A Setback for Mutual Trust and Confidence?

Abstract

According to Douglas Brodie, ‘[t]he emergence of mutual trust and confidence is a development to be welcomed unreservedly in employment law. It serves to challenge abuse of power, and promotes the dignity of the employee.’1 In recent years the implied term of trust and confidence, the existence of which has long been a feature of employment law in the United Kingdom, has been tentatively recognised in Australian employment contracts.2 However, the potential for mutual trust and confidence to perform the role Brodie envisions for it is threatened by the recent decision of the Full Court of the South Australian Supreme Court in South Australia v McDonald (McDonald).3 McDonald, which survived a special leave application to the High Court, may significantly narrow the kinds of employment contracts into which the term is implied. The decision suggests that the implication of the term is unnecessary in employment contracts governed by a statutory scheme which provides mechanisms for dispute resolution. It raises interesting questions about both the basis for the implication of the term, and its interaction with statutory regulation of employment contracts. As all modern awards and enterprise agreements under the Fair Work Act 2009 (Cth) are required to provide procedures for settling disputes,4 McDonald, read widely, may exclude the implication of a term of mutual trust and confidence from the large number of contracts to which the relevant Fair Work Act provisions apply.