Implied term of mutual trust and confidence rejected by High Court

The High Court has handed down its decision in the landmark case of Commonwealth Bank of Australia v Barker today, determining that there is no common law term of mutual trust and confidence implied into contracts of employment in Australia. 

The Court overturned the majority decision of the Full Federal Court, which had concluded that a term was implied into the employment contract between the CBA and Mr Barker, to the effect that the employer would not, without reasonable cause, conduct itself in a matter likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.  The implied term had been held by the Full Federal Court to require the CBA to take positive steps to consult with Mr Barker about alternative positions and to give him the opportunity to apply for them, in circumstances where it had made him redundant.

In a joint judgment, three members of the High Court decided that the implied term of trust and confidence was not sufficiently necessary to justify the exercise of judicial power in a way that may have a significant impact upon employment relationships and the law of the contract of employment in Australia.   The implied term, if accepted, would impose obligations on both employers and employees.   The Court noted that the complex policy considerations involved in implying such a term made the matter more appropriate for determination by the legislature.  The previous award of $317,000 damages to Mr Barker was overturned.