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Do you have a contractual obligation to 'be nice'?
Monday, 1st September 2014, by Loran McDougall
In today's Workplace Bulletin:
- Mutual trust and confidence – a contractual obligation to ‘be nice’?
Dear Reader,
You are probably quite familiar with the express terms that appear in your employment contracts. But do you know what terms are implied?
You are probably quite familiar with the express terms that appear in your employment contracts. But do you know what terms are implied?
Implied terms are not consciously or expressly agreed on, or expressed in writing, but courts and tribunals do consider them to be part of an employment contract.
Terms may be implied by:
- custom, i.e. what is usual practice in your business;
- fact, i.e. a term that parties would have agreed to if asked at the time they made the contract; or
- law, i.e. terms that courts and tribunals consider to be necessary in an employment contract for the employment relationship to operate, regardless of whether the parties would have deemed the terms necessary when they made the contract.
Today, Charles Power will focus on the implied mutual trust and confidence term, which is implied by law and based on the idea that trust and confidence are necessary for employers and employees to work productively together.
According to the term, you and your employees are required not to do anything unreasonable that might destroy or seriously damage the trust and confidence that underpins the employment relationship.
However, as Charles explains below, the reach of the term – and even its very inclusion in Australian employment contracts – is still in question.
Until next time,
Loran McDougall
Editor
Workplace Bulletin
Editor
Workplace Bulletin
P.S. In last week’s bulletin on how to reduce psychosocial hazards in your workplace, we advised that you should ‘Avoid involving employees in decision-making that is related to, or affects, how their work is performed or managed.’ This statement was made in error. You should, of course, involve employees in decision-making that affects them. Apologies for the error!
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Mutual trust and confidence – a contractual obligation to 'be nice'?
by Charles Power
Editor-in-Chief, Employment Law Practical Handbook
Editor-in-Chief, Employment Law Practical Handbook
Nearly 30 years ago, an Australian court recognised for the first time the possibility that all employment contracts contained an implied ‘mutual trust and confidence’ term.
This was in the context of Burazin v Blacktown City Guardian (1996), a case in which a part-time sales rep, after complaining to her manager regarding non-payment of commission, suffered a series of ugly incidents before being forcibly removed from the premises by two police officers and dismissed without valid grounds.
The mutual trust and confidence term would oblige an employer not to, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.
This was in the context of Burazin v Blacktown City Guardian (1996), a case in which a part-time sales rep, after complaining to her manager regarding non-payment of commission, suffered a series of ugly incidents before being forcibly removed from the premises by two police officers and dismissed without valid grounds.
The mutual trust and confidence term would oblige an employer not to, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.
The existence of this term was confirmed recently by three Federal Court of Australia judges inCommonwealth Bank of Australia v Barker (2013). An appeal against this decision has been heard by the High Court and a decision is pending.
The decision of the High Court will be truly fascinating. The question will be, are “sense of identity, self-worth, emotional wellbeing and dignity” (to borrow the words of Justice Jessup, the only judge in Barker’s case who rejected the concept of the mutual trust and confidence term) essential elements of the bargain an employer strikes with an employee?
Even if the High Court accepts the term, it will not apply to dismissal or to steps that are inextricably bound up with dismissal. However, it will apply to workplace investigations processes, particularly where these do not give the alleged wrongdoer a fair, unbiased hearing.
If the mutual trust and confidence term is found to exist, it is important to appreciate that it will be owed by the employee as well as the employer.
In Jaques v The McCarroll Motor Group T/A McCarroll (2014), the Fair Work Commission ruled that an employee destroyed the trust and confidence term in the employment relationship when he gave misleading information about his qualifications in a job interview with his soon-to-be employer.
The employee was dismissed when more accurate information about his qualifications came to light. And although the FWC found that the dismissal wasn’t procedurally sound, it ruled that this did not outweigh the “manifest conduct and capacity” issues that led to the dismissal.
Regards,
Charles Power
Editor-in-Chief
Employment Law Practical Handbook
Editor-in-Chief
Employment Law Practical Handbook
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The information in this email is intended solely for the addressee. Access to this email by anyone else is unauthorised. If you are not the intended recipient, please return the message to the sender and delete it from your records. All content is © 2007-2013 Portner Press Pty Ltd All Rights Reserved.
Disclaimer: We research our recommendations and articles thoroughly, but disclaim all liability for any inaccuracies or omissions found in our publications. Click here to view our Privacy Policy and Terms and Conditions.
Queries: For general enquiries, email cs@portnerpress.com.au or call 1300 782 911.
Workplace Helpdesk: Paid subscribers to the Employment Law Handbook can ask our experts for advice.
Syndication: To republish a Workplace Bulletin article, please email cs@portnerpress.com.au for information.
Workplace Bulletin ISSN 1836-117X
Portner Press Pty Ltd
96-98 Bridport Street
Albert Park VIC 3206
Australia
