Employment Law 5 Implied Terms

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					Employment Law

 5. Implied Terms
       Sources of terms and conditions of the
         individual employment relationship
                 Contract terms

  Express terms                     Implied terms
Written        handbooks,         Implied by      Implied by
Employment     companies          law             fact
contracts      policies
                              Implied by       Implied
  Oral         Collective     statute          by the
  Statements   agreements?                     courts
   Terms implied by the courts (at common law)

                     Obedience                                    Adami
Employee duties       Faithful               e’ment             Faccenda
                                               Post-           Woolworths
                    Care and skill             e’ment
                   Mutual trust and           Status in UK           Brodie
 Employer          confidence
                                              Status in Aus         Burazin
                    Duty of care                          Johnstone
                     Provision of work?                Blackadder (T8)
  The work
-wage bargain            Automatic Fire Sprinklers (not in materials)

                See Riley and Owens 229-249: don’t need to know all the detail
Employee’s duty of obedience
The key principle here is:
– ‘[T]he lawful commands of an employer which
  an employee must obey are those which
– fall within the scope of the contract of service
– are reasonable. […]”
R. v Darling Island Stevedoring Co (1938) 60 C.L.R.
  601 at 621-622 (per Dixon J)
What had Adami refused to do?
What was Isaacs ACJ’s view of the
position that any act of disobedience
would justify dismissal? Was it shared by
the other judges? [compare Laws in T6]
Do you think that this case would be
decided in the same way today?
Employee’s duty of obedience:
M has been harassing P at work. Employer
directs M not to call P after hours. M does so:
can employer take disciplinary action? (McManus
v Scott-Charlton (1996) 140 ALR 625)
H wears a caftan at work. E/r directs him not
do. Must H comply?(Australian
Telecommunications Commission v Hart (1982)
43 ALR 165)
E/r directs B to work in a dangerous country.
Must B does so? (Bouzourou v Ottoman Bank
[1930] AC 217; Ottoman Bank v Chakarian
[1930 AC 277)
  Employee’s duty of fidelity
This is a contractual duty: employees, especially
senior employees, may also have some similar
fiduciary duties, but these are not as extensive
as those of a trustee
The duty operates during the employment
agreement, but also, to a lesser extent,
Many employment contracts, have express
terms dealing with employer loyalty and non-
competition. These may be invalid, especially
post-employment: restraint of trade.
    Employee’s duty of fidelity:
This restricts, inter alia:
–   unauthorised disclosure of information
–   soliciting customers to start rival business
–   ‘moonlighting’ (to some extent)
–   public criticism of employer (subject to public interest
Note though:
– the public interest in competitive market
– In an age where employers offer less job security, to
  what extent should they still be permitted to restrict
  employees using their skills elsewhere?
   Employee’s duty of fidelity
Conduct which in respect of important matters is
incompatible with the fulfilment of an employee's duty,
or involves an opposition, or conflict between his interest
and his duty to his employer, or impedes the faithful
performance of his obligations, or is destructive of the
necessary confidence between employer and employee,
is a ground of dismissal […]
But the conduct of the employee must itself involve the
incompatibility, conflict, or impediment, or be destructive
of confidence. An actual repugnance between his acts
and his relationship must be found.
Blyth Chemicals v Bushnell (1933) 49 CLR 66 at 81-82 (per Dixon
   and McTiernan JJ)
What was the nature of FC’s complaint
against F?
According to the court, what are the
differences in the scope of the fidelity duty
during and after employment?
Why did FC fail?
  Employee’s duty of fidelity:
While B was working for C, he gained a controlling
interest in a company which was a potential rival to C.
Was C’s dismissal of B justified? Blyth Chemicals v
Bushnell (1933) 49 CLR 66
 E works for L company, which produces breathalysers
for the police. E discovers that the devices are flawed
and reports the matter to the press. Has E breached his
duty of fidelity? Lion Laboratories v Evans [1984] 2 All
ER 417
   Post-employment ‘non-compete’
clauses: the restraint of trade doctrine
Some employers seek to protect their
commercial interests by including express terms
in contracts prohibiting competition
Courts are wary about these clauses and may
refuse to enforce them, unless they are carefully
limited in:
 – time
 – geography
 – scope
See Woolworths v Banks [2007] NSWSC 45
        ROT: Woolworths
 What kind of order was Woolworths
seeking, and why?
What are the key restraint of trade
principles, according to McDougall J?
Why was Woolworths unsuccessful?
Did it matter that B had agreed that the
clause was reasonable?
    Employee’s duty of care
Employees are under a duty to exercise
reasonable care in carrying out their
employment, but only to the extent that the
employer directs them within the parameters of
the contracted skill
Negligent employees can be sued by their
employers: the leading authority is: Lister v
Romford Ice [1957] A.C. 555
An employer may be vicariously liable to a
person suffering loss (recall tort): Hollis
        Employers’ duties:
    mutual trust and confidence
This is a recently formulated duty – it is well
settled now in the UK. The leading case is the
House of Lords decision in Malik.
 It is the employer equivalent of the duty of
fidelity and requires employers to treat
employees reasonably; it imposes a limit on
‘managerial prerogative’
Its status in Australia is not entirely clear. Its
existence was affirmed in Burazin v Blacktown
City Guardian (1996) 142 A.L.R. 144
 The impact on the employer of the duty of
mutual trust and confidence: some examples
 English courts have found the following to be in
 breach of the implied duty:
  –   unjustified verbal abuse
  –   capricious relocation
  –   exaggerated allegations
  –   operating a dishonest business (see Brodie article)
 In the past, difficult to obtain damages for
 breach of this term: frequent use is to establish
 employer repudiation of the employment
 contract, and thus ‘constructive’ dismissal
 UK parliament provides a remedy for unfair
 dismissal: courts don’t want to ‘double up’
 Now, position is different as long as breach is
 prior to dismissal: Eastwood

What was the nature of the injury done to
Eastwood, Williams and McCabe?
Why did their cases fall on the ‘right’ side
of the boundary line (from their point of
How does Lord Stern differ from the other
What should be the law in Australia?
  Did the court accept that the duty of mutual
  trust and confidence was part of Australian law?
  Would breach of the duty lead to an award of
  On what basis was B awarded compensation for
  the manner of her dismissal?
 But see now WRA 654(9)
  Note that this case was decided prior to Malik
  (HL) and Eastwood
  This area of the law awaits a High Court decision
    Employer’s duty of care
This exists in contract and tort, and is
amplified by occupational health and
safety law
While an employer cannot contract out of
legislation, the scope of the contractual
duty of care may be affected by express
contractual terms.
Employer’s duty of care: Johnstone v
    Bloomsbury Health Authority
 What was the employee obliged to do in the
 express terms?
 What implied term did he rely on?
 According to the majority, how did the implied
 term qualify the express term?
 What attitude did the different judges take
  – whether the work requirements could be void for
    public policy reasons?
  – whether an express term which imposed an absolute
    requirement to work 88 hours could be modified by
    the implied duty?
  Employer responsibility for illness
        related to overwork
K was employed part-time as a merchanising rep
of C – she repeatedly told her employer that she
had too many clients in too large an area.
Eventually she contracted a psychological illness
caused by work-related stress
Should C compensate K for the psychiatric
Is it relevant that C agreed to the duties upon
taking up the job?
See Koehler v Cerebos (Australia) Ltd — (2005)
222 CLR 44 (decided on tort not contract basis)
The work-wage bargain: ‘no work, no pay’ (1)
 Generally, the contractual obligation of the
   employer to pay wages is contingent on the
   performance of ‘service’ by the employee:
   – Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72
     CLR 435; ‘Service’ is determined by the nature of the
     employment and may include being on call, or on leave
   An employer must afford an employee a
   reasonable opportunity of earning wages – so
   can’t just suspend a worker without pay
      Provided employee is paid, can’t insist on being
       provided with work, except in cases where they need
       to be given chance to perform (e.g. athlete, actor)
      Could this be extended more broadly: Blackadder per
       Callinan and Heydon JJ at [80] PM 603
 The work-wage bargain: ‘no work,
           no pay’ (2)
 Where an employer dismisses an employee
  (even wrongly), the employee cannot earn
  wages after the dismissal: Byrne.
 At common law, where an employee does
  work, the employer will have to pay unless the
  employer directs that different work be done
  (cf work bans)
 This position may be altered by legislation,
  express contractual term, award, etc.:
   WRA prohibits employer from paying for any form of
    industrial action (if work authorised, not industrial
    action): Part 9 Division 9
No common law tort conferring a right to privacy
in Australia: Australian Broadcasting Corporation
v Lenah Game Meats (2001) 208 CLR 199
– But note relevance of equitable relief in some
  situations (e.g. confidential information)
Note limited legislation:
– E.g. Surveillance Devices Act 1999 (Vic) (esp Part 2A
  introduced in 2007)
– Information Privacy Act 2000 (Vic) (cf federal privacy