Employment Law, Government & Legislation, Oddstuff

Johnson and Addis, Australia

At the core of every employment relationship is the term of mutual trust and confidencne. Conduct which breaches the mutual trust and confidence can justify a dismissal or lead to an award of damages for the employee. This has been common ground in New Zealand since the commencement of the Employment Relations Act in 2000.

However, in Australia, this is all new. There, the Courts have consistenly held that  mutual trust and confidence will not be implied if an employee otherwise access to statutory unfair dismissal laws (“the Johnson Rule”) and, even if it can be applied and it is breached, damages for stress or financial loss are not awarded (“the Addis Rule”).

Now, it seems that this is all going to change because the NSW Court of Appeal in Shaw v State of New South Wales [2012] NSWCA 102 held that

“In summary, there is no authority of the High Court or an intermediate appeal court in Australia that will unquestionably compel dismissal of the claim for damages… the significant qualifications upon [the Addis rule] will leave room for the appellants’ claim to be addressed. There is a cogent basis for arguing that damages for breach of contract may be awarded… I consider to be remote the possibility that [breach of trust and confidence] cannot ever sound in damages.”

And this might mean that in the future

“Accordingly, when dealing with treatment, management, counselling and termination of senior staff and executives, the manner in which this occurs could potentially lead to claims of breach of the implied term and expose the employer to damages for breach of contract. ”

Of course, New Zealand employers have been living with the Employment Relations Act long enough to know all of the above by heart and have long gotten used to it.  And its kind of funny to read about these basic principles and see them developing across the ditch. Ironically, though, although the CA convened the full panel to decide the matter and researched the matter thoroughly, it didnt occur to them to also include New Zealand.

Well, maybe next time, when they think about good faith in employment relationships…

Details:

http://www.claytonutz.com/publications/edition/7_june_2012/20120607/mutual_trust_and_confidence_in_employment_contracts_has_the_door_to_damages_been_thrust_open.page#page=1