Court limits damages arising from employee common law contract claims

An important decision by the New South Wales Court of Appeal provides some reassurance to employers concerned about a rising number of employee claims based on implied contractual duties.

The New South Wales Court of Appeal found that the scope and extent of any implied duty of good faith or trust and confidence in Australian employment contracts was uncertain, and that even if the duties do exist, a breach of such duties will not generally give rise to damages for distress, humiliation, injury to feelings or loss of reputation in what can be called unfair dismissal circumstances. 

Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217

While each case turns on its own facts, this case supports the general propositions that:

• The existence, scope and extent of any implied duty of good faith or mutual trust and confidence in Australian employment contracts is uncertain. 
• Employees cannot recover contractual damages for injury to feelings, humiliation, distress or lost employment prospects associated with an unfair dismissal. 
• This is the position regardless of whether the injury or loss arises out of the dismissal itself or some step taken prior to dismissal such as suspension, or an adverse finding arising out of an employer's investigation.

The full Update on this decision is available at the link below.