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.

The Terms of Employment (Information) Act, 1994-What Employers and Employees Should Know

terms of employment information act 1994
Employment contract

Are you an employer?

Have you given your employees written statements in accordance with the Terms of Employment (Information) Act, 1994?

You should, you know.

Are you an employee? Did you receive a written contract?

If you didn’t, you are entitled to one.

Terms of Employment (Information) Act, 1994

The Terms of Employment (Information) act, 1994 sets out the basic terms of employment which the employer must provide to the employee in a written form within 2 months of starting the employment.

Failure to do so will leave the employer open to a claim from the employee, pursuant to the Terms of Employment (Information) act, 1994. The maximum amount that can be awarded to the employee is 4 weeks’ remuneration.

The claim must be brought to the Workplace Relations Commission (WRC) and is a straightforward win or loss situation-that is, it is clear whether there has been a breach of the legal obligation or not.

Other employment related cases may involve arguments about facts, and the interpretation of previous decisions of Courts or tribunals, or the law as set out in statute.

But in this type of case the written statement/contract of employment was either furnished to the employee within the prescribed timeframe or it was not.

For this reason, employers would be strongly advised to give their employees the necessary statements within the 2 month window.

What must be in the written statement?

Firstly, we can look at section 3 of the Terms of Employment (Information) Act, 1994 which sets out the following matters:

An employer shall, not later than 2 months after the commencement of an employee’s employment with the employer, give or cause to be given to the employee a statement in writing containing the following particulars of the terms of the employee’s employment, that is to say

(a) the full names of the employer and the employee,

(b) the address of the employer in the State or, where appropriate, the address of the principal place of the relevant business of the employer in the State or the registered office (within the meaning of the Companies Act, 1963 ),

(c) the place of work or, where there is no fixed or main place of work, a statement specifying that the employee is required or permitted to work at various places,

(d) the title of the job or nature of the work for which the employee is employed,

(e) the date of commencement of the employee’s contract of employment,

(f) in the case of a temporary contract of employment, the expected duration thereof or, if the contract of employment is for a fixed term, the date on which the contract expires,

F5 [ ( fa ) a reference to any registered employment agreement or employment regulation order which applies to the employee and confirmation of where the employee may obtain a copy of such agreement or order, ]

F6 [ (g) the rate or method of calculation of the employee ’ s remuneration and the pay reference period for the purposes of the National Minimum Wage Act, 2000,

( ga ) that the employee may, under section 23 of the National Minimum Wage Act, 2000, request from the employer a written statement of the employee ’ s average hourly rate of pay for any pay reference period as provided in that section, ]

(g) the rate or method of calculation of the employee’s remuneration,

(h) the length of the intervals between the times at which remuneration is paid, whether a week, a month or any other interval,

(i) any terms or conditions relating to hours of work (including overtime),

(j) any terms or conditions relating to paid leave (other than paid sick leave),

(k) any terms or conditions relating to—

(i) incapacity for work due to sickness or injury and paid sick leave, and

(ii) pensions and pension schemes,

(l) the period of notice which the employee is required to give and entitled to receive (whether by or under statute or under the terms of the employee’s contract of employment) to determine the employee’s contract of employment or, where this cannot be indicated when the information is given, the method for determining such periods of notice,

(m) a reference to any collective agreements which directly affect the terms and conditions of the employee’s employment including, where the employer is not a party to such agreements, particulars of the bodies or institutions by whom they were made.

You must also consider regulations introduced in S.I. No. 49/1998 – Terms of Employment (Additional Information) Order, 1998 which set out the information which must be provided about rest breaks.

  1. (1) In relation to an employee who enters into a contract of employment after the commencement of this Order, the employee’s employer shall, within two months after the employee’s commencement of employment with the employer, give or cause to be given to the employee a statement in writing containing particulars of the times and duration of the rest periods and breaks referred to in sections 11, 12 and 13 of the Act that are being allowed to the employee and of any other terms and conditions relating to those periods and breaks.

(2) In relation to an employee who has entered into a contract of employment before the commencement of this Order, the employee’s employer shall, if requested by the employee to do so, give or cause to be given to the employee, within 2 months of the request being made, a statement in writing containing particulars of the times and duration of the rest periods and breaks referred to in sections 11, 12 and 13 of the Act that are being allowed to the employee and of any other terms and conditions relating to those periods and breaks.

Exclusions, Changes, and Complaints

Section 2 of the Act provides some exclusions:

2.—(1) This Act shall not apply to—

(a) employment in which the employee is normally expected to work for the employer for less than 8 hours in a week, or

(b) employment in which the employee has been in the continuous service of the employer for less than 1 month.

Section 5 of the Terms of Employment (Information) act, 1994 obliges the employer to notify the employee of changes to a term or condition within 1 month.

Section 6 of the Act provides for employees who were in the employment before the commencement of the Act. They can request a statement in accordance with section 3 and must be given it within 2 months of the request.

Section 7 of the Terms of Employment (Information) act, 1994 sets out how complaints will be dealt with, and provides for compensation of up to 4 weeks’ remuneration.

Conclusion

Employers should give their employees a written statement or written contract of employment within 2 months of the commencement of the employment.

If they don’t they are leaving themselves wide open for a simple, “open goal” type claim by their employee(s).

 

Need a contract for your business?

Contact me.

I can supply you with

  1. a template contract which you will complete yourself for each employee. This would involve things like commencement date, job description/role, rate of pay, and any other specific details for the individual employee and/or
  2. individual contracts for each employee-we get all the necessary details from you for each employee and draft the contracts for you.

Staff Handbooks

You will also need a staff handbook because you will need to provide certain basic procedures which will apply in the workplace.

For example, discipline, grievance, dignity at work policies/procedures. Also, your contract of employment will refer to these policies/procedures.

I can also supply you with a staff handbook (€100 plus vat).

Learn more about it here.

2 Common Myths About Employment Contracts

Employment Contract

These are easy mistakes to make, you know.

But I regularly come across two very common misunderstandings about contracts of employment.

  1. “I don’t have a contract”

One of the first questions I ask anyone who seeks my advice is, “send me a copy of your contract”. And often the reply is along the lines of: “I have been working there for 5/10/15 years but don’t have one”.

What this person means is that they don’t have a written contract or written statement of their terms of employment.

This does not mean, of course, that they don’t have a contract. Because they most certainly do.

They have shown up at the workplace, carried out a role or tasks requested by the employer, abided by the rules and regulations in the workplace, followed reasonable directions, showed up when rostered, and got paid by the employer.

That course of conduct between the parties-employer and employee-over a number of years is the contract of employment.

Simply because the terms and conditions of employment have not been committed to writing does not mean there is none in existence.

There is, but just not in written format.

When you buy a bus or train ticket you almost certainly will not have a written contract, but a contract does come into existence, nevertheless.

  1. “I never signed the contract my employer gave me so I’m not bound by its terms”

Just because an employee does not sign a written contract or statement of terms and conditions of employment does not mean that they are not bound by the terms and conditions contained in it.

Many perfectly valid, enforceable contracts are made without the need for a signed, written agreement.

Unless the employee has made known his objection to a particular term(s), notwithstanding the fact that the does not sign the written contract, he is almost certainly bound by the terms and conditions.

Because he has performed the contract over a period of time, and not raised any objections, it can be reasonably assumed that there is a valid, binding contract in place.

So, if that contract provides, for example, for a notice period on termination of 1 month from the employee, and the employee has performed all other terms and conditions of the contract over a period of time, then it is a term of the contract that the employee provide one month’s notice of his intention to leave.

Not doing so will leave him open to being sued by the employer for damages for breach of contract.

In these circumstances there is nothing preventing the parties from agreeing to a lesser period, that is the parties can agree to change it.

But one party on his own cannot change it unilaterally.

Takeaways

If you are an employer you are obliged to give a written statement of certain terms and conditions to the employee within 2 months of starting. You cannot force him to sign this statement, however, and it’s not absolutely necessary as he will be bound by it provided he performs it without objection.

If you are an employee the mere fact that you don’t have a written statement of terms of employment doesn’t mean you don’t have a contract; you do.

Employers: Here’s the 1 Thing You Need to Get Right for Your Employees

small-employer-employment-contract

Are you an employer?

If you are there are many ways you can fall foul of employment legislation in Ireland.

Because there is a huge body of law covering the employment relationship, including common law, statute/legislation, regulations/directives emanating from Europe.

If I was asked what was the one thing you should do to protect yourself as an employer, my advice would be: give your employees a sound, well drafted, legally compliant contract of employment.

Let me explain: the employment relationship is based on contract.

Sure-there is plenty of legislation stipulating the minimum entitlements for employment related issues such as rest periods, holidays, payment of wages, all types of leave such as maternity leave, notice periods, part time employees’ rights, and so on.

But at the end of the day if your contract of employment is sound and drafted for your particular employment, your particular circumstances, you will avoid a lot of stress and heartache.

And most importantly you will greatly reduce the chances of success of a claim against you.

Don’t cut corners here, don’t just do a Google search and copy and paste what you find and use it in your workplace.

You could easily incorporate terms and conditions which would be completely inappropriate for your workplace.

There are a number of reasons for vital importance of your contract of employment.

The most important reason is that the more clarity there is between you and your employee the less chance of misunderstanding and bad feeling, and ultimately less chance of an employment related claim or dispute.

One of the 1st things the parties should inspect closely in the event of a dispute between employee and employer is the contract: what does it say, if anything, about the issue at hand, eg the right to a bonus or annual leave, the obligation to transfer locations, the right of the employer to alter the contract, the right to be paid for overtime, etc.

It is then too late to discover that your contract does not reflect what you intended.

Written statement of certain terms of employment

Another great reason to ensure your employees are given contracts is because it is a legal obligation on the employer.

Failure to do so within two months of the start of employment will leave you open to a claim under the Terms of Employment (Information) Act, 1994.

This claim is an easy one for employees to win because it is simply a fact that you either gave a contract to the employee or not.
If you haven’t you have no defence to such a claim and you are at the mercy of the Rights Commissioner as to what he awards in compensation to the employee, which can be up to 4 weeks remuneration.

What to do now

In addition to the employment contract I would also strongly recommend that you have three policy documents drafted and distributed to your employees:

  1. A disciplinary policy/procedure
  2. A grievance policy/procedure
  3. A dignity at work policy, which deals with harassment, bullying, sexual harassment, and discrimination.

These policies, provided they are implemented in the workplace, combined with the contract of employment will ensure you are in a strong position to defend yourself against employment related claims.

But if you are to do only one thing sort out a contract of employment for your staff.

Are you an employer?

Need a quote for a contract of employment? Contact me.

We can supply you with

  1. a template contract which you will complete yourself for each employee. This would involve things like commencement date, job description/role, rate of pay, and any other specific details for the individual employee and/or
  2. individual contracts for each employee-we get all the necessary details from you for each employee and draft the contracts for you.

How Safe is Your Business From This Simple Mistake?

small-business-mistake

Imagine this.

You’ve worked hard to build up a solid base of clients in your hairdressing or beauty salon business.

It hasn’t been easy, but you began to see the fruits of your hard work, long hours, and commitment pay off around 12 months ago.

In fact, it got so busy that you had to take on another hairdresser and, after fielding applications and interviews, you took on Nigel 9 months ago.

Nigel seemed to be the perfect person for the job; he was originally from the area and had spent the last 5 years in Dublin working in one of the country’s top salons gaining valuable experience.

You agreed the main parts of his employment contract-his salary and working hours-and things have gone surprisingly smoothly. You didn’t give him a written contract because you were both happy enough and the real meat of the agreement was how much he would be paid and how many hours per week he would work, and you were agreed on this.

You noticed that he got on great with all your clients and they really liked him.

Last weekend, though, you heard some disturbing news: you were told Nigel was going to set up his own salon on the Main Street in your town. You didn’t believe it at first, but couldn’t help worrying about it because there was a nagging concern in the back of your head.

If it was true, it would not be hard to imagine pulling a lot of your clients with him.

Then you notice a friend of his wishing him well on his new venture on his Facebook page.  You can’t wait any longer and you confront Nigel and put the disturbing rumours to him.

Nigel confirms your worst fears and gives you a month’s notice.

You ring a solicitor with your questions:

  1. Can you dismiss him immediately?
  2. Do you have to give him notice? If so, how much?
  3. Will he have a case for unfair dismissal?
  4. Do you have to pay him if you terminate his employment today?
  5. Can he bring your clients with him?

You’re told that you can dismiss him and, while he is entitled to one week’s notice, he does not have the required 12 months’ service to bring a claim for unfair dismissal.

But you now quickly realise that the most serious aspect of this whole affair is Nigel setting up his new competing business on Main Street, and the danger of you losing a lot of your clients-clients you had spent years acquiring.

And the most stomach churning part of the whole affair?

You now know that if you had a written contract in place from the start of Nigel’s employment you could have protected yourself and your business with a non-compete clause.

This non-compete covenant may have only lasted for 12 months after Nigel left, and it may only apply to a limited geographical area, for example your town or County, but it would have been a huge help, wouldn’t it?

Because if Nigel had to click his heels and wait for 12 months before starting on Main Street maybe he would thought twice about quitting now; and if he couldn’t set up in your town maybe he would have started his business far enough away from you that it would have no impact on your existing clients.

The sad thing is you will never know now because there is no non-compete clause, because there is no contract.

There are plenty of risks involved in running your own business-some avoidable, some unavoidable.

Putting a written contract in place for all your employees is not expensive, and a well drafted one specifically for your needs might even help save your business.

Learn more about drafting an employment contract including a restrictive covenant here.

Are you an employer?

Need a quote for a contract of employment? Contact me.

We can supply you with

  1. a template contract which you will complete yourself for each employee. This would involve things like commencement date, job description/role, rate of pay, and any other specific details for the individual employee and/or
  2. individual contracts for each employee-we get all the necessary details from you for each employee and draft the contracts for you.