Over the last decade, Australian courts have vigorously debated over the existence, formulation, and consequences of the implied term of mutual trust and confidence, in the context of employment contracts. The decision in Commonwealth Bank of Australia v Barker  FCAFC 83 (‘Barker’) has granted some clarification in this area, with the majority confirming that a term of mutual trust and confidence can be implied into all contracts of employment, unless the term would be inconsistent with the express terms of the contract. The decision has created implications for employers who must review the terms of their employment contracts and reconsider their pre-termination processes, and doubt ...view middle of the document...
The time for discovering redeployment opportunities was extended by a week, following which Mr Barker was advised that his employment was terminated. His contract of employment expressed via clause 8 that his employment may be terminated if the bank were unable to place him in an alternative position.
Mr Barker commenced proceedings in the Federal Court contending that CBA's actions in failing to make satisfactory efforts to redeploy him had breached the term of trust and confidence implied into his employment contract, as there was no express term excluding its possible operation.
The decision at first instance
Besanko J found that the redeployment policy was not incorporated into Mr Barker’s contract of employment. However, the policy was not articulated in merely expressive or ambitious terms — the parties had a genuine anticipation that the explicit processes set out in the redeployment policy would be complied with.
His Honour found that the term was consistent with the approach taken in England and that its presence had been assumed by the high court.
Besanko J was clear in articulating that the decision did not concern whether the policy was a term and condition of the employment contract, or go to the question of qualifying the Bank’s power to terminate Mr Barker’s employment in accordance with the terms of the employment contract. He emphasised that the problem concerned whether the implied term was breached prior to the event of the termination of the employment, and decided that the term was not a “back door method” of avoiding the effect of the statement that the redundancy policies were not terms of the contract. Besanko J contended that the term only functions where a party does not have reasonable and proper cause their conduct and their behaviour is likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. Consequently, the banks complete inactivity with Mr Barker within a reasonable period resulted in a serious breach of its redeployment policy, and the implied term of mutual trust and confidence.
His Honour awarded damages for loss of opportunity to be redeployed to a position within the Bank in the sum of $317,500.
Issues on appeal
CBA appealed Justice Besanko's decision to the Full Court of the federal court on the basis that the implication of the term was unjustified and did not breach it. Mr Barker cross-appealed seeking additional damages. On appeal, the Full Court confined its decision to two issues; whether the contract of employment contained the implied term of trust and confidence, and if it did, whether CBA's breach of its own policies, constituted a serious breach of the relationship of trust and confidence upon which the term is founded. The content of the duty was also a contentious issue, as it required the determination of whether it needed to be attached to an entitlement or benefit in the contract.
The federal courts decision
In a joint...