Employment contracts; implied trust and confidence

The question whether an employer’s policies and procedures can create enforceable obligations on the employer remains unanswered following the decision of the High Court in Barker’s case CBA v Barker (2014) HCA 32 delivered on 10 September 2014. In that rather tortuous case, the High Court ultimately held that contrary to the common law position which has been created by the English courts, an employment contract in Australia is not to be interpreted on the basis that it contains an implied mutual duty of trust and confidence. The High Court did however observe that nothing in its decision should be taken as an indication that such contracts do not contain an implied duty upon both parties to act in good faith in the performance of the contract, rather than there being something particularly inherent about the relationship itself. The court also pointed to a duty to co-operate to ensure that each party has the benefit of the contract. This was also said in the context of the performance of the contract rather than that it was about the relationship itself. Quite what this distinction means is yet to be seen, so in one sense the decision poses more questions than it answers.

The practical effect of the Barker case in the High Court is that the rejection of the principle of an implied term of the kind relied upon by Mr Barker is to deny him the substantial award of damages because the CBA had not followed its own policies and procedures which would otherwise have entitled him to a sum by way of compensation for redundancy. Since the policies were not expressly incorporated into his contract of employment, his lawyers needed to find a way for him to claim that he did have a contractual entitlement to the benefit of the policies, which was accepted by the Federal Court at first instance, and then on appeal to its Full Court (by a majority only), recognizing the implied term of mutual trust and confidence and thus holding that it had been breached by a failure by the bank to apply the policies.

Unless an employment contract in some way expressly incorporates such policies into it, the orthodoxy again is likely to be that they do not by themselves create any legal right for employees to have them applied by an employer. Obviously, a failure by an employer to apply policies fairly and evenly may be a powerful ground for contending that a dismissal is unfair, but unless the duty of co-operation or that of good faith in the performance of the contract is interpreted to support the implication of the policies, that is all that an employee will have as a remedy namely a statutory claim  for unlawful or unfair dismissal.