The Concept of Implied Terms and Mutual Trust - Essay Example

Employment Law Student’s name: Instructor’s name: Course title: Date: Introduction In any contractual agreement this inclusive employment contract has direct and implied terms. Most common law countries have implied terms as a means of addressing legal gaps that might exist or are not addressed with the relevant legislations. In Australia, the same concept has been applied in the employment law where employees can seek redress if they feel that their employers have breached mutual trust and confidence of the relationship. The rationale and acceptance of such paradigm are based on the approved fact that one of the basis of fruitful relationship is based on mutual trust and confidence and once this lacks, the relationship is likely to be strenuous. The focus of this exposition is to determine whether the term mutual trust and confidence is implied in the employment contract in Australia. Secondly, to examine if any international case law has had an impact on Australian position. Lastly, the paper critically outlines the advantages and disadvantages for employers and employees of having such implied terms in the employment contract. 2.0 Implied Terms and Mutual Trust & Confidence in Employment Law Context Before examining if mutual trust and confidence or the duty to act fairly and reasonably is implied in Australian employment law/ contract, it would be prudent to brief examines the two concepts, theories underpinning the concept of trust or duty to act fairly and reasonably, how they are applied within Australian context and the nexus between them. 2.1 Implied Terms According to Middlemiss (2011, p. 37 and 38) implied terms are interpretations incorporated by judges under the framework of common law in the absence of direct terms that explains the matter under their consideration. Moreover, with the presence of a direct term, the judges can still utilises implied terms in their judgements. In the context of employment law, he observes that “these terms have the effect of placing rights and obligations on both the employer and employee and take the form of duties”. To create a vivid picture of the same, it prudent to contrast the concept of implied terms with the direct terms. Middlemiss (2011, p.11) indicates that these are terms that are well articulated by the two engaged parties (employer and employee) in the employment contract through verbal or written agreement. The numerous that are imposed on employees towards employer and thus, obliged to fulfil include turning up and being available at work, respecting and implementing reasonable orders, ensuring good faith/ trusts by not exposing factors such as trade secrets, accounting for profits & commissions and cooperating with employers. On the other hand, employer has the following duties towards employee: fair remuneration as agreed, sustain employee trust & confidence, offering optimal working condition, indemnify workers and ensuring safety of workers (Middlemiss, 2011, p.38). The concept (implied terms) has been widely applied in various employment disputes between an employer and employee. For instance, cases in relation to implied terms include Spencer Industries v Collins and Victoria University of Technology v Wilson. In the case two cases, the contention was whether any invention made by the employee during his course of duty belongs to him and not the employer. For the case of Spencer Industries Pty Ltd v Collins (2003) 58 IPR 425, Collins an employee of Spencer industries was employed as sales manager did an improvement of the product being sold by the company. In this regard the company prayed to the court to determine the ownership of the invention. In the ruling the court observed that an invention made by employee that is outside his or her scope whether that individual utilised the employer’s time belongs to the employee. The same ruling was affirmed in the case of Victoria University of Technology v Wilson (2004) 60 IPR 392. In the employment contract, Dr. Gray was engaged to teach and conduct research. Apart from the above Gray was based at Royal Perth Hospital. In addition he had an interest in research and Development Company through which he invented and obtained a method of treatment of liver cancer. In court findings, it was noted that he had prior to being employed at the university conceived the ideas and thus university’s contention of the invention being developed in the course of the work was rejected. In this regard, the court ruled that invention made by the employee belongs to him and not the employer unless it was stated in the contract or the person was paid to do so. These cases show that a court/ judges can incorporate interpretations that were not initially outlined in the employment contract. 2.2 Mutual Trust and Confidence in Context of Employment Law Bordie (2008, p329) notes that the concept of implied obligation of mutual trust occupies an integral position within the law of the employment contract. Riley (2012, p.521) opines that this is why it is nowadays a common occurrence where employees pray to the court to rule that an employer has contravened “an implied term of good faith, trust and confidence in the employment relationship”. Middlemiss (2011, p.40) on his part states that duty to maintain trust and confidence is the most implied term in employment contracts. Moreover, the term is used in more generic view so as to expand the scope of its application. This has empowered employees and allowed them to make applications in court so as to cater for legislation gaps in common law countries and deter employees from acting badly as result of gaps not covered by legislation. Desombre and Benny (1998, p.32) corroborates the same when they observe that “there is an implied term in all employment contracts that the employer will not conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence”. The question that emerges is what this concept is and what the theoretical and legal underpinnings. This section outlines the concept and theoretical underpinnings while legal underpinnings are discussed in section 3. 2.2.1 The Concept The broad application of this concept implies that there isn’t specific definition of the same. Nevertheless, the concept has been conceptualised as “wide-ranging duty of the employer not to do anything that will jeopardise the position of trust and confidence between him and his employees” Middlemiss, 2011, p.41). Kaasa and Parts (2013, p.38) notes that honesty and integrity are the building blocks of trust and that trust is means of establishing credibility of a process. Additionally, they note that trust is the cornerstone of successful relationship and thus this can be extended to employer-employee relationship. In a nutshell, they note that where trust exists everything is easier to achieve and in the absence of the same within the context of employment a party can seek redress since the relationship would be a strained one. Middlemiss (2011) for his part notes the elements that are factored in testing breach of mutual trust and confidence include procedural irregularities, misleading reference and unfair remuneration. Riley (2012, p.526) on his part provides the following parameters as the elements used to determine lack of trust and confidence: unwarranted carping criticism, demotion, capricious withdrawal of benefits, pointed disregard of policy-based entitlements, precipitate or unreasonable discipline without prudent and careful investigation of complaints. Since the concept has been applied in its wider context within the employment law, Middlemiss (2011) provides a chronological account on the areas of application within the employment law. In the first order, he notes that the concept was applied within the framework of procedural irregularities. He cites the case of Robinson V. Crompton Parkison. Robinson an electrician employed by Crompton was accused of theft which the court later determined was unfair, nonexistent and acquitted him of the same charges. After acquittal he sought apology from the employer which was never forthcoming. In relation to this scenario, he left employment and sued his employer for constructive dismissal under the premise of breach of trust and confidence. His application was upheld by the court and thus, severed the relationship by the employer (p.41). The other example given by Middlemiss (2011, p.41) is the case law of Post Office v. Roberts. In this scenario, a senior employee wrote a negative appraisal letter about the employee (Roberts) that she is not fit for promotion yet this was not in sync with her performance as exhibited in his records. This made it difficult for the employee to even seek transfer and yet the reason for such bad letter was not communicated to her. While seeking redress for unfair dismissal, the Industrial Tribunal found out that she had been unfairly dismissed on the grounds that the employer had breached the implied term of trust and confidence. In this regard, the intent was not considered, but the cumulative impact as result of the letter. The second situation that one can sue for breach of trust and confidence that Middlemiss (2011, p.41) is in a situation or scenario that an employer gave unfair or misleading reference pertaining a former employee to a prospective employer. he uses the case law of TSB Bank v, Harris. In this regard the court affirmed that the bank had contravened the implied term of trust and confidence of their former employee by giving a reference to the prospective employer which he was not made aware of and not given chance to substantiate or defend himself. The last scenario that he gives is in precinct that the employer operated unfair system of remuneration. For instance, the case of Clark v. Nomura; Tranco plc v. O’Brien highlights this concern. The emerging theme out of these case laws that courts use to establish whether there is a breach of trust and confidence by employer is the existence of unfair, perverse or prejudicial treatment on an employee. This is derived from the fact that an employer has control over employees. Nevertheless, this control should not be taken for granted and be misused, but it should be used to enhance the relationship between the two (Middlemiss, 2011, p.48).Theoretically, trust is assessed in the context of principal-agent arrangement. In this regard, the employer trusts employees and thus delegates duties to him or her at a fee as means of rewarding his or her effort. On the other hand, the employee expects the employer to act in good faith so as to create the required trust (Kaasa and Parts, 2013, p.39). 3.0 Is Mutual Trust and Confidence in Australian Employment Contract Implied To affirm or disapprove this topic, the best would be to use case examples. An example of acceptance of a duty, on both employer and employee not to perform acts that interfere with trust and confidence is based on the ruling by the Supreme Court of New South Wales in the case of Russell v. The Trustees of the Roman Catholic Church for the Archdiocese of Sydney. While in their ruling they found out that the defendant did not breach the duty of trust and confidence, they signalled that such context applies in Australia. Such statement indicates that the judge supported application of duty of mutual trust and confidence even though in this case it was not warranted. The case of Quinn v. Gray equally highlights the acceptance of this concept in employment law. While the petition was thrown out, the critical bit that shows the acceptance is the speech made by Bryne J during the delivery of judgement. Bryne said that “I am mindful that, in a contract of employment these damages might rarely arise as a matter of fact, but I am not concerned with this because the arbitrator has made the findings of fact”. The recent case law in Australia within the context of procedural irregularities relates to Gera v Commonwealth Bank of Australia. Gera the applicant and employee of the bank which were the respondents had his contract terminated after he was accused of taking wine with Ms Winnel a probationary employee leading to rape case in Mr. Gera Hotel Room. One of the applications by Gera and issue to be determined by court was that an implied term of good faith and mutual trust and confidence in his contract of employment with the Bank was violated and thus, the bank has committed the tort of interference with contractual relations between Mr. Gera, his client and future employers. The applicant quoted Industrial Relations Act 1988 (Cth), s.170DC, Interpretation Act 1984 (WA), s.56 and Workplace Relations Act 1996 (Cth), ss.326(3), 643, 659, 721, 824. The court rejected his application because he failed to prove/support his allegation. A search from the Australasian Legal Information Institute web page provides a list of case laws where the concept of mutual trust has been applied even though in certain circumstances the appellant was not successful. The case laws have quotes of the presiding dudges in regard to the same. These case laws include from the above examples it is evident that the mutual trust and confidence in Australian employment contract is implied. Taske v Occupational and Medical Innovations Ltd [2007] QSC 118; (2007) 167 IR 298; Lennon v State of South Australia [2010] SASC 272 at [177]; State of South Australia v McDonald [2009] SASC 219; (2009) 104 SASR 344; Rogan-Gardiner v Woolworths Ltd (No 2) [2010] WASC 290 at [125]; Foggo v O'Sullivan Partners (Advisory) Pty Ltd [2011] NSWSC 501; Thomson v Orica Australia Pty Ltd (2002) 116 IR 186 at 224; McDonald v State of South Australia [2008] SASC 134; (2008) 172 IR 256. 4.0 Influence of International Case Law on Australian Position In discussing the influence of international case law on Australian position in regard to mutual trust and confidence England or Britain comes into focus since it is considered the origin of common law which is equally applied in Australia. Moreover, the country has had and still has a close working international relations and thus, most of their traditions including legal ones have a position or have normally influenced Australia. Godfrey (2003, p.29) notes that have applied the duty of trust and confidence as it is applied in United Kingdom. Godfrey (2003, p.29), indicates that by then High Courts in Australia had not considered the by then. However, he notes that “many have assumed or at least suggested that implied terms of trust and confidence is already part of Australia law”. Example of such cases include Byrne and Frew v Australian Airlines Ltd, Burazin v Blacktown City Guardian, Lloyd v Gilbertson [Qld} Pty Ltd and Nettleford v Kim Smoker Pty Ltd. One example of case law that has influenced Australian position in regard to mutual trust and confidence is Rogers FLR at 218-222. While citing Rogers FLR at 218-222, FMCA at paras.104-118 per Lucev FM notes that implied terms of mutual trust and confidence is part of Australian law. 5.0 Advantages and Disadvantages of Such Implied Terms The one problem that might arise is the issue of consistency. For common law, the major decision making stage is at the trial. It is at the discretion of the judge or a bench of judges to decide to acquit or penalise an individual based on the evidence/ argument presented by the defence and the appellant/ prosecution (Papadopoulos, 2004, p.3). This is why is common for the same given case to be interpreted differently yet the situation is almost the same. Moreover, the use of precedent might not serve the issue under determination and thus not serving justice. This can work to the disadvantage of both the employer and employee. On the other hand, the advantage is based on the fact that the concept is applied on the basis of its general meaning instead of contextual basis. This implies that it can be used to seal loopholes that might be exploited by employers as result of legal gaps that exist that are not addressed by legislations pertaining employment. This works to the advantage of employees (Middlemiss, 2011). 6.0 Conclusion The aim of this discourse was to determine whether the term mutual trust and confidence is implied in the employment contract in Australia. Secondly, to examine if any international case law has had impacts on Australian position. Lastly, the paper critically outlines the advantages and disadvantages for employers and employees of having such implied terms in the employment contract. The paper found out that the term mutual trust and confidence is presently being implied in the employment contract in Australia. Secondly, the paper found out that international case law has had an impact on Australian position, of significance to the later in UK. Lastly the paper found out the disadvantages of implied terms relate to the varied interpretation by courts and the advantage is anchored on its generic application instead of contextual application. References Journals Brodie, D. (2008). Mutual Trust and Confidence: Catalysts, Constraints and Commonality. Industrial Law Journal, 37(4): 329-346. Desombre, T. and Benny, R. (1998). The changing context of employment in the NH: some legal implications of changes to employment contracts. Health Manpower Management, 24(1): 26-32. Godfrey, K. (2003). The renaissance of the implied term of trust and confidence. Australian Construction Law Newsletter, 88: 29-51. Middlemiss, S. (2011). The psychological contract and implied contractual terms: synchronous or asynchronous models? International Journal of Law and Management, 53(1): 32-50. Riley, J. (2012). Siblings but not Twins: Making Sense of ‘Mutual Trust’and ‘Good Faith’in Employment Contracts. Melbourne Univeristy Law Review, 36(1): 521-552. Case Laws Gera v Commonwealth Bank of Australia Ltd [2010] FMCA 205 (30 March 2010). Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217; (2008) 72 NSWLR 559. Spencer Industries Pty Ltd v Collins (2003) 58 IPR 425; [2003] FCA 542. The Quinn & Ors v Gray [2009] VSC 136 (1 April 2009). Victoria University of Technology v Wilson (2004) 60 IPR 392. Books Kaasa, A., & Parts, E. (2013). Honesty and Trust: Integrating the Values of Individuals, Organizations, and the Society. Advanced Series in Management, 10, 37-58. Read More