Some contractual obligations of employers and employees flow not from the terms that they expressly agree, but from terms that are implied in the contract. Terms can be implied in order to fill gaps in the terms that have been expressly agreed (filling gaps ) or from custom and practice (custom and practice ). In addition, some terms have come to be implied into every contract of employment as a result of court decisions over the years ( Employer's implied obligations ).
If the employer and employee have failed to reach any express agreement on a particular aspect of the employment relationship, a term may need to be implied in order to make the contract workable. For example, if a contract includes a relocation clause, a further term may need to be implied that the employer will not ask the employee to move beyond commuting distance without giving sufficient notice to enable the employee to make the minimum necessary personal arrangements.
A term may also be implied because, although no express agreement was reached on it, it is obvious from the relationship between the employer and the employee and all the surrounding circumstances that the term was intended to be included in their agreement. For example, if the employer and employee have not expressly agreed on the employee's place of work, it is likely to be implied that the workplace is the location where the employee reports for work each day.
If there is a dispute over issues covered by implied terms of this nature, it will ultimately be for a court or employment tribunal to decide what the terms are. Since the outcome of litigation is unpredictable, it is obviously preferable for companies to ensure that all the necessary issues are covered by express terms.
In some limited circumstances, terms can be implied into a contract as a matter of custom and practice. In order for this to happen, the contract term must be reasonable, clearly and precisely defined and widely known in the industry or in the particular workplace involved. If the term meets these criteria, then it will be implied into an individual employee's contract even if he or she was not aware of its existence. Because it is difficult to assess with any certainty whether these criteria are met, it is not advisable to rely on custom and practice as a source of contract terms; express terms are always preferable.
It is important to note that a term does not become part of a contract as a matter of custom and practice simply because the employer or employee has acted in a particular way over a period of time. The litmus test is whether the company or the employee was acting in that way because they viewed themselves as under a legal obligation to do so.
Take, for example, a company that operates from a working assumption, set out in an internal management policy document, that it will make redundancy payments in excess of the statutory minimum when it implements redundancies. Each time there is a redundancy exercise, it reviews that assumption to ensure that the company can afford to make the enhanced payments. Over the course of several years, it makes the enhanced payments, but there then comes a time when it decides it can afford only the statutory minimum. The company is unlikely to be breaching the contracts of those who are dismissed by paying them the minimum, because it never intended that the enhanced payments should be a contractual entitlement, and never indicated to the workforce that they were.
Their Association can give advice to companies that are unsure about the contractual status of company policies.
Over the years, the civil courts have decided that some terms should be implied into all contracts of employment. These terms continue to evolve, but currently the most important implied obligations on an employer are:
- Duty to pay
The employer has a duty to pay the employee, provided the employee is ready and willing to work. In general, an employer is not obliged to provide an employee with work. There are two exceptions to this, where an employer is under an obligation to provide work. One is where the employee's earnings depend on work being done, such as in the case of pieceworkers or those paid on a commission basis. The other is where the employee's position in the labour market is dependent on him or her continuing to work, because lack of work leads to immediate loss of reputation or skills. The courts have accepted that this could apply to traders in the financial markets in the City of London, so it could also extend to other employees with specialist knowledge or expertise that quickly loses its value if it is not used.
- Trust and confidence
The employer has a duty not to act in a way that is likely to destroy or seriously damage the relationship of trust and confidence between the employer and the employee, unless it has a reasonable and proper reason for doing so. This is an important implied term, which has been applied and developed in many recent court cases. It is breached, for example, where an employer fails to support an employee who is being bullied or harassed. In some circumstances, it can have the effect of limiting the employer's ability to exercise its express powers under the contract. For example, a company could be in breach of this implied term if it used an express power to move an employee to different work without giving the employee any support or training in the new role.
- Health and safety
The employer is obliged to take reasonable care for the health and safety of the employee. The employer has similar duties under the law of negligence and the Health and Safety at Work etc. Act 1974.
The employee also has implied duties, the most important of which are these:
- Co-operation
The employee is obliged to co-operate with the employer, including obeying the employer's lawful and reasonable instructions. Whether an instruction is lawful and reasonable will depend in part on the express terms in the employee's contract dealing with job duties.
- Loyal service
The employee is also obliged to give loyal service to the employer. This term may mean that the employee should not be involved in competing activities or work for a competitor in his or her spare time, if this poses a clear risk that the employer will be substantially harmed. The term certainly means that the employee should not disclose confidential information that he or she comes across in the course of work.
- Trust and confidence
Like the employer, the employee is under a duty not to act in a way that breaches the relationship of trust and confidence between them, unless he or she has reasonable and proper cause for doing so.
- Health and safety
The employee is also under an implied duty to take reasonable care for his or her own health and safety and that of fellow employees and to exercise reasonable care and skill in his or her work.