Recent Developments in Employment Law

17th September 2014

Some interesting decisions in the Australian High Court and NSW Supreme Court have shaken up the way employers should approach individual employment arrangements.

Mutual trust and confidence

The High Court has dismissed the idea that an obligation of mutual trust and confidence is implied into Australian employment contracts. The concept of mutual trust and confidence had gained traction in recent times with the idea that the employer will not, 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 High Court heard an appeal against a decision made in the Australian Federal Court where an employer was found to have breached the implied term for failure to properly follow its own policy on managing employee redundancy.

The High Court was not impressed with the decision, concluding that the implied term, which originated in English employment law, is not automatically implied by law into all Australian employment contracts. It is neither necessary to imply the term in order for such contracts to be effective, nor is it appropriate having regard to the Australian statutory context.

This decision should provide reassurance to employers that every employment policy created for the purpose of managing staff relationships obligations and responsibilities are not automatically imported into the contract of employment. However, such arrangements can still be implied as a matter of fact if necessary to ensure the efficacy of the employment contract.

Reasonable notice of termination of employment

The NSW Supreme Court has awarded 10 months pay in damages to a person whose employment was terminated by her employer after 24 years of service. Her employment contract did not include an express period of notice to terminate employment, so the Court was asked to determine a reasonable period of notice. The Court applied the well established principle that the length of notice that is reasonable is a question of fact and is to be determined after the consideration of all relevant circumstances, mindful that the primary purpose of notice is to enable the employee to obtain new employment of a similar nature. In this instance, the employer had provided only 5 weeks notice of termination, but the Court took into account the seniority of the employee, the level of responsibility of her position, length of service and likelihood of finding a similar position at her age. The Court also included the bonus payments in calculation of her ordinary pay.

The lesson for employers is very simple. Make sure that all employment contracts include a term expressly providing the period of notice or payment in lieu that is required of the employee and employer to terminate the employment relationship.