Is There a Duty of Trust and Confidence Implied in Employment Contracts in Australia - Essay Example

Name of Student: Institution: Instructor: Course Code and Name: Date of Submission: Is there a Duty of Trust and Confidence Implied into Employment Contracts in Australia? if such a Duty does not Exist, Should Australian Law Recognise it? Critically Evaluate with Reference to Australian and other Common law Law Jurisdictions Introduction Trust is the essence of human existence. It is the basic human component that is the every relationship or interaction. From human survival to organizational survival, trust is the supreme most bonds that join the interactions. It is the basis upon which confidence is built. Trust is the duty of any leader and is an essential quality for guiding others. Trust unites human understanding and the lack of it leads to the destruction of all human relationships. During the last few years, employers have faced a number of cases brought top them by disgruntled employees. Previously, such claims were made after dismissal or any unfair treatment at work. In the recent past, employers have been using alternative methods of addressing employee conduct and more so working towards building of trust and confidence. The principle of mutual trust and confidence in employment contracts can be described as an essential relational norm. The role played by the duty of trust and confidence in the development of a relational approach to employment is examined. The potential for this duty in affecting future employment performance is great and thus the issue is being taken into great consideration in successful organizations. In being presented with cases by employees, the Australian courts have variously analyzed the historical background of this implied term of trust and confidence. This has led the courts into recognition that the term is indeed implied by law into employment contracts. In the case of Buckland v. Bournemouth University Higher University Corp., the court of appeal handed down judgments that were of great significance to the doctrines of the General English contract law. The law governing the common law implied mutual trust and confidence which is major component of the contract of employment1.Employers have been applying the doctrines as derived from such cases to recognize the vitality of the principle of mutual trust and confidence2.This case concerned a professor of archeology and his employer. The employer was Bournemouth University Higher Education Corp. and the issue was the unauthorized remarking of exam scripts. Two of his colleague professor had remarked papers which he had already rewarded grades and assigned new grades to the two papers. The general trend was usually to remark papers of some failed students so that the grades would be altered upwards to pass these students. His marking was moreover criticized and after an independent review produced a report that exonerated the professor, the resigned and claimed that he had been dismissed and that the dismissal was unfair. The professor sought to show that he had been constructively dismissed and that the basis was the breach of the implied trust and confidence .The court of appeal ruled that the employer' actions rendered it breach of the implied term of trust and confidence. The employer's report of the professor's incompetence did not repudiate the claims and it was held that the dismissal of the professor was unfair and he was therefore entitled to compensation. In Australia, a number of court rulings have began filling the gap by extending the way employees can sue their employers under the contract law. It has in the recent past been established that the duties of good faith and mutual confidence are implied in the terms of employment. These implied terms in Australia have enabled the employers and employees more flexible ways to obtain relief in employer conduct which clearly does not exist in Australia until recently. Anything that s work related can cause employee grievance or disgruntled employees. Employment an industrial researchers argue that if an employee grievance is not well taken care of or promptly addressed, it can lead to increase n the stress levels of employees and this can negatively impact performance and this as usual translates into lack of productivity3.Employees in Australia have a number of avenues to take their grievances and this can be seen in the ever increasing court cases. Employees are choosing to take their grievances to court since the higher damages awards are generally available and can be easily pursued. In a bid to minims this cases, Australian firms and organizations have come up with various grievance handling procedures. These procedures are being incorporated into the firm's system and while this is a very good start, it is important that the rules and procedures are followed and taken into great consideration. In Australia, the High Court has not delivered any ruling relating to the matter but it has recognized that the term in other common law jurisdictions is viewed as implied law. In a significant case in 2008, Russel v. the Roman Catholic Church for the Archdiocese of Sydney 5, the supreme court of New South Wales considered the issue and concluded that the term of mutual trust and confidence was implied by law in the Australian employment contracts. They ruled that this is so unless or until expressly stated. In this particular case, the breach of the term arose from the employer adopting various procedures during an investigation into allegations made against the employee, Mr. Russell. Notwithstanding the recognition of the term of mutual trust and confidence, the employee was not awarded any damages since the breach related with the manner in which the employees' contract of employment was terminated. Importance of the implied law of trust and confidence Since this decision, a number of other cases have gained momentum and recognized the very existence and meaning of this implied term. An important case was the Downe v, Sydney West Area Health Service (no 2)84. This was another of the New South Wales Supreme Court decision. The court concluded that the indefinite suspension of an employee and the direction to perform work a another location amounted to a breach of the implied mutual trust and confidence. This shows that Australia has continued to embrace the term as an implied law in employment contracts. In yet another case that involved McDonald v State of South Australia, The Australian Supreme Court recognized the existence of the implied term of mutual trust and confidence and its vitality. It found that the education authority had breached the term and had failed to properly manage a teacher's performance. The authority had failed to consult him about changes in the workplace and had failed to contact the employee during a long period that he was ill. The appeal of this decision was taken to the high court and it was determined that not only was the term implied into the teacher's employment contract, but also implied by the Australian law5.In another decision of a case involving Yousif v Commonwealth Bank of Australia, the implied term of mutual trust and confidence. They however did not find any breach in that particular case. The breach that the employee claimed was the failure by the employer to appoint and promote her to a certain position. The reasons for the employer's failure were however for strategic business reasons and thus did not amount to breach of the implied term6.Also, the case between St. Joseph's Hospital Limited v Corey, the New South Wales Decision Tribunal recognized the term of implied trust and confidence. It confirmed the existence of mutual trust and confidence in the Australian employment contracts and found that the breach of anti-discrimination legislation could indeed constitute a breach of the implied law7. This cases show that there is a general acceptance by the Australian courts not only to recognize the existence of the term as an implied law but also the willingness by the courts to expand and better understand the notion. The implications of this are those employees are faced with a wide avenue of addressing their grievances. However, this has been associated with other costs that are prohibitive and hinder the employees from claiming damages due to any arising issues. For employers in Australia, breach of contract proceedings is an expensive undertaking and the adverse costs pose areal problem and concern them a lot. They have thus been forced to create grievances handling mechanisms within the organizations that help in solving the problems internally. The Fair Act of 2009 gives the employee the right to claim that an employer has taken adverse action against them in accordance with the workplace right. These further shows how Australia has continued to try understanding the concept of this implied law in employment contracts regarding mutual trust and confidence The development of this term has been a recent development and its origin is probably from the e general duty of cooperation arising from contracting parties. The reason for this development is part of the history of employment in this century8. The relation that existed in Australia of master servant has thus become obsolete. In Spring v Guardian Assurance plc, the changes which have taken place in the recent past are great , imposing more duties and obligations rather than the employee like it was I the past. The current situation implies that a balance be struck between an employer's interests in managing the business and the employee's interests in not being unfairly treated and exploited9.Notwithstanding the fact that the Australian Supreme court has not realized the term as part of law, by applying the case as seen from Byrne and Frew v Australian Airlines Ltd., many have assumed that it is already part of law in the Australian setting.10In another case of Brackenridge v Toyota Motor Corporation Australia, the Industrial Relations Court of Australia recognized that there was an implied term that an employer acts in good faith and fairly. Although in this case no damages were awarded, the court recognized the existence of this law in Australian employment contracts11.Employers have also come to the knowledge that in every employment relationship, mutual trust and confidence is an important ingredient and that is the reason that the law imports into employment contracts this particular law. This law involves an implied promise by the employer to act in good faith and to act fairly in such a manner as not to destroy the relationship of confidence within the parties without any reasonable cause12.The evolution of this kind of law has seen a shift of the status that existed I the past employment relationships. The employer has by far greater duties regarding the employee's welfare and has to take care of the physical, psychological and even financial welfare of the employees. This could be fiduciary obligation to the employee and the actions of the employer could amount to a breach. The changes that are evolving between the employer and employee are sometime implied and may reflect many ideals of public law or equity. Being the ideal of public law, this shows the necessity of reasonability of the employer13. Being an ideal of equity, the importance of trust and confidence is taken into consideration. The implication of the trust and confidence term is likely to have a very significant impact on the use of prerogative power in the employment relationship by either party. Attempts by the employers to use their dominant and bargaining position to the detriment of the employees are likely to be constrained by the use and implication of the trust and confidence term14.The term is also likely to curtail the employer's ability to change policies unilaterally, relocate employees, and alter working hours, awarding salary increases and bonuses. A requirement to work unreasonable overtime could as well lead to breach of the term. Excessive workloads by employers will be reduced as an implication of the implementation of this term as law. The arbitrary selection of employees for redundancy for improper purposes is also an implication of the term of trust and confidence15.As the social standards in Australia change, the need for implementation and recognition of this term as implied law in employment contracts increases. It is slowly becoming a necessity achieving organizational goals and the productivity and performance of employees is directly affected by the conduct and actions of the employer. This has been evident following the grievance handling procedures being put in place by employers. The term's implications are mostly positive and once implemented and integrated into a firm's system, the firm's goals and objectives are well achieved16. Despite the broad acceptance of the term, it will only be implied by law into Australian employment contracts. There being no express provision will render it prone to deprivation of its very important substance, devaluation or even the drastic undermining of this concept. This term implies that certain surveillance and monitoring practices be put in place for employers. The term also suggests that the work references for all employees are fair and reasonable17. Employers cannot therefore engage in corrupt practices once this term is effected as implied law in employment contracts. Wrongdoing on the part of the employer will be disclosed too once this term is clearly observed. A course of conduct that is supposed to be followed will determine the extent of the term in any organization18.The term is generally implemented to provide relief to employees. With the increase in bullying and sexual harassment by employers, the employees can seek relief by referring to the term of implied trust and confidence. The employee is faced with a situation whereby his or her rights are well taken care of For instance, an employee on paternity or maternity leave should not be awarded a lesser position upon return This would in itself be breach of the implied term of trust and confidence. This law should be recognized in the Australian law as an implied term in employment contracts19. The benefits of using this term exceed the shortcomings and hence should be adopted. Limitations of the implied term of trust and confidence Employers' power to conduct workplace surveillance in a bid to limit the activities to be carried out I the workplace may at times be abuse of power. This could amount to breach of the term of trust and confidence .The obligation not to breach the term has been examined by courts and the workplace surveillance limits what is done by employees in a negative manner20.However, the scope of this term seems to have limited application with respect to the manner of terminations. The various indications that it has potential notwithstanding, the term's scope is largely confined to conduct and this has mostly occurred in the employment relationship21.It for instance have no part to play in the mere dismissal of employees. Employees can take dismissal matters to court and quote the breach of the e term whereas the reasons for dismissal could be entirely genuine and reasonable22. Some employees entirely ignore the true purpose of the term and go overboard and misinterpret h e whole term. The main purpose of mutual trust and confidence term is the enhancing of healthy relationships between employers and employees. The momentum of this term has also been seen as short-lived. The Eastwood and Manoor v Magnox Electronics plc case clearly illustrates the whole concept of the term being short-lived23.If an employee's rights under the employment contract are given a wide interpretation, they encompass an employee's ability to make a living out of the employment, and the implications of the term are likely. However, if the employee's rights are construed narrowly, limited to specific periods, then such an implication of the term is very unlikely24. This term protects employees from unfair termination of employment. The words trust and confidence confer legal rights rather than any other basic requirement of any personal relationship. It is rare for any human being to have total trust in another25. What is required of an employment relationship is just sufficient trust and confidence to make the relationship valuable and productive. Trust and confidence ensures that two parties behave in manner that enables work to be performed on sound basis regarding commercial and legal standards. The options by the Australian courts to make the term a legal term and implied law, but without attaching damages to the law, leaves it with too much flaw. This leaves the employee with no option but to quit employment or commence injective action. Fortunately, it seems like the Australian courts may be willing to expand and fully understand the doctrine as shown by the case of Emmerson v Housing Industry Association Ltd. That provided damages to the breach of the implied term of trust and confidence. It is hoped that the High Court does this too and recognizes the existence of this term26.If given the opportunity, the high court is hoped to react positively when considering this issue. It is expected to realize that the employee is very much in need of such a law. Having the opportunity to claim damages is totally different from the opportunity to prove financial loss as a result of the employer's breach of the implied term of trust and confidence27. This is clearly illustrated as in the case of Husain and Zafar v Bank of Credit and Commerce International28.In Australia, where the termination of employment could lead to or trigger a psychiatric injury, an employee can recover damages for the injury or the anxiety directly resulting from such injury. Unlike Australia, most countries like Canada and New Zealand have liberated themselves have started awarding damages for distress caused by any injuries caused by any breach of the implied term of trust and confidence. Conclusion It is definitely clear that the issue of trust and confidence requires clarification by the High Court f Australia. The cases regarding this issues is hoped to change in the near future. The deregulation of the labor market and the recent constraints being placed on the Australian labor market will lead to this liberation. Employees in finding alternative means of fighting for their rights is likely to see an increase in the judicial consideration and exploration of implied terms and this will consequently lead to the renaissance of the implied term of trust and confidence29. The Australian Employment law is experiencing a lot of change and needs the application and integration of the implied term of trust and confidence. This will give the employees a platform to exercise their rights and ensure their proper treatment. If such action is to be put, the employers will see an improvement in the productivity of their workforce and this will subsequently translate into great returns30. The Australian courts having progressed to the recognition of this implied term, the High Court is definitely hoped to incorporate this into the employment contact law. The law as has been successful in other more liberated countries could also be successful in Australia if well applied. Bibliography Byrne and Frew v Australian Airlines Ltd.(2010)133 SACS 122 Brackenridge v Toyota Motor Corporation Australia (2009) IR 110 Burazin v. Black town City Guardian Pty Ltd. (2008) 122 EFR 109 Brodie Daw 'The Heart of the Matter; Mutual Trust and Confidence' (1996)25 Industrial Law Journal 126,135 Tolhurst Carter the New Law on Implied Terms (2002)11 Journal of Contract Law 76, 80 Concut Pty Ltd v Worell and Another (2000)68 IR 277 Lawrence Clarke Mutual Trust and Confidence: The duty of disclosure (1999)9 The Industrial Law Journal 45, 50 David Cabrelli 'Buckland v. Bournemouth University Higher Education Corp. Statutory Constructive Dismissal and the implied term of trust and confidence '(2011)74 Modern Law Review Journal 122,134 Downe v. Sydney West Area Health Service (2008) 218 FLR 68 Eastwood and Manoor v Magnox Electronic plc (2000) ILRL 126 Kelly Godfrey 'The Renaissance of the Implied Term of Trust and Confidence' (2004)12 The PublicEmployment Lawyers Journal 23, 80 Hilton v Shiner Builders Merchants (2001) IRLR 727 Hill v General Accident Fire and Life Assurance (1998) IRLR 641 Husain and Zafar v Bank of Credit and Commerce International (2000)12IRLR82 Johnson v Unysis Ltd. (2001) UKHL 13 Lewis v Motorworld Garages Ltd (1986) ICR 157 CA Boyle Mathew, 'A Relational Principle on Trust and Confidence' (2007)27 Oxford Journal of Legal Studies 633,640. Malik and Mahmud v Bank of Credit and Commerce International SA (1997)3 WLR 97 Gary McCarry ‘Constructive Dismissal OF Employees in Australia'(1994)68 Australian Law Journal 494,500 Bary Moore 'Warning on Workplace Stress' (2002)10 Industrial News Journal 1, 6 Gary McCarry 'Damages for the employer's Breach of the Implied Duty of Trust and Confidence' (2001)8The Australian Law Journal 112,120 McDonald v State of South Australia (2008) SACS 134 Reel Noughton 'The Industrial Relations Court and the Contract of Employment' (2000)26The Australian Bar Review 140,155 Dean Pollard 'Employer's Duty of Confidence and Trust' (2008)7Australian Superannuation Law Journal 112,115 River wood International v McCormick (2000)177 ALR 193 Robinson v Crompton Parkinson (1996)2IRLR19 Vivienne Reiner 'Follow your Rules or Lose out' (2009)10 Weekend Australian Journal 1, 5 Spring v Guardian Assurance plc (1995)162 ER 129 Jason Swaton 'Implied Contractual Terms (2006)5 Journal of Contractual Law 141,145 Yousif v Commonwealth Bank of Australia (2009)13 . 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