Update – Full Federal Court Ruling - Implied term of mutual trust and confidence in the employment relationship

Posted on 10 September 2013

In an update to our Monday, November 12, 2012 blog on the Federal Court's ruling on the implied term of mutual trust and confidence in the case of Baker v Commonwealth Bank of Australia, on 6 August 2013 a majority of the Federal Court dismissed an appeal by the Commonwealth Bank of Australia (CBA) reaffirming its original decision and raising the order of damages from $317,000.00 to $335,000.00 that the CBA must now had to pay their former employee.

The case, relating to CBA's redundancy of Mr Baker in 2009 where they failed to follow their own redundancy policy prior to his termination, should act as a warning to all employers as it sets out a precedent that employers may face a common law claim for damages if they act unreasonably towards an employee and the conduct breaches the implied contractual term of trust and confidence. In order to reduce the risk of liability to a legal claim employers must follow their own workplace policies and processes to ensure they do not breach implied terms of mutual trust and confidence in the contract of employment.

The case is significant as it is the first time an Australian Court has agreed that a term of mutual trust and confidence can be implied into an employment contract. While the CBA have yet to comment on the decision publicly, they will need to appeal the matter to the High Court with in the next month if they wish to have the decision overturned.