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Employment contracts in the spotlight following recent court case

A recent case provides clarity for businesses over employment contracts.

A recent case before the High Court of Australia has highlighted the complexity of Australian employment law, even as the result will be welcomed by business owners.

The case related to the dismissal of a worker at a major Australian bank. At the time of the redundancy, the plaintiff was informed that the company would attempt to provide alternative employment for the man, however in the meantime he was asked to turn over his work phone and email. Because of this, the company had no way to contact the man when an alternative position came up and he was subsequently made redundant.

The man then took legal action against his former employer, arguing that his employment contract contained within it an implied term of mutual trust and responsibility. While this implied trust is a common feature of the legal industry in the UK, this was the first time that its presence had been contested in an Australian court.

While the original case ended in a ruling in favour of the dismissed man, the case has since gone to the High Court, with a judgement handed down in September. Here, it was determined that the man's employment contract did not contain an implied term of mutual trust and responsibility, overturning the Full Court's August 2013 ruling.

Even though this ruling provides some level of certainty, the matter is not yet settled completely. This question of implied mutual trust and responsibility may still be addressed through legislation at the federal level which would finally provide a clear answer on this question.

While this will be good news for employers who may have been impacted, had the implied terms been upheld by the court, the episode serves as a reminder of the importance of having employment contracts drawn up by an employment contract lawyer. This will give the best assurance that any explicit or implied terms of your agreement will ideally not lead to future legal action.