Mutual trust and confidence

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Mutual trust and confidence is a phrase used in English law, particularly with reference to contracts in UK labour law, to refer to the obligations owed in an employment relationship between the employer and the worker.

Contents

This concept relates to a new but highly important concept in employment law, and constitutes a term that is implied into all employment contracts. The implied term means that both the employer and employee should behave in such a way as to not undermine the employment relationship.

Academics now talk of the duty of good faith in the employment relationship. (i.e. both parties should "look out" for each other)

It is such an important issue that this implied term can override (in certain circumstances) an express term of the employment contract. e.g. excessive hours for junior doctors (See the Court of Appeal decision in Johnstone v. Bloomsbury Health Authority )

Cases

Australia

In 2014 the High Court of Australia unanimously and firmly rejected the proposition that contracts of employment in Australia should contain an implied term of mutual trust and confidence. The court left open the question whether there is a general obligation to act in good faith in the performance of contracts and the related question whether contractual powers and discretions may be limited by good faith and rationality requirements. [1] [2]

See also

Notes

  1. Commonwealth Bank of Australia v Barker [2014] HCA 32 , (2014) 253 CLR 169.
  2. Commonwealth Bank of Australia v Barker: Judgement summary at High Court of Australia website.

Related Research Articles

United Kingdom labour law Law in the United Kingdom

United Kingdom labour law regulates the relations between workers, employers and trade unions. People at work in the UK benefit from a minimum charter of employment rights, which are found in various Acts, Regulations, common law and equity. This includes the right to a minimum wage of £8.91 for over-25-year-olds under the National Minimum Wage Act 1998. The Working Time Regulations 1998 give the right to 28 days paid holidays, breaks from work, and attempts to limit excessively long working hours. The Employment Rights Act 1996 gives the right to leave for child care, and the right to request flexible working patterns. The Pensions Act 2008 gives the right to be automatically enrolled in a basic occupational pension, whose funds must be protected according to the Pensions Act 1995.

In employment law, constructive dismissal, also called constructive discharge or constructive termination, occurs when an employee resigns as a result of the employer creating a hostile work environment. Since the resignation was not truly voluntary, it is, in effect, a termination. For example, when an employer places extraordinary and unreasonable work demands on an employee to obtain their resignation, this can constitute a constructive dismissal.

In United Kingdom law, the concept of wrongful dismissal refers exclusively to dismissal contrary to the contract of employment, which effectively means premature termination, either due to insufficient notice or lack of grounds. Although wrongful dismissal is usually associated with lack of notice sometimes it can also be caused by arbitrary dismissal where no notice was required but certain grounds were specified in the contract as being the only ones available but none existed.

Fiduciary person who holds a legal or ethical relationship of trust

A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties. Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for example, a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to another party, who, for example, has entrusted funds to the fiduciary for safekeeping or investment. Likewise, financial advisers, financial planners, and asset managers, including managers of pension plans, endowments, and other tax-exempt assets, are considered fiduciaries under applicable statutes and laws. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another whose aid, advice, or protection is sought in some matter. In such a relation, good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.

A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.

Contractual term Any provision forming part of a contract

A contractual term is "any provision forming part of a contract". Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the contract.

English contract law Law of contracts in England and Wales

English contract law is the body of law that regulates legally binding agreements in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth, from membership in the European Union, continuing membership in Unidroit, and to a lesser extent the United States. Any agreement that is enforceable in court is a contract. A contract is a voluntary obligation, contrasting to the duty to not violate others rights in tort or unjust enrichment. English law places a high value on ensuring people have truly consented to the deals that bind them in court, so long as they comply with statutory and human rights.

Implied terms in English law are default rules for contracts on points where the terms which contracting parties expressly choose are silent, or mandatory rules which operate to override terms that the parties may have themselves chosen. The purpose of implied terms is often to supplement a contractual agreement in the interest of making the deal effective for the purpose of business, to achieve fairness between the parties or to relieve hardship.

<i>Malik v Bank of Credit and Commerce International SA</i>

Malik and Mahmud v Bank of Credit and Commerce International SA [1997] UKHL 23 is a leading English contract law and UK labour law case, which confirmed the existence of the implied term of mutual trust and confidence in all contracts of employment.

Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] 1 WLR 589 is an English trust law case, especially relevant for UK labour law and UK company law, concerning pension funds and the implementation of a poison pill.

Johnson v Unisys Limited [2001] UKHL 13 is a leading UK labour law case on the measure of damages for unfair dismissal and the nature of the contract of employment.

An employment contract in English law is a specific kind of contract whereby one person performs work under the direction of another. The two main features of a contract is that work is exchanged for a wage, and that one party stands in a relationship of relative dependence, or inequality of bargaining power. On this basis, statute, and to some extent the common law, requires that compulsory rights are enforceable against the employer.

<i>Cable & Wireless plc v Muscat</i>

Cable & Wireless plc v Muscat [2006] EWCA Civ 220 is a UK labour law case, concerning the test for an implied contract between an employee and a place they work through an employment agency. It holds that with reference to the reality of the relationship, an implied contract should be found according to the ordinary rules of construction.

<i>James v Greenwich LBC</i>

James v Greenwich London Borough Council [2008] EWCA Civ 35 is a UK labour law case, concerning implied contracts for workers who work through employment agencies. Its opinion was reversed by the Agency Workers Regulations 2010 and superseded by the more recent Supreme Court decision by Lord Clarke in Autoclenz Ltd v Belcher.

Dacas v Brook Street Bureau (UK) Ltd [2004] EWCA Civ 217 is a UK labour law case, concerning the employment rights of agency workers.

<i>Muschett v HM Prison Service</i>

Muschett v H M Prison Service [2010] EWCA Civ 25 is a UK labour law case, which held that an agency worker had no right to claim discrimination from either the agency or the place of work.

<i>French v Barclays Bank plc</i>

French v Barclays Bank plc [1998] EWCA Civ 1092 is a UK labour law case concerning the contract of employment. It held that changing a staff manual can breach the term of mutual trust and confidence that is implied into every individual contract of employment, and a unilateral change to a workplace practice can breach that contract.

<i>Transco plc v OBrien</i>

Transco plc v O'Brien[2002] EWCA Civ 379 is a UK labour law case concerning the contract of employment.

<i>Reda v Flag Ltd</i>

Reda v Flag Ltd [2002] UKPC 38 is a case from Bermuda law, advised upon by the Privy Council, that is relevant for UK labour law and UK company law concerning the dismissal of a director.

<i>Spring v Guardian Assurance plc</i> United Kingdom labour law court case

Spring v Guardian Assurance plc[1994] UKHL 7, [1995] 2 AC 296 is a UK labour law and English tort law case, concerning the duty to provide accurate information when writing an employee reference.

<i>Commonwealth Bank of Australia v Barker</i>

Commonwealth Bank of Australia v Barker is a leading Australian judgment of the High Court which unanimously and firmly rejected the proposition that contracts of employment in Australia should contain an implied term of mutual trust and confidence.