not be established simply through ‘serious breaches’ of company policies that do not form part of the employment contract.


Although the decision has clarified aspects of the law regarding the implied term, the decision has arguably created more uncertainty as to the precise scope of the implied term in any given case. The decision may not be the final word on the subject, as the employer has filed an application for special leave to appeal the decision in the High Court.


Employers in Australia should consider taking advice on steps to minimise risks in this area, including careful consideration of the legal and practical issues around the drafting of employment contracts and policies, and the manner in which ‘disputes’ and separations may be most appropriately managed.

 

herbert smith Freehills

 

For further information, please contact:

 

Miles Bastick, Partner, Herbert Smith Freehills
miles.bastick@hsf.com

 

Matthew Kalyk, Herbert Smith Freehills
Matthew.Kalyk@hsf.com

 

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