The Full Court of the South Australian Supreme Court in State of South Australia v McDonald left open the question of whether mutual trust and confidence is part of Australian law of employment contracts generally. That question is left for another day. What was decided is that the duty of mutual trust and confidence implied upon an employer (not to act capriciously and unreasonably or not to make unreasonable and unfair decisions without consultation with the employee see above case para 210) can be excluded where statute and or industrial instruments (eg Awards and/or Enterprise Agreements) contain many significant terms and conditions of the employment relationship (para 237).
Fundamentally the Full Court said:
1. The duty of mutual trust and confidence is designed to restrain abuses of employer’s power.
2. It will not be implied where the employer’s powers are circumscribed within the context of employment or other statutory /industrial sources – such as (see para 269-70)
• Rights to appeal decisions that affect the employee
• Dispute resolution and grievance procedures
• Other rights of involvement within the workplace.
The trust and confidence duty has been evolving at speed in the NSW jurisdiction. It has been broadly applied to the benefit of employees with Award entitlements and high income employees. It is strongly arguable since the Full Bench’s decision in McDonald that the implied term duty of trust and confidence can be excluded where the employee is subject to:
• An enterprise agreement
• An award
• A contract of employment and/or policies and procedures that provide dispute/grievance clauses and staff involvement.
In the new era of the modern awards (I January 2010) much of the Australian workforce will be subject to awards, irrespective of the Individual Flexibility Arrangements – which cannot vary employee’s access to the dispute resolution procedure under an Award.
The new “Adverse Actions” provisions strengthen the argument that statutes require that employees not abuse their power to prejudice an employee.
Unquestionably the Full Court did not intend to exclude the duty from almost all Australians. It chose it’s deliberative path because Mr McDonald was self represented and the Full Bench decided it would be inappropriate to consider the larger question – is the term part of employment contract law in Australia? But the result provides strong grounds (compelling in S.A. and persuasive federally and in other states) for arguing the term cannot be applied to award and enterprise agreement employers across Australia.
The irony is this case is despite all statutory and industrial protection Mr McDonald was treated unfairly by his employer? It would be interesting to see what the result would have been had Mr McDonald been represented.