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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?
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,
Jessica Oldfield
Loran McDougall
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!
The issue of annual leave seems to raise a lot of questions, such as:
  How much annual leave can be carried over from one year to the next?
  Can we ask our employees to take their accrued paid annual leave?
  Can an employee ‘cash out’ their annual leave entitlements?
  If an employee gets sick during their annual leave, do we treat these days as personal or annual leave?
  Does an employee on long service leave accrue sick leave and annual leave while not in the workplace?
  Are casual employees entitled to annual leave?

Mutual trust and confidence – a contractual obligation to 'be nice'?
by Charles Power
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.
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.
Charles Power
Charles Power

Employment Law Practical Handbook

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