What is an implied term?

Employment contracts are subject to the same legal principles as other contracts in that the terms between the parties should be expressly written but in addition there are number of term that can be implied into an employment contract even where they are not expressly agreed. This can occur even in a very comprehensive contract of employment. It is important to be aware of them.

Key Implied Terms

The duty to maintain mutual trust and confidence:

This term may be relied on by both employers and employees. It is more commonly relied on by employees claiming constructive dismissal on the basis that the employer has breached the duty of trust and confidence. Employers rely on it for justification for dismissal. In both cases the breach must be significantly serious to be considered to have undermined trust and confidence.

The duty to provide a safe, healthy work environment: 

This includes special duties owed to pregnant or vulnerable employees.

The duty of fidelity:

This term is often relied on by employers in cases where employees are preparing to act in competition whilst they are still employed. Employees have an implied duty not to act against the interests of the employer.

The duty to provide work:

There is generally no duty for an employer to provide work for its employees but there are circumstances in which this may arise where employees need to work to maintain skills or reputation. It is advisable to have an express garden leave clause to deal with this.

How do employment contract terms become implied?

Terms can be implied in a number of ways and often in more than one way.

By conduct – the conduct of the parties makes it clear that there an agreed way of doing things even though it isn’t expressly agreed – eg employees finish early every Friday.

By custom and practice – similar to conduct but it’s where something becomes the norm or an established practice. The courts will look at whether the custom is contrary to any express terms and the employees’ understanding of the arrangement in considering whether it should be implied. Eg one of the most common issue that arises is whether a bonus is payable as there has been custom and practice to pay a bonus in previous years.

Applying the officious bystander test – where a term is so obvious it goes without saying eg that an employee would get paid for working or that they will turn up for work.

As a matter of business efficacy – where the term is necessary to allow the contract to work eg where a business provides a service that the employee is qualified to provide that service.

A characteristic term is implied or imposed because of the nature of the term – the House of Lords decided in the case of Malik v BCCI that a term of trust and confidence should be implied into an employment contract as a necessary characteristic of that contract. Another characteristic term is that the employee will carry out their role with faith and fidelity.

By statute – these terms may be described as imposed rather than implied – examples include the right to minimum holiday and notice periods.

How do implied terms effect express terms?

Implied terms do not usually override express terms of the contract.

There are some exceptions:

• A term implied under the officious bystander test;
• An implied term restricting an express term giving the employer a discretion (eg an term may be implied that such a discretion be exercised fairly); and
• A term implied by statute.
• An express term which states that the contract sets out all terms between the parties may at least allow the employer to argue that no other term should be implied so it is a good idea to include this term to limit terms being implied by custom and practice. It would be unlikely to override other types of implied term.

It is advisable to keep contracts under review to ensure they reflect the actual arrangements with employees. This way employers may proactively manage situations which may give rise to disputes such as payments on exit or bonuses.