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Excerpt from this article first published in Human Resources Magazine, Issue 124 - 20 March 2007
In the Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney & Anor, the Supreme Court of NSW recognised that duties of good faith, and trust and confidence exist and are implied terms in Australian employment contracts. This was the first acceptance of the implied duties by an Australian Court.
Mr Russell was employed by St Mary’s Cathedral as Director of Music. In 1999, Mr Russell was charged with sexual misconduct, resulting in numerous investigations. In 2003, his employment was terminated. Mr Russell made an unfair dismissal application to the Industrial Relations Commission of NSW. The Commission considered that the termination of Mr Russell’s employment by the Church was unfair and ordered reinstatement and backpay. Mr Russell then made a claim to the Supreme Court seeking damages for the breach of his employment contract by the Church, namely a breach of the implied duties of good faith and trust and confidence, and wrongful dismissal. The claim was heard by His Honour Justice Rothman.
In determining that there is an implied duty of good faith in employment contracts, Justice Rothman stated that the duty requires exercise of ‘prudence, caution and diligence’, or in other words, due care to avoid or minimise adverse consequences to the other party. Similarly, His Honour determined that there was a duty not, without reasonable and proper cause, to act in a manner calculated and likely to seriously damage the relationship of trust and confidence between an employer and employee. His Honour noted that clarification of these implied duties is still required by an Appellant Court.
There was no express term in Mr Russell’s employment contract dealing with notice. When there is no express term dealing with notice, the Court will imply a “reasonable” notice period. The Court found that Mr Russell was wrongfully dismissed by the Church (in breach of his employment contract) because it had terminated him without providing him 12 months reasonable notice. His Honour considered 12 months notice to be reasonable, having regard to Mr Russell’s seniority and length of service. There is no implied right to a payment in lieu of notice.
The Court found that to the extent that there had been a breach of Mr Russell’s employment contract, he had suffered no damage (given that the Commission had already ordered reinstatement and backpay).
Employment contracts should contain express terms dealing with the period of notice that will be given to an employee if the employment is to end and provide for payment in lieu of notice.
Good performance management and investigation practices will assist an employer defend a claim of a breach of the implied duties of trust and confidence.
