Pub­li­ca­tions

Breach of an employer’s duty of mutu­al trust and confidence


In brief

In Bark­er v Com­mon­wealth Bank of Aus­tralia [2012] FCA 942 the Fed­er­al Court deter­mined that a pol­i­cy deal­ing with rede­ploy­ment, was of suf­fi­cient stature as to ren­der a breach of it, a breach of the employer’s duty of mutu­al trust and confidence.


Background

Mr Bark­er had been employed by the Com­mon­wealth Bank of Aus­tralia (CBA) and through a series of events was made redun­dant by CBA. Mr Bark­er con­tend­ed that CBA did not fol­low its poli­cies in regard to its selec­tion of him for redun­dan­cy and did not com­ply with its rede­ploy­ment pol­i­cy. In not fol­low­ing such poli­cies Mr Bark­er argued CBA had breached the employ­ment contract.

From late 2008 to ear­ly 2009 a seg­men­ta­tion process was under­tak­en at CBA which result­ed in a rearrange­ment of port­fo­lios which meant that one of the exec­u­tive man­agers would be made redun­dant. Mr Bark­er was select­ed because although his work was sat­is­fac­to­ry it was not per­ceived to be as good as anoth­er employ­ee. Mr Bark­er had achieved a Meets Expec­ta­tions” in his per­for­mance review while the oth­er employ­ee had achieved an Exceeds Expec­ta­tions”. Fol­low­ing the redun­dan­cy, CBA’s rede­ploy­ment pol­i­cy was trig­gered to attempt to rede­ploy Mr Bark­er else­where with­in CBA.

Decision

The rede­ploy­ment pol­i­cy was ren­dered inef­fec­tive because, as Jus­tice Besanko not­ed, Mr Bark­er an employ­ee of CBA for 27 years, was advised his posi­tion was redun­dant and asked to leave CBA and return any CBA items on the same day. Mr Barker’s email access was also imme­di­ate­ly with­drawn. As a result, the attempts of the rede­ploy­ment team to con­tact Mr Bark­er using his work details were ineffective.

A doc­u­ment titled HR Ref­er­ence Man­u­al stat­ed that the man­u­al did not form part of any employ­ment con­tract for an employ­ee. The inten­tion to be inferred from these words was that the rede­ploy­ment pol­i­cy could not there­fore be implied as a term of Mr Barker’s employ­ment con­tract. Jus­tice Besanko held that the words in ques­tion were deci­sive on the top­ic in the absence of any coun­ter­vail­ing fac­tor, and there­fore deter­mined that the rede­ploy­ment pol­i­cy was not a con­trac­tu­al term.

Jus­tice Besanko accept­ed the propo­si­tion that an implied term of mutu­al trust and con­fi­dence exists in an employ­ment con­text and con­clud­ed there was an implied term of mutu­al trust and con­fi­dence in the con­tract of employ­ment between Mr Bark­er and CBA. His Hon­our then con­clud­ed a breach of the rede­ploy­ment pol­i­cy con­sti­tut­ed a breach of that implied term of mutu­al trust and con­fi­dence. This was notwith­stand­ing his find­ing that the rede­ploy­ment pol­i­cy itself, did not con­sti­tute a con­trac­tu­al term in the con­text of this case.

Mak­ing Mr Bark­er redun­dant was not a breach of the rede­ploy­ment pol­i­cy. How­ev­er, CBA did breach its rede­ploy­ment pol­i­cy in not tak­ing any time­ly or mean­ing­ful steps to attempt to rede­ploy Mr Bark­er. That is, there had been a three week delay between Mr Barker’s redun­dan­cy and when the rede­ploy­ment team con­tact­ed him. Jus­tice Besanko concluded:

The Bank’s almost total inac­tiv­i­ty with­in a rea­son­able peri­od means that its breach of its rede­ploy­ment pol­i­cy was a seri­ous breach and that it was in breach of the implied term of mutu­al trust and con­fi­dence.i

The fact that Mr Barker’s solic­i­tors were threat­en­ing legal action did not relieve CBA of its oblig­a­tions under the rede­ploy­ment policy.

His Hon­our award­ed dam­ages for loss of an oppor­tu­ni­ty to have been rede­ployed on the basis that Mr Bark­ers chances of rede­ploy­ment were not so insub­stan­tial they should be ignored. On this basis Mr Bark­er was enti­tled to dam­ages of $317,500 based on 25% of future earn­ings of $1,160,000 and $110,000 for past earn­ings (name­ly four weeks’ notice owed to Mr Barker).

NOTE: the deci­sion and orders were made on 3 Sep­tem­ber 2012 and may be sub­ject to an appeal.

Conclusion

Whether or not a pol­i­cy will be regard­ed by the courts as a con­trac­tu­al term is to be deter­mined, amongst oth­er things, by ref­er­ence to the employ­ment con­tract, the rel­e­vant poli­cies, evi­dence as to the role of the poli­cies, and whether they are aspi­ra­tional or promis­so­ry in nature. 

The com­mon law duty that:

an employ­er must not with­out rea­son­able or prop­er cause con­duct itself in a man­ner like­ly to destroy or seri­ous­ly dam­age the rela­tion­ship of con­fi­dence and trust between the employ­er and employ­ee,ii

may be implied into an employ­ment con­tract. A fail­ure to fol­low a work­place pol­i­cy even if it is not found to con­sti­tute a con­trac­tu­al term may still con­sti­tute a breach of that duty of mutu­al con­fi­dence and trust.

A pol­i­cy which cat­e­gor­i­cal­ly states it is not part of the employ­ment con­tract cre­ates a stronger posi­tion for an employ­er who seeks to exclude poli­cies from being implied into their employ­ees’ con­tracts of employ­ment. Employ­ers must be care­ful not to send mixed mes­sages about the role of policies.

Employ­ers must also be vig­i­lant in apply­ing their poli­cies in a time­ly and appro­pri­ate man­ner in order to help pre­vent employ­ee com­plaints. In the Bark­er case close­ly adher­ing to work­place poli­cies may have influ­enced whether or not legal pro­ceed­ings were com­menced against the employer.

4 Octo­ber 2012


Bark­er v Com­mon­wealth Bank of Aus­tralia [2012] FCA 942 at [352].
ii Bark­er v Com­mon­wealth of Aus­tralia [2012] FCA 942 at [323], refer­ring to Malik v Bank of Cred­it and Com­merce Inter­na­tion­al SA (in liq.) [1998] AC 20.