Implied terms

If terms have not been expressly agreed, they can be “implied” through conduct or custom and practice. If the conduct of the parties demonstrates that they have agreed a certain term, it may be implied into the contract. In the same way, terms that have been regularly adopted in a particular trade or industry or in a particular area and have become standard practice may be said to be implied through custom and practice. The term must be “reasonable, notorious and certain” (Devonald v Rosser & Sons 1906(2) KB 728).

It is not enough to show that something has happened for a certain length of time. There must be evidence that both parties intended it to be part of the contract. For example, in North Lanarkshire Council v McDonald & another (UKEATS/0036/06), the fact that workers had worked half an hour of overtime every day for a year did not make the extra hours a contractual right.

In George v Ministry of Justice ([2013] EWCA Civ 324), the Court of Appeal held that the practice of prison officers working extra hours and being given time off in lieu (TOIL) had become incorporated into Mr George’s contract of employment through custom and practice. Prison officers and governors had operated for more than 20 years on the assumption that officers had no right to refuse to work the extra hours which would be repaid through TOIL, based on a collective agreement known as Bulletin 8. Records were kept of the extra hours worked and of periods when hours fell short. However, another term of the collective agreement — to provide the TOIL within five weeks of the extra hours — had not been incorporated by custom and practice, since there was no evidence that this practice had become reasonable notorious and certain.

If a term is truly discretionary it cannot be regarded as a contractual right through conduct or custom or practice. In Horkulak v Cantor Fitzgerald International ([2004] IRLR 942), which concerned an employee’s entitlement to compensation in respect of a discretionary bonus, the Court of Appeal held that where a term is discretionary, there is an implied term that the employer will exercise its discretion genuinely and rationally. For more examples of custom and practice and guidance on whether a term is likely to be judged discretionary or a contractual right in the context of enhanced redundancy pay see Chapter 11: Redundancy pay.

There is no implied term that on promotion an employee should be better off:

An employee’s implied terms include fidelity and good faith — for example, not giving away trade secrets (Ticehurst and Thompson v BT [1992] IRLR 219). Contract terms can also be implied if there would be no workable contract without them. These can be terms that both parties would have agreed to, had they thought about it, or terms that have been held to be essential to all contracts of employment.

Well-established implied terms include the duty not to destroy mutual trust and confidence, which binds both employer and employee. Neither party should, without “reasonable and proper cause” act in a manner that is likely to destroy the trust or confidence that exists between employer and employee.

If the employer fundamentally breaches the contract (for example, the duty of mutual trust and confidence) this can give rise to a right to resign and to claim constructive unfair dismissal in the employment tribunal (see Chapter 10: Constructive dismissal) or wrongful dismissal in the civil courts.

Employers can be in breach of an implied contract term if they negligently misrepresent a situation, as a result of which employees take or accept a course of action they would otherwise have rejected. In Hagen v ICI Chemicals [2002] IRLR 31, employees agreed to transfer under TUPE (see Chapter 12) because they had been told their pension rights would be more or less the same, but this was not correct and some employees lost out substantially. The High Court held that this was a breach of contract and that the employees could sue their old employer for damages.

Where a term has not been negotiated with an individual employee, the Supreme Court has held that the employer has an implied duty to take reasonable steps to bring that term to their attention (Scally and others v Southern Health Board [1991] IRLR 522). The ruling came in the case of four doctors who were unaware of their right to purchase additional years towards their pension entitlement. The extent of this duty was considered by the Court of Appeal in the following case:

The duty to inform does not oblige the employer to advise employees of their best choice (University of Nottingham v Eyett [1999] IRLR 87) or to protect their economic well-being (Crossley v Faithful & Gould Holdings ([2004] IRLR 377)). If the employment contract gives the employer the right to choose how to terminate it, either at the end of its term or with pay in lieu, there is no implied term that the choice will be exercised in a way that would be most beneficial to the employee (Reda v Flag Ltd ([2002] IRLR 747) (see Chapter 10: Dismissal).

Implied duty to provide a safe working environment

Employers have an implied duty of care towards their employees to provide a safe system of work and a suitable working environment, as well as a duty in negligence.

Implied duty not to cause psychiatric harm

In Walker v Northumberland CC ([1995] IRLR 35), the High Court held that this extends to a duty not to cause an employee psychiatric damage, where it is reasonably foreseeable that the employee might suffer psychiatric harm as a result of the employer’s actions (or failure to act).

A breach of this duty of care can give rise to a claim for damages in the civil courts as a personal injury claim, if the employee can show that the injury was foreseeable. In 2002, the Court of Appeal set out the principles for dealing with psychiatric injury claims arising from stress at work in the case of Sutherland v Hatton ([2002] IRLR 263). In particular, the key to establishing liability in negligence for any sort of work-related injury is foreseeability — to what extent would a reasonable employer have foreseen this kind of harm to this particular individual? In a claim based on psychiatric injury, a claimant is more likely to succeed if there is evidence that the likelihood of injury has been brought to the employer’s attention, for example through a previous period of sickness absence linked to stress, or earlier mental health problems such as anxiety or depression, known to the employer. The employer’s liability is often triggered by failure to provide sufficient support when a person returns to work after a period of absence. See for example, Barber v Somerset CC [2004] UKHL 13.

The Courts have emphasised that an employer is not automatically liable just because an individual can be shown to have suffered stress as a result of work (Hartman v South Essex Mental Health and Community Care NHS Trust [2005] EWCA Civ 6). This case also demonstrates that an employer cannot be assumed to be aware of a pre-existing condition if this was disclosed confidentially to occupational health as part of a pre-employment health screening.

Equally, employers accused of psychiatric harm caused by bullying are only likely to have breached the implied duty of care if they knew, or should have known, about the risk to the employee’s health. This underlines the importance of spelling out these risks in particular cases, so that employers cannot later claim that they did not foresee the risk of harm.

In Dickens v O2 plc ([2008] EWCA Civ 1144), Ms Dickens was promoted in the space of 10 years, from being a secretary to a management accountant and on to Finance and Regulatory Manager. Ms Dickens, who had no formal accountancy training, was then assigned to conduct audit work with which she struggled, through inadequate training and support. Ms Dickens had a crisis at work causing her to go home. She said that she could not cope and was suffering from stress and depression including Irritable Bowel Syndrome. She was frequently late to work and was asked to take a sabbatical. Her employer referred her to its confidential counselling helpline and later to occupational health.

The Court of Appeal decided that Ms Dickens’ illness was reasonably foreseeable and that O2’s failure to address her work issues had aggravated her depressive condition. The Court found that O2 should have sent Ms Dickens home and instructed occupational health to investigate earlier. The employer was liable for failing to do anything of substance.

In the following case a requirement for a driver to work without a reasonable break was found to be a breach of contract:

Employers are also liable if their employees act in a way that causes harm to a third party (such as an agency worker) to whom the employer owes a duty of care.