Terms implied by law into employment contracts: are they necessary?

Abstract

Australian courts are faced with competing narrow and wide approaches to the necessity test that is applied when they are asked to imply a new contractual term by law. This complexity stems from the obscure development of the necessity test in England. The recent Australian High Court decision concerning the existence of an implied term of mutual trust and confidence, in Commonwealth Bank of Australia v Barker, appears paradoxically to support both the narrow and wide approaches to the necessity test. This article argues that unless the application of the necessity test is clarified, the courts will likely avoid implying terms by law in employment contracts altogether. This outcome is problematic because gaps in those contracts will remain and need to be filled.