Commonwealth Bank of Australia v Stephen Barker [2014] HCA 32

The High Court in Commonwealth Bank of Australia v Stephen Barker [2014] HCA 32 has ruled Australian employers do not owe an implied contractual duty to refrain from engaging in "trust-destroying conduct".

Prior to this decision, Australian courts had recognised a duty implied into all employment contracts which prevented the parties from engaging in conduct likely to undermine the trust and confidence relationship underpinning the employment contract.

The trust and confidence term was said prevent an employer from such conduct as:

  • engaging in conduct designed to force an employee to resign
  • wrongfully suspending an employee
  • conducting disciplinary proceedings improperly
  • engaging in discriminatory behaviour.

In Barker's case the High Court noted the arguments in support of the recognition of the term were predicated on a contemporary view of the employment relationship, being one involving common interests and akin to a partnership. Given the recognition of the term favoured a particular view of social conditions and desirable social policy, its recognition should be determined by parliaments not courts.

The Court concluded an employment contract does not need to impose a positive mutual trust and confidence obligation on the parties in order for the employment contract to operate. On the other hand, the recognition of the term would create uncertainty. For example, given it would be imposed on employees as well as employers, you might have a situation where an employee breaches his or her implied duty of mutual trust and confidence by conduct which was neither intentional nor negligent, but objectively caused serious disruption to the conduct of their employer's business.

What does this mean going forward?

The rejection of the implied mutual trust and confidence term is unlikely to thwart the trend of Australian courts and tribunals in treating employment as a relationship rather than a binary division of rights and obligations. In an employment context, the Barker decision reaffirms the implication of duties of cooperation and gives a green light for recognition of an implied duty of good faith.

Courts will continue to recognise terms imposing obliging mutual obligations of loyalty, cooperation, fairness and fidelity on employers and employees, whether they be expressed in contracts, incorporated by reference from human resources policies or implied by reason of the specific circumstances of the industry or workplace in which an employee works. Employers still need to be careful about how those documents are drafted.

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