Rouse Lawyers

- The Law Firm For Business Owners and Entrepreneurs -

Call us: (07) 3648 9900

  • Home
  • Expertise
    • Corporate & Commercial
    • Private Wealth & Tax
    • Franchising
    • Technology
    • Intellectual Property
    • Commercial Litigation
    • Employment Law
    • Estate Planning
    • Property Law
  • About
    • Our Team
  • Reviews
  • Articles
  • Careers
  • Legal Guide
  • Contact

High Court Overrules Finding of Duty of “Trust and Confidence” in Employment Contracts

The High Court has overruled a decision of the Full Court of the Federal Court in relation to whether a mutual duty of trust and confidence is implied in employment contracts.

In 2012, the Federal Court in Barker v Commonwealth Bank of Australia (CBA), awarded damages to an employee in relation to a breach by the employer of an implied term of “mutual trust and confidence” arising from an employment contract.

In overruling the Federal Court’s decision, the High Court found that, under Australian common law, employment contracts do not contain an implied term of mutual trust and confidence.

IMPLIED TERMS

Implied terms are found in most, if not all, contracts. Parties to a contract do not, and cannot, expressly provide for all events that may arise in their course of dealings with each other. There are gaps which courts may be asked to fill, by implying a term in favour of one of the parties.

There are number of types of implied terms, the most common being those implied by law, and those implied in fact (or, to give business efficacy to the agreement).

THE FEDERAL COURT DECISION

Our article on the background of this case and the Federal Court’s decision can be accessed by following this link.

In summary, in a two-to-one majority, the Full Court of the Federal Court implied the following term into Mr Barker’s contract with CBA:

‘…the employer will 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.”

The majority went on to find that CBA had breached the duty arising from this implied term.

The dissenting judge disagreed that Australian law required the implication of such a term into employment contracts.

OVERRULED BY THE HIGH COURT

In its appeal to the High Court, CBA argued that the term implied by the Full Court of the Federal Court was not necessary to give business efficacy to the contract.

The High Court agreed and unanimously overturned the Federal Court’s ruling, commenting that the implication of such a term into employment contracts involved a range of complex policy considerations and, for that reason, the question was a matter more appropriate for the legislature rather than the courts.

WHAT DOES THIS MEAN FOR EMPLOYERS?

The Federal Court’s decision in 2012 created considerable uncertainty for employers.

This uncertainty was removed by the High Court’s determination that the duty implied by the Federal Court will not apply to employment contracts. Accordingly, an employer will not need to take into consideration an implied term of “mutual trust and confidence” when taking steps to terminate a contract. Of course, employers must still be weary of avoiding other types of claims when terminating employment, such as failure to observe notice periods and potential adverse action claims.

Other relevant articles:

Employment Update: the Fair Work Amendments Act 2012
Employment Contracts & Cascading Restraint of Trade Clauses

November 21, 2014 Filed Under: Commercial Litigation, Employment Law

Enter your details below to contact a professional Commercial Litigation lawyer.

↓

We add new contacts to Rouse Lawyers database. We may send you information or service offerings we believe may be relevant to you. If you agree to being contacted by us in the future, send your enquiry. Naturally, you can unsubscribe any time.

Client Reviews

"Great knowledge, timely advice"

Rouse Lawyers has acted for us for the past 6 years, including franchising work, lease reviews and sales of certain businesses. Peter and the team not only have great knowledge, timely advice and have provided successful resolutions, but they also spend the time to learn not only about our businesses, but us as individuals.

David MckelvieBusiness Owner And Entrepreneur

"I would recommend Rouse Lawyers for any business"

“Young Guns has engaged Rouse Lawyer for all legal requirement/advice for the past 10 years. They have been on our business journey from 10 employees to 450 employees. Matt and Peter have always showed a personal interest in our business success and therefore made many recommendations for short term and long term strategies. I would be happy to recommend Rouse Lawyers for any business looking for a legal partner who they can trust and can provide ongoing, up to date advice.”

Scott YoungYoung Guns Container Crew

"I have no hesitation whatsoever in recommending Rouse Lawyers"

We have used Rouse Lawyers as a “one-stop-shop” for our all commercial and private legal requirements, and we value their expertise and experience. The team at Rouse Lawyers always ensure that they are fully up to date with what our business dealing entails. Our enquiries are efficiently and promptly handled, and any requests are dealt with professionally, ensuring that all the available options have been adequately explained at all times. Peter, Matthew and the team are very professional and we value their advice greatly. I have every confidence that we receive the most comprehensive counsel plus a competitively priced package individually tailored to our business. I have no hesitation whatsoever in recommending Rouse Lawyers to my friends and business associates.

Terry Fenner Fenner Group

PRIVACY POLICY DISCLAIMER TERMS

BRISBANE OFFICE

Ph: +61 7 3648 9900

Fx: +61 7 3648 9911

Level 2, 22 Wandoo St, Fortitude Valley, QLD 4006

17-Page Guide Reveals:

How To Protect Your Business and Your Assets While Allowing Your Business To Thrive

Written by Matthew Rouse, commercial lawyer and founder of Rouse Lawyers.

17-Page Guide Reveals:

How To Protect Your Business and Your Assets While Allowing Your Business To Thrive

Written by Matthew Rouse, commercial lawyer and founder of Rouse Lawyers.

Sign Up To Our Newsletter