MAJOR HIGH COURT DECISION ON EMPLOYMENT CONTRACTS
IF IT’S NOT WRITTEN IT MAY NOT BE IN.
Contracts of employment can be
oral, written, implied by law or be a combination of all three.
A written employment contract does
not necessarily contain all the terms that govern the employment relationship
as some terms may be implied by law.
The law that implies them can be
either legislation or law that has developed through court decisions, which is
known as common law.
An example of a term that could be
implied by legislation is one against theft. As it is illegal to steal, it is implied into
employments contracts (unless they state so explicitly) that employees not
steal from their employers.
Breach of such an implied term routinely
leads to an employer terminating the contract and summarily dismissing the
employee.
The difficulty with implied terms
is where the common law is relied upon.
Some terms can be “in” whilst
others are “not in”.
One implied term recently ruled
“not in” was an implied term of mutual trust and confidence.
Such a term means that neither
employers nor employees will do anything, without reasonable cause, to destroy
or seriously damage the relationship of trust and confidence that exists
between them.
Mr Barker was a long time employee
of the Commonwealth Bank of Australia, who when he was not redeployed within
the bank was made redundant. He contested whether the bank had implemented its
redeployment policy correctly and said the that bank’s failure to do so
breached, amongst other things, an implied term in his employment contract of
mutual trust and confidence.
The trial judge agreed adopting
legal reasoning developed from cases in
the United Kingdom and awarded Mr Barker
$300,000.00 as damages: Barker v CBA [2012] FCA 942.
On the bank’s appeal to the Full
Court of the Federal Court, Mr Barker held on to his money by a two – one
majority: CBA v Barker [2013] FCAFC 83.
On the bank’s further appeal to the
High Court, Mr Barker was not so lucky: CBA v Barker [2014] HCA 32. There the
five judges relying on slightly different lines of reasoning decided that there
was no implied term of mutual trust and confidence in Australian common law so
that it could form part of an employment contract.
The result was that Mr Barker was left
with an amount for four weeks’ pay in lieu of notice: a substantial reduction
on the damages first awarded to him.
The general legal principle around
implying terms into contracts is that they must be necessary so as to give
business efficacy to the contract.
The lesson to take from the Barker
cases is that implying terms from common law into an employment contract, regardless
of the parties’ intentions as expressed by the written agreement between them, will
be increasingly more difficult.
