Implied Terms of Employment in the Employment Contract-What You Should Know

implied term employment contract
Employment contract

When a contract of employment is being drawn up it is impossible to provide for every eventuality in the work relationship between employer and employee.

For this reason certain terms of employment will be implied into the contract, and together with the express terms set out in the contract, form the contract of employment.

What are they? When will an implied term arise? How will you know?

Firstly, it is not always clear cut as to whether a particular term is implied into a contract; but there are some fundamental terms that certainly are implied into every contract.

Let’s take a look at those, shall we?

And let’s also look at when this is likely to arise.

Conditions for Implied Terms

There are a number of tests which must be passed if you are to imply a term into an employment contract:

  • Custom and practice

If you are to rely on custom and practice to incorporate an implied term into a contract the customer should be “reasonable, notorious (well known), and certain.” This might arise, for example, where the employer pays an annual bonus for many years.

  • Business efficacy

This arises where a term is implied to give a contract efficacy-that is, to make sense of it and make it workable. This would occur where it is “obvious and necessary”, for example the obligation for a lorry driver having a driving licence.

  • Officious bystander test

This occurs where something is so obvious that it goes without saying, and a third party observer would agree that it was blatantly obvious

  • Conduct of the parties after the contract is made

The conduct of the parties after a contract has been made and employment has commenced can give rise to an implied term being incorporated into the contract. It would be necessary to show an intention by the parties to include it as a term.

  • Terms implied by statute

An example here would be if there is no notice period expressly stated in the contract it is implied that the statutory notice period will apply.

  • Terms implied by law

These would include the obligation on the employer’s part to provide work and on the employee’s part to follow reasonable direction and show good faith and loyalty to the employer.

Let’s take a look at some well accepted implied terms.

Common Implied Terms

  1. The mutual obligation to maintain trust and confidence in each other

Both employer and employee are obliged to conduct themselves in a way that can allow each party to have trust and confidence in the other party.

The employee will often, in a constructive dismissal case, point to the unreasonable conduct of the employer and claim that he could not be expected to continue to have trust and confidence in the employer.

The obligation works both ways and an employer who discovers an employee cannot be trusted with handling cash for example, no matter how small the amount, can reasonably claim that he cannot enjoy trust and confidence in the employee any longer.

2. The duty of loyalty

It is an implied term that the employee will faithfully serve the employer and will not act against the best interests of the employer.

3. Giving references

There is no obligation on the employer to give a reference, but where one is given there is an implied term in the contract that the reference is accurate and fair.

4. Grievance procedure

It is almost certainly the case that there is an implied term in the contract that the employer will deal with complaints or problems from employees fairly and in a timely manner. This is the case even where the employer does not have a grievance procedure or policy in the workplace.