Implied terms in an employment contract

Terms in any contract can either be express or implied. An express term is one that is written down or agreed orally. An implied term is one that is not an express term, yet which still forms part of the contract.

Generally, express terms in a contract apply over implied terms. So you might expect a draughtsman to include all terms expressly because doing (particularly in plain English) so would help make all the terms clear, and help prevent future disagreement arising from differing interpretation of what was agreed. However, because implied terms apply regardless of whether they are written into a contract, often they are left implied. Sometimes it is not making clear all the terms gives one side a small advantage.

Legal tests

Implied contractual terms must pass one of two tests to be legally binding.

The efficacy test considers whether the contract would work sufficiently without the term being implied. If it could not be, then the term is considered to be part of the contract. An example is the duty of mutual trust and confidence between an employer and an employee.

The officious bystander test considers whether a third party (a bystander on the street who is asked for an opinion) would assume that the term is included within the employment contract. For example, it is obvious that an employee should not intentionally act in a way that harms the business of his or her employer.

In addition to these tests, custom and practice should be considered. These may be within the business, or custom within the industry or society. For example, if a business has always given employees a paid day of holiday on the founder’s birthday, and this practice has become part of the culture or expectation for a sufficiently long time, that benefit is likely to be considered contractual.

Statutory law - law passed by Parliament - usually seeks to change the balance of legal strength between parties in situations where one party might otherwise be disadvantaged. Employment is one area where there is much statutory law because employees might otherwise be exploited.

Employees have minimum rights that cannot be reduced, even if mutually agreed. If an employment contract attempts to reduce these rights, or does not give them expressly, then they will be implied into the contract. As examples:

Common implied terms and employment contracts

Most contracts of employment have implied terms attached to them. These include:

The duty to maintain mutual trust and confidence

This duty applies to both the employee and the employer, although it is typically relied on by the employee, particularly in claims of constructive dismissal.

Each party has a duty to conduct himself, herself or itself in such a way to maintain trust and confidence in the relationship of employment. If, for example, an employer acts in such a way to damage the relationship, perhaps by amending the contract and imposing unfair conditions and the employee, then the employee might claim that this trust has been broken.

The duty of fidelity

During employment an employee should be loyal to an employer and not to act against his, her or its interests.

As examples, an employee should not carry on a business in direct competition; or use business assets for personal gain without the permission of the employer.

Since this implied duty only exists during employment, post-employment restrictions should be expressly written down in the employment contract if they are to be binding after the employee has left.

Duty to pay

An employee is entitled to reasonable remuneration for the work that he or she provides. This is usually set out as an express term within an employment contract. However, if it is missing, then it is implied.

Of course, in addition, statutory law gives the employee the right to receive no less than the Minimum Wage.

The duty to take reasonable care for the employee’s health and safety

An employer has a duty to care for the physical and mental health of the employee, and for his or her safety while at work.

That includes recognising when it might be appropriate that the employee takes sick leave. It also includes providing a safe workplace (both from physical harm, and from discrimination and bullying).

Duty of reasonable care when providing a reference

An employer does not have to provide a reference to a former employee. However, if one is given, he, she or it should take reasonable care to provide one. For example, the former employer should take care to ensure that facts given in a reference are true, and not subjective.

Please note that the information provided on this page:

  • Does not provide a complete or authoritative statement of the law;
  • Does not constitute legal advice by Net Lawman;
  • Does not create a contractual relationship;
  • Does not form part of any other advice, whether paid or free.
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