The duty is owed by both parties to the contract and requires both parties not to act in a way that is designed or likely to damage or cause the relationship to break down. It is a very wide term that applies to every aspect of the relationship between employer and employee.


Background

Case law has developed to establish two separate elements of the duty of mutual trust and confidence – to treat each other with respect and consideration and not to act unreasonably. These elements developed from case to case and were eventually affirmed by the House of Lords in the leading case of Malik v Bank of Credit and Commerce International [1997] IRLR 462. The doctrine is stated as follows: the employer shall not without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.

The behaviour must be sufficiently bad to ‘destroy or seriously damage’ the relationship. Examples from case law include failing to investigate a grievance, failing to make reasonable adjustments for a disabled employee, imposing a change without notice. It covers a wide range of circumstances and because the test is ‘calculated or likely to destroy’ there is no requirement for there to be an intention to destroy.


Where the employer breaches the term

Employees may argue that a breach of the duty of trust and confidence amounts to a repudiatory breach of contract and resign and claim constructive dismissal. As with any case of constructive dismissal the breach of the contract must be sufficiently serious and the resignation must be because of the breach.

It should be noted that where the decision or action to dismiss itself is a breach of trust and confidence the employee’s remedy lies in a claim for unfair dismissal. The courts have decided that there is no additional right of action for unfair dismissal or personal injury arising from a dismissal that is in breach of the trust and confidence term.


Where the employee breaches the term

As stated the duty is a mutual one and may be breached by either party. In these circumstances a dismissal is likely to be on the grounds of ‘some other substantial reason’. However, in the case of Leach v The Office of Communications (Ofcom) [2012] EWCA Civ 959 the Court of Appeal reminded employers that “in order to justify dismissal a breakdown in trust must be a “substantial reason.” “Breakdown of trust” is not a mantra that can be mouthed whenever an employer is faced with difficulties in establishing a more conventional conduct reason for dismissal”. The EAT commented that although the dismissal was fair the description of the reason as a breakdown in trust and confidence was not helpful and may have been more properly described as risk of reputational damage. This is a warning to employers not to be too quick to label reasons for dismissal as a breakdown in trust and confidence. It is important not to confuse it with an employee's competence or capability. Employers should carefully examine the reasons for any dispute and carefully document them in any disciplinary letters.


Discretion and express terms

Although it is clear and settled law that implied terms do not override express terms and that an express term cannot be limited by an implied term, the EAT in United Bank v Akhtar [1989] IRLR 507 described the duty of trust and confidence as ‘an overriding obligation’ and that express terms should be exercised in a way that is consistent with that obligation. This Supreme Court in Braganza v BP Shipping Ltd and Another [2015] UKSC 17 acknowledged that an employment contract is different from a commercial contract and the exercise of discretion should be rational and reasonable.

Even though an express term in a contract of employment gives the employer the power to do something the exercise of that power must be in a manner which affords respect to the employee and is not unreasonable.

Kiera Lee, Partner at Mills Selig, will be appearing as a guest speaker at Legal-Island’s ‘Essential of Employment Law for NI Employers’ event on 18th October 2016 at the Merchant Hotel in Belfast - Book your place here