The employment relationship constitutes an intimate and important contract between employer and employee. It is relationship that serves to underpin commercial life and activity in any market economy and as such it is hard to overstate its profound socio-economic significance. This short paper first considers the law relating to the duty of trust and confidence which is implied in every contract of employment, then examines the impact of that implied term in the context of dismissal.
The duty of trust and confidence is imbedded into the contract of employment to ensure that each party to a contract of employment does not, without justification, behave in a manner that is likely to damage or destroy the crucial relationship of confidence and trust that should exist between an employer and an employee. For example, in Bliss v South East Thames Regional Health Authority , a demand that an employee submitted himself to a psychiatric examination was deemed to be an act calculated to destroy the said relationship of trust and confidence.
The duty overlaps and complements the concept of fair dealing owed by the employer. This duty contributes little to the duty of fidelity that an employee owes to an employer and which overlays the employment relationship, in particular in light of the sensitive commercial information which may be at the disposal of the employee, but it is specified as a specific duty in light of the many scenarios that can bring it to the fore.
In practice the implied duty of trust and confidence probably more often litigated than the other implied terms in an employment contract. It is important to note that this is a mutual duty, meaning that both the employer and the employee are obligated to treat each other respectfully. An employee must act properly in his dealings with or on behalf of his employer so as not to jeopardise the trust invested in him or her, and the employer most strike a balance between conducting its business as it sees fit, and safeguarding employee’s desire to be fairly and properly treated. There are many examples of what might constitute a breach of the duty of trust and confidence and some of these feature below:
A good example of the interpretation and application of this duty can be found in United Bank Ltd v Akhtar . In this case an employee was subject to a mobility clause which provided that he was liable to be transferred to any place in the United Kingdom in which his employer operated at short notice and with only the possibility of a discretionary relocation payment. It transpired that the employee was asked to move from Birmingham to Leeds with just a few days notice albeit the employer was aware the employee was suffering difficult personal circumstances. The court held that this amounted to a breach of the implied duty that employers will conduct themselves in a manner that does not harm the delicate relationship of trust and confidence. It is submitted that it can be inferred that entailed in the discussed implied term is embedded an expectation that employers and employees will behave reasonably in regards to each other’s interests. Inter alia, repeated attempts to change an employee’s terms and conditions of employment were found to amount to a breach of the duty of trust and confidence in Woods v WM Car Services (Peterborough) Ltd
In the case of a serious breach of the implied duty of trust and confidence employees may well be motivated to claim damages against their employer or more likely to use the breach as grounds for an action of constructive dismissal. On the other hand employers may be moved to cite such a breach either as a reason for the imposition of disciplinary action or to justify the dismissal of the employee. Where there has been a breach of implied duty of confidentiality an employer may also be moved to seek an injunction against the employee to prevent further breaches.
In the 2004 House of Lords case of Eastwood v Magnox Electric the Law Lords endorsed the decision in Johnson v Unisys Ltd , in which the legal framework on unfair dismissal was deemed to constitute a comprehensive and complete code. The obvious inference to be drawn from this ruling is that employees are only entitled to bring common law claims for damages for breach of an implied term of trust and confidence in connection with the behaviour of their employer prior to dismissal.
The rationale behind this ruling is that claims in relation to dismissal itself can only be brought under the unfair dismissal scheme.
However, the Lords did state that the duty of trust and confidence should have as much bearing on an employer exercising his power to dismiss as it does when the employer carries on a continuing employment relationship. It is submitted that there is an anomaly or at least an inconsistency in the current law, given that there is a duty to act in good faith and with fairness in applying the implied duty in circumstances when an employer is deliberating as to whether to suspend an employee but not in circumstances when the employer is considering taking the more serious decision to dismiss the employee.
It is submitted that it would be a natural development of the implied duty of trust and confidence to incorporate within it an obligation only to dismiss employees fairly and in good faith. The Eastwood decision thus reopens the prospect of employees bringing common law claims seeking damages for unfair termination of their employment.
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