Implied terms of employment contracts


There is much legal controversy about when and what to imply into employment contracts. The High Court has somewhat surprisingly held that there is no implied term of mutual trust and confidence. Commonwealth Bank of Australia v Barker [2014] HCA 32 (10 September 2014). The issue for consideration Other Australian decisions about this issue are eccentric and some are plain irrational. Here however is a lucid summary of the current state of the law on the issue in Australia.

“There was some arid debate as to whether any obligation to provide and reasonably agree a Scorecard must be an implied term of the Employment Agreement.  The failure of Mr Leahey to articulate such an argument was the subject of criticism by CSG in its final submissions.  However, I consider the better view is that resort to implication of an ad hoc implied term is unnecessary and the obligation arises as I have explained in [179] above.  As I have previously noted, in Avenia v Railway & Transport Health Fund Ltd [2017] FCA 859 at [142]-[143], in not dissimilar circumstances:

The Full Court in University of Western Australia v Gray [2009] FCAFC 116; (2009) 179 FCR 346 at [135], quoting Society of Lloyd’s v Clementson [1995] CLC 117 at 131, observed that contractual terms implied in fact (of the kind contended for by the parties in the present case) are “individualised gap fillers, depending on the terms and circumstances of a particular contract”. Gageler J in Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169 at [113] made the same point, drawing the distinction between contractual terms implied in law (which can be seen as incidents attached to standardised contractual relationships, operating as “default rules”) and terms implied in fact which should only be implied where the well-known conditions set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPCHCA 1; (1977) 180 CLR 266 are met, including that the term is “necessary” to give “efficacy” to the particular contract, and that the term to be implied is not inconsistent with any express term of the contract.

Often parties turn to ad hoc implied terms where such an implication is not actually necessary. It is beyond the scope of this judgment to debate the difficult questions surrounding where the context or framework within which the contract is interpreted finishes and implication of a term begins and, in particular, whether notions such as a duty to co-operate can be seen as an informing or organising principle around a formed bargain, not as separate and distinct implied terms: see Chief Justice Allsop’s extra-curial observations in “Conscience, Fair-dealing and Commerce – Parliaments and the Courts” (FCA) [2015] Federal Judicial Scholarship 17 at [34] … As will be seen, it suffices for present purposes to note that this is an example of a case where a proper construction of the express terms of the contract by reference to context, including the nature of the employment relationship and the duty to co-operate, demonstrates there are no real ‘gaps’ and hence there is no need for an ad hoc expedient to fill perceived but illusory voids.”

Leahey v CSG Business Solutions (Aus) Pty Ltd [2017] FCA 1098 delivered 18 September 2017 per Lee J