The Continuing Rise of the Implied Term of Mutual Trust and Confidence

By Jonathan Greenacre

Employers in businesses which are now exempt from unfair dismissal laws may dismiss employees for misconduct without any legislative or common law obligation to follow a "fair" procedure.

The recent decisions in two cases indicate that the employer's implied duty not to destroy trust and confidence in the employment relationship may mean that an employer that ignores its own human resources policies breaches the employment contract, regardless of whether the policy document was incorporated into the employment contract.

In both cases the courts accepted that by providing certain written representations to an employee, the employer was indicating that the relationship was to operate in a certain way. In order to uphold mutual trust and confidence in the employment relationship (ie to give effect to the implied terms) both parties were obliged to follow the obligations.

Greenacre discusses the post WorkChoices legal landscape in which many employees have no protections against summary dismissal. He then discusses the judgments in these two cases (Dare v Hurley [2005] FMCA 844 and Thomson v Orica [2002] FCA 939) and argues that in determining whether or not the employer should honour certain representations, the court considers principles which are very similar to those used to determine whether or not an individual has a legitimate expectation that a government administrator should honour certain representations. The final section argues that the implied term is likely to expand its operation and scope in the near future due to the WorkChoices laws.

The recent decision in Goldman Sachs JB Were Services Pty Limited v Nikolich [2007] FCAFC 120 (7 August 2007) where the Full Bench of the Federal Court held that the HR policy was to be read into the employment contract reinforces the point.

(LexisNexis Butterworths Employment Law Bulletin. vol 13, nos 3 and 4; pp28-36)