Implied term of trust and confidence — practical implications of the decision in Commonwealth Bank of Australia v Barker
The decision in Commonwealth Bank of Australia v Barker  has significant implications on a practical level for employers. The decision confirmed that there is an implied term of mutual trust and confidence in every Australian employment contract.
You can view an earlier ClearLaw article titled "Commonwealth Bank of Australia v Barker " discussing this case. However, by way of summary, the Full Court of the Federal Court of Australia found that the Commonwealth Bank of Australia (CBA) owed an implied duty of trust and confidence to Mr Barker, who had worked as an employee of the CBA for 20 years. The case related to the circumstances of Mr Barker's redundancy.
Some areas in which employers will need to consider how the implied term will operate are:
- redundancy situations;
- where the employer engages in conduct that may contravene its own policies; and
- where the actions of the employer directly conflict with representations made to the employee.
Restraint of trade clauses
Restraint of trade clauses are becoming more common. Such clauses continue, however, to be difficult to enforce. An employer wishing to enforce a restraint against a former employee must show that the clause is no broader than necessary to protect a legitimate business interest.
The recent Victorian Supreme Court of Appeal decision in Wallis Nominees v Pickett  highlights the difficulties employers face when enforcing a restraint. Mr Pickett was an IT consultant who was assigned by his employer to work with a client at its premises for a period of 11 months. At the end of that period, Mr Pickett accepted an offer for a full-time position with that client.
Mr Pickett's employment contract included a clause that sought to prevent Mr Pickett from providing services to a client he had been engaged to 'provide specific services for' (first limb) and to any client to which he had 'cause to be in contact with' (second limb) during the normal course of the provision of services, for 12 months after termination of the contract.
The Court found the restraint in Mr Pickett's contract to be invalid, and the employer could not rely on it. This is because the drafting of the two limbs did not allow the limbs to be read independently and the 12 month duration was not reasonably necessary.
To increase the prospects of a restraint clause being enforced, the following should be considered:
- use clear and unambiguous language aimed at protecting identifiable interests when drafting restraint clauses;
- the clause should not be drafted to cover interests that cannot reasonably be protected; and
- for individuals in important positions, consider making a payment in exchange for the restraint.
'Adverse action' includes circumstances where an employer:
- dismisses an employee;
- injures an employee in his or her employment;
- alters the position of an employee to the employee's prejudice; or
- discriminates between an employee and other employees of the employer,
because the employee has exercised a workplace right (such as making a complaint or inquiry in relation to the employee's employment).
The number of adverse action claims being filed continues to increase and this trend is unlikely to change moving into 2014. An example of the type of claim being brought is that discussed in NTEU v RMIT . Professor Bessant worked for RMIT. In 2009 and 2010, Professor Bessant made a number of complaints about Professor Hayward, the new Head of School.
In March 2010, in a memorandum, Professor Hayward stated he wanted Professor Bessant removed due to a mix of 'inter-personal, organisational and financial reasons'.
In 2011, Professor Hayward sought permission from RMIT for Professor Bessant's position to be made redundant. This request was approved and Professor Bessant's position was made redundant.
The NTEU relevantly argued that RMIT had taken adverse action against Professor Bessant by dismissing her. The NTEU argued, among other things that RMIT took adverse action against Professor Bessant because of the complaints she made.
The Court found that RMIT had breached the adverse action provisions of the Fair Work Act 2009 (Cth) by dismissing Professor Bessant. The Court came to this decision because among other things:
- the decision maker did not expressly state in evidence that she had not considered the complaints when she made the decision; and
- there was no contemporaneous evidence of the reasons for deciding that the position held by Professor Bessant was to be made redundant.
When contemplating a redundancy process, employers should:
- prepare a business case justifying the need for change in the business;
- ensure any selection criteria for potential redundancies are clearly articulated in the business case and properly applied; and
- ensure there is a clear and accurate record of the reasons for decision.
More information from Maddocks
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Employment, Safety & People team.
More Cleardocs information on related topics
You can read earlier ClearLaw articles on HR topics.