Implied terms 


Many employment contract terms are not expressly agreed and instead are left unsaid. These are known as implied terms. Where an employment contract is silent, there are three circumstances in which contract terms can be implied. These are: 


• where a contract term is necessary to give business efficacy to the contract, in other words, to make it workable (Liverpool City Council v Irwin [1977] AC 239);


• where a contract term is so obvious that both parties, if asked by an informed outsider when entering into the contract whether they intended to be legally bound, would have responded “of course!”; and 


• through custom or practice. 


Sometimes regular and standard trade or industry practices carried out over a long time become implied into the employment contract through custom and practice. Effectively, this phrase is shorthand for saying that an informed onlooker, watching the behaviour of both parties from the outside, would reasonably conclude that both sides believe a practice (for example, paying enhanced redundancy pay), has crystallised over time into a set of legally enforceable rights and obligations. 


For a contract term to be implied based on custom and practice, that practice must be widely known to the relevant section of the workforce and there must be widespread expectation that it will be legally enforced. The practice must be “reasonable, notorious and certain” (Devonald v Rosser & Sons [1906] (2) KB 728). In Garratt v Mirror Group Newspapers Limited [2011] ICR 880, a practice of only paying enhanced redundancy pay to employees who signed a compromise agreement had become a contract term, applying this test.


Where an employer publicises a practice generally to the workforce, either directly or via a trade union, this can help build a case based on “custom and practice” but as always, it all depends on the surrounding context (Park Cakes Limited v Shumba [2013] EWCA Civ 934). These cases are usually very difficult to win. 


It is not enough to show that something has been happening for a long time. There must be evidence that both parties intended the practice to be a legally enforceable obligation. For example, in North Lanarkshire Council v McDonald [2006] UKEATS/0036/06, the fact that workers worked half an hour of overtime every day for a year did not make the extra hours a contractual right.


As always with contract interpretation, choice of language is very important. Clear words such as “shall” and “must” suggest a contractual obligation, whereas vague or discretionary language such as “ex-gratia” or “policy” points the other way. 


If an employer’s behaviour, viewed objectively, could just as easily be explained as an exercise of discretion rather than the performance of a legal obligation, it will be impossible to imply a term based on custom and practice (Park Cakes Limited v Shumba [2013] EWCA Civ 934).


Where a contract term is discretionary, there is an implied term that the employer will exercise that discretion genuinely and rationally (Horkulak v Cantor Fitzgerald International [2004] IRLR 942).


Well-established implied contract terms include the implied duty not to destroy mutual trust and confidence and the duty of good faith that bind both employer and employee. For example, an employee who gives away trade secrets would be in breach of these implied duties (Ticehurst and Thompson v BT [1992] IRLR 219). 


There is a fundamental implied term in every employment contract that employees who are ready, willing and able to work will be paid their agreed wages, in full and on time (Beveridge v KLM UK [2000] IRLR 765). This term can only be limited by a clear express contract term that wages will not be paid in specific circumstances, for example, during lay off or short-time working (Craig v Bob Lindfield & Son Limited [2015] UKEAT/0220/15/LA) (See Chapter 4: Guarantee pay). 


A fundamental breach of the employment contract by the employer can entitle the employee to resign and claim constructive unfair dismissal in the employment tribunal, or wrongful dismissal in the civil courts. For more information, see Chapter 10: Constructive dismissal, page 320. 


The duty of good faith includes a duty not to mislead staff and to take reasonable steps to provide accurate information where wrong information could impact on their financial situation. Employers can be liable in negligence if employees change their position and lose out as a result. For example, in Hagen v ICI Chemicals [2002] IRLR 31, employees agreed to transfer under TUPE (see Chapter 12) because they were told their pension rights would be broadly unaffected. This was not correct and some employees lost out substantially as a result. The High Court held that this was a breach of contract and that the employees could sue their old employer for damages. 


Where an employment contract gives the employer a choice whether or not to make a payment in lieu of notice, there is no implied term that the choice will be exercised in the way that is most beneficial to the employee, even if this means that the employee loses out on a valuable benefit such as a commission payment or a bonus (Reda v Flag Ltd [2002] IRLR 747). Pay in lieu of notice is looked at in Chapter 10: Payment in lieu of notice.


An employer that holds itself out as having high standards of integrity can be held to account using the implied contractual duty of trust and confidence when it fails to meet its own standards, as this case demonstrates: 


Where a term has not been negotiated individually with employees, 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). This ruling was made in the case of four doctors who were unaware of their right to purchase additional years towards their pension entitlement.


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). 


Employers have an implied contractual duty to provide a safe system of work and a suitable working environment. They also owe a duty not to cause harm through negligence. 


Employers have an implied duty to take reasonable steps to keep their employees’ confidential data such as salary, national insurance number, address, name and age safe and secure, and not to expose them to the risk of financial losses or identity theft. Failure to keep this data secure would also be a breach of the Data Protection Act 1998 (see Chapter 4). 


Another important implied duty is the duty not to cause reasonably foreseeable psychiatric injury (Walker v Northumberland CC [1995] IRLR 35). A breach of this duty can lead to a personal injury claim for damages in the civil courts. Stress alone is not an injury for this purpose, and foreseeability of stress (as opposed to psychiatric injury) will not make an employer liable (Sutherland v Hatton [2002] IRLR 263). 


To succeed in a personal injury claim based on harm to mental health at work, a claimant must be able to prove that their employer knew or should have known about the risk to them of psychiatric injury. Useful evidence could include a pattern of previous sickness absence due to mental health conditions such as anxiety or depression, and an employer’s failure to support a return to work after time off for anxiety or depression that was known to be linked, for example, to work overload (see for example, Barber v Somerset CC [2004] UKHL 13). In practice, these are complex and difficult cases. The courts have said that employers are allowed to take at face value what employees tell them about their fitness for work. If someone returns to work after a period of sickness absence and gives the employer no reasonable cause for concern, in general the law entitles that employer to assume they are well enough to go back to their old job.


Similarly, an employer is entitled to assume that an apparently healthy employee with no history of psychiatric ill-health can cope with “even a very serious set-back at work” (such as, in the following case, a disciplinary suspension) without developing a depressive illness: 


Even the fact that an employer knows an employee is taking medication such as anti-depressants is not necessarily enough to alert them to a need to take special care (Easton v B&Q [2015] EWHC 880).


However, employers cannot escape liability just by offering a counselling service or occupational health services if they already knew or should have known that an employee was at risk of psychiatric harm, for example, because of excessive workload or responsibilities (Dickens v O2 plc [2008] EWCA Civ 1144). Reps should also familiarise themselves with the HSE Management Standards on Workplace Stress, available from the HSE website, which provide a useful framework with which to hold employers to account.


An employer will not normally be taken to know of a medical condition if it is only revealed confidentially to an occupational health adviser (Hartman v South Essex Mental Health and Community Care NHS Trust [2005] EWCA Civ 6).


In some cases of work-based personal injury, a claim based on disability discrimination may be preferable for the member to a contract or negligence claim in the civil courts. However, reps need to be aware that time limits are far shorter in the employment tribunal than in the civil courts — just three months, as opposed to three years for a personal injury claim in the civil courts (see Chapter 7: Discrimination).