We wish to bring to your attention some important recent developments affecting employers and employees.

Employment relationship

The New South Wales Court of Appeal recently decided that there is an implied duty of mutual trust and confidence and a duty of good faith in every contract of employment (Russell v Catholic Church Sydney).

What is the duty of good faith? Is the duty to treat employees fairly and act responsibly. However it does not mean that the employer may not act in its own interests.

What is the duty of mutual trust and confidence? It is a duty not to act in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between employer and employee.

The case concerned the termination of employment of Mr Russell by the Catholic Church following complaints of sexual misconduct and centered on an investigation conducted by the Church leading to his dismissal. Mr Russell claimed that the investigation was not carried out fairly and breached the implied duties of good faith and mutual trust and confidence in this contract of employment. One of the witnesses had been interviewed by telephone and Mr Russell claimed that this interview should have occurred in person.

The Court upheld the existence of the implied duties but found on the facts that the Church had not breached its contractual duties by failing to interview the witness in person.

Bottom line: The case highlights the need for employers to conduct investigations into misconduct fairly and with due process.

Maternity leave

Under the existing Standard, an employee is entitled to 12 months unpaid paternity or maternity leave. If at the end of the leave period the employee's role is no longer available, the employer has to offer alternative suitable employment.

Two recent cases before the Courts have involved alleged sexual discrimination of employees on maternity leave. In one case, a senior executive of Perpetual Ltd, Fiona Dunn claimed that she was bullied and ignored whilst pregnant and that her job, which involved managing 21 staff and $30 million in sales, was made redundant while she was on maternity leave. The matter was settled privately between the parties just before the hearing.  Whilst we do not know the outcome of the confidential settlement, it is likely in my view that a significant payment was made to the Ms Dunn.

In another case, a software company that dismissed an employee who was on maternity leave because it liked her replacement better was fined the maximum penalty of $30,000. The judge described the conduct of the company as "unattractive and in part dishonest".

Regard should also be had to the Workplace Relations Act which prohibits an employer terminating an employee’s employment for the reason that they are absent whilst on maternity or other parental leave. This is an offence which carries penalties for breach.

Bottom line: Caution needs to be exercised to any proposal to terminate an employee who is on maternity or other parental leave.

If you have any queries in relation to this please contact David Beale - email: dbeale@rbhm.com.au