Employers should comply with their employment policies, even if they do not form part of their employment contracts, otherwise they may be exposed to claims for breach of the implied term of trust and confidence. The Federal Court recently ruled a Bank breached the implied term of mutual trust and confidence by not complying with its policies and awarded a former employee $317,500 in damages.
The employee contended his employment contract with the Bank included as terms, HR policies and the implied term of mutual trust and confidence. The policies issued by the Bank included those relating to 'redundancy, redeployment, retrenchment and outplacement'. The employee also argued that the Bank breached its own policies and the implied term of mutual trust and confidence.
The employee had been employed by the Bank for 27 years when on 2 March 2009 his position was made redundant. He was given indicative retrenchment figures, which were calculated on the assumption of an exit date of 20 March 2009. The employee was subsequently told the Bank's preference was to redeploy him and failing that, his exit date would be 2 April 2009. He claimed his redundancy and lack of deployment was contrary to the policies issued by the Bank. The policies contained a statement which said that they did not form part of any agreement or contract entered into by the Bank.
It was held that the policies were not implied as a matter of fact or expressly incorporated into the employee's employment. However, Justice Besanko found the implied term of mutual trust and confidence applied and ruled that a 'serious breach' by the Bank of its own policy would be sufficient to breach the implied term. Justice Besanko held the employee was entitled to damages for the loss of chance to be redeployed due to the Bank's breach of the implied term of mutual trust and confidence by acting in 'serious breach' of its redeployment policy.
The Court considered the Bank had not raised the possibility of an alternative role with the employee until more than three weeks after it had advised him of the impending redundancy. As a result, the judge held the Bank's 'almost total inactivity within a reasonable period' meant the breach of the redeployment policy was serious enough to breach the implied term of mutual trust and confidence.
Justice Besanko considered the following conduct to be in breach of the policy and, therefore, the implied term of mutual trust and confidence:
- Failure to consult with the employee
- Failure to discuss with the employee the possibility of retraining or redeployment, and
- Failure to develop or implement a redeployment plan.
What does this mean?
This decision illustrates that workplace policies issued by employers, which may not form part of the employment agreement, still need to be applied and actioned by employers. Serious breach of these policies can result in a breach of an implied term of trust and confidence.
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