High Court sensibly rules employers not obliged to be nice at the exit

THE High Court saved employers – and probably itself – from a world of pain this week.How do we know this? The court said so.

THE High Court saved employers — and probably itself — from a world of pain this week.

How do we know this? The court itself said so.

A former executive with the Commonwealth Bank, Stephen Barker, had claimed there was an implied term of mutual trust and confidence in his contract and that meant his employer had to be nice to him as he was being shown the door.

It’s a little more scientific than that, but not by much. Barker was earning too much to make a statutory claim for unfair dismissal (he got a $180,000-plus payout) so he relied on the common law — the law made by judges — to argue the bank breached its own redeployment policy.

He won at first instance and on appeal, but the defeat in the High Court was comprehensive. The court wasn’t going to hand down a decision that would make “mutual trust and confidence” a feature of all employment contracts.

In the wake of the verdict, employers warned there had been a growing number of claims brought by disgruntled executives and said a potential floodgate had been closed. If it hadn’t, you can bet they would been on the phone to the federal government.

Barker’s lawyers suggested, rather hopefully, that the High Court had called on the Abbott government to increase the protection of unfair dismissal laws.

The court did nothing of the sort. It said that finding an implied term of mutual trust and confidence in an employment contract “would impose obligations not only on employers but also on ­employees”.

“It may, of course, be open to legislatures to enshrine the implied term in statutory form and leave it to the courts, according to the processes of the common law, to construe and apply it. It is a different thing for the courts to assume that responsibility for themselves,” it said.

Indeed, the most intriguing aspect of the case is how far the court went to set out the limits of its own power.

The lead judgment of Chief Justice Robert French and Justices Virginia Bell and Pat Keane said the court was being asked to exercise judicial power “in a way that may have a significant impact upon employment relationships and the law of the contract of employment in this country”.

“The common law in Australia must evolve within the limits of judicial power and not trespass into the province of legislative action,’’ they said.

“Judicial announcement of an obligation of mutual trust and confidence, to be applied as an incident of employment contracts and applicable to employers and employees alike, involves the assumption by courts of a regulatory function …

“Clause 8 (of Barker’s contract) conferred a benefit by way of a termination payment but did not confer a contractual entitlement to the benefit of the Redeployment Policy. The submission made on behalf of Mr Barker that ‘the prospect of ... redeployment was a benefit in the relevant sense’ should not be accepted.”

In other words, he was entitled to the money but not the love.

Barker had been with the bank for 28 years and was a regional executive in Adelaide when there was restructure in early 2009. The bank said it hoped to redeploy him over the next month but if that was not possible he would be terminated.

He was told to leave the building and his phone and email accounts were suspended.

A recruitment consultant didn’t know he had no access to his bank email or voicemail and it was only very late in that month that he was actually contacted.

The job on offer was not considered suitable and after his exit date was extended by 10 days he was terminated.

Perhaps Barker was entitled to a bit more love than he got. But as Bret Walker SC — a favoured counsel of Labor groups who was this time representing the bank — said during argument: “You are not going to be treated as a lifetime employee of somebody who was entitled to terminate you on four weeks.”

Barker’s counsel relied on a couple of state cases that had taken their lead from two common law cases in England.

It meant the courts below mistakenly accepted that an implied term of “mutual trust” was “consistent with the contemporary view of the employment relationship as involving elements of common interest and partnership, rather than of conflict and subordination”.

As the High Court said rather bluntly: “The history of the development of the term in the United Kingdom is not applicable to Australia.” Anyway, said the lead judgment, “implications are a species of judicial lawmaking and are not to be made lightly”. (This is where you check the blood pressure of opponents of the free speech and voting cases such as Professor James Allan).

This court might be waging war on the way the commonwealth spends money.

The schools chaplaincy case is just one example. It’s also continuing the trend since the early 2000s of imposing limits on executive power as it protects its own turf — and the rights of those who come before the courts.

However, bank executives with $180,000 termination payouts who have no claim in statute law need not apply.