There is a long line of cases which established the principle that compensation by way of damages are generally not recoverable for injured feelings or distress arising out of an employer‘s breach of an employment contract.


Historically, damages in an unfair dismissal case were generally limited to the amount of the salary, which would have been paid over the notice period plus any commission, or allowance the employee would have earned. There was generally no consideration given to compensating an employee who suffered injured feelings or encountered difficulties in obtaining further employment.  Addis v Gramophone Co Ltd [1909] AC 488.


However, some of the principles of employment law were based on what some cases discussed to be an implied duty of mutual trust and confidence which was said to be  present in most contracts of employment. This theoretically means that the relationship of the employer and the employee operates in the context of mutual respect, where a degree of co-operation is required of both parties to ensure the relationship works successfully.


Well the High Court has recently considered the law about this and handed down its judgment in Commonwealth Bank of Australia v Barker [2014] HCA 32 on 10 September 2014. It dealt with the question: “Whether term of mutual trust and confidence should be implied by law in employment contracts”. The answer is categorically: “No” which means there is no implied duty of trust and confidence in an employment contract.


It will be interesting to see how the Australian Courts deal with claims for injury to an employees’ reputation: and where the act of dismissal causing a loss of reputation is distinguished from other reputational damage.


Cases such as Emmerson v Housing Industry Association Ltd (1999) 46 AILR, where damages for breach of contract were awarded to the injured employee in an amount exceeding $50,000 which included, among other factors, the loss of the employee’s ability to obtain alternative employment arising from a breach of the employer’s implied duty of mutual trust and confidence and damage to the employee’s reputation including pain, shock and humiliation are now called into question as the High Court makes a definitive statement about the absence of any implied duty of trust and confidence.


As an employee, the right to be treated fairly is enshrined in the employment relationship; even if no duty of trust and confidence is enshrined in the relationship.  The Fair Work Commission is also empowered to issue orders to stop any bullying in the event that the employee brings an application.


The Fair Work Act prescribes certain remedies that an employee is entited to claim in particular circumstances.  In particular, at Section 392  where: (1)  An order for the payment of compensation to a person must be an order that the person’s employer at the time of the dismissal pay compensation to the person in lieu of reinstatement.


Criteria for deciding amounts

(2)  In determining an amount for the purposes of an order under subsection (1), the FWC must take into account all the circumstances of the case including:

(a)  the effect of the order on the viability of the employer’s enterprise; and

(b)  the length of the person’s service with the employer; and

(c)  the remuneration that the person would have received, or would have been likely to receive, if the person had not been dismissed; and

(d)  the efforts of the person (if any) to mitigate the loss suffered by the person because of the dismissal; and

(e)  the amount of any remuneration earned by the person from employment or other work during the period between the dismissal and the making of the order for compensation; and

(f)  the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation; and

(g)  any other matter that the FWC considers relevant.

An employee’s misconduct reduces the amount of compensation payable where at ss(3) the Act prescribes:

(3)  If the FWC is satisfied that misconduct of a person contributed to the employer’s decision to dismiss the person, the FWC must reduce the amount it would otherwise order under subsection (1) by an appropriate amount on account of the misconduct.

The Fair Work provisions expressly exclude claims for shock and distress arising from dismissal.

(4)  The amount ordered by the FWC to be paid to a person under subsection (1) must not include a component by way of compensation for shock, distress or humiliation, or other analogous hurt, caused to the person by the manner of the person’s dismissal.


For more information about your workplace rights please don’t hesitate to contact us.

Bruce Havilah

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