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Article Summary

This practice note analyses the term or duty of mutual trust and confidence implied into every contract of employment. This requires employers and employees not to conduct themselves in a manner likely to destroy or seriously damage their relationship. The term affects all aspects of the employment relationship and creates a means of describing unreasonable conduct. It is a two-way duty binding employer and employee. The term cannot be excluded by express terms. There are two strands - treating each other with respect, and not acting wholly unreasonably. Examples of breach include dishonesty, mishandling procedures, misleading about dismissal reasons, and unreasonable behaviour. A breach will be repudiatory, allowing resignation and a constructive dismissal claim. The employer's motives are relevant but not determinative. The test is objective. There must be no reasonable and proper cause for the conduct. An existing breach by the employee may reduce compensation. A range of conduct may breach the term, including discrimination, though this will depend on the particular facts.