Implied term in employment contracts

Implied terms of employment contract

What are the implied terms?

Implied terms are terms which may not be written in the employment contract but are either understood by both the employer and the employee to exist or which are implied by law.

Many employment contracts will cover the obvious implied terms in any event but it is still worthwhile being aware of how an Employment Tribunal or court may look at a situation. It is also important to recognise that the terms of an employment contract may be interfered with by a Tribunal or court to imply that certain terms of that contract are unfair or that the day to day reality was different from the contract. This is another way in which implied terms impacts on employment law.

The most well known and important implied term in every contract of employment is that of mutual trust and confidence between employer and employee. Without this an employment relationship cannot work and this is a matter of common sense really. If an employee steals from an employer this of course must destroy trust and confidence just as if an employer fails to pay the employee.

 Their existence is important in order for the employment contract to work.

Employer implied terms

  • Duty to pay the employee for his or her work
  • Duty to provide work for the employee
  • Duty to take reasonable care of the employee’s health and safety as well as their physical and mental health (this includes providing a safe work environment)
  • Duty to take a reasonable care in giving references: the reference (if provided) should be fair and accurate although the employer is under no obligation to provide references

Employee implied terms

  • Duty to personally perform the work (as opposed to sending someone else)
  • Duty to work with reasonable care and skill and to devote time and attention to perform the tasks given by the employer
  • Duty of good faith and duty not to act against the employer (such as setting up a competing business or disclosing confidential information)
  • Duty to obey reasonable and lawful orders or instructions which are within the scope of his or her contract

There is also a mutual duty of trust and confidence between the employer and the employee, which is an essential part of the employment contract.

Where do the implied terms come from?

The terms can be implied by:

The law in a statutory provision

Practice or past conduct at the workplace or within the industry (such as giving employees a Christmas bonus)

Obviousness: terms are so obvious that they do not need spelling them out, such as provision that an employee will not steal from his employer

‘Business efficacy’: the terms are implied in order to make the employment contract workable: such as that a driver must hold a valid driving licence

What is the difference between implied and express terms?

Express terms are agreed with the employer and written into the contract of employment or any other form of correspondence (letters or emails exchanged before starting the employment, job advertisement, staff handbook). They can include a wide range of issues such as the amount of holiday, salary, sick pay scheme, place of work, contract term etc.

Breach of implied terms

If either side does not follow the implied terms they are in a breach of contract. The consequences of a breach of implied terms are the same as for a breach of express terms and depend on the seriousness of a breach.

An employee can claim damages or use the breach to justify a constructive dismissal (which occurs when an employee resigns from his employment because the employer’s behaviour has left the employee no other choice).

From the employers’ point of view, they might use the breach of implied terms to instigate a disciplinary action or, in the case of breach of confidentiality, obtain an injunction preventing the employee from using the confidential information and to avoid further breaches.

How to proceed if an employer is in breach?

The first step would be to speak to the employer informally and try to resolve the matter peacefully. The other steps include:

  • Grievance procedure: depending on the seriousness of the breach (such as if the employer failed to pay the employee’s wages) the employee should raise a grievance procedure against the employer or if the matter is appropriate to try mediation.
  • Employment Tribunal: an employee can decide to take a legal action and bring the matter into the Employment Tribunal after the employment has ended.
  • Civil courts: if an employee is still employed and wants to bring a claim he or she will have to do it through the small claims track.

What can happen if you are in breach?

As with a breach of contract by an employer the first step should be to try to settle the matter between the employer and the employee informally or using mediation. If the employer suffers financial loss caused by the employee’s behaviour they can claim damages. The employer can bring a claim against the employee to the county court.

If you are an employer or employee and are concerned about implied terms or how to interpret the employment contract based on a change of circumstances we can advise. We can also draft contracts of employment for employers to minimise the risk of terms being implied into the contract by a Tribunal or court which are unhelpful to you as employer. Get in touch for a free initial discussion as to how we can assist or visit our additional employment law resource.