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. 





The question whether a term should be implied usually only arises once the parties’ relationship has broken down. 


Sometimes regular industry practices carried out over a long time become implied into the employment contract through custom and practice. This phrase is really just shorthand for saying that any informed onlooker looking in from the outside would reasonably conclude that both sides regard a practice (such as paying enhanced redundancy pay) to have crystallised over time into a set of legally enforceable rights and obligations. 





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





It is not enough to show that something has been happening regularly over 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 employees 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, a court or tribunal is very unlikely to imply a term based on custom and practice (Park Cakes Limited v Shumba [2013] EWCA Civ 974).





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. There are some common examples listed on page 335 of Chapter 10: Constructive dismissal. 


An employee who gives away trade secrets will breach these implied duties (Ticehurst and Thompson v BT [1992] IRLR 219). 





Every employment contract contains a fundamental implied term 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 is the work/wage bargain. This implied term can only be limited by a clear express contract term limiting the payment of wages in specific circumstances, for example, during a lay-off or short-time working (Craig v Bob Lindfield & Son Limited [2015] UKEAT/0220/15/LA) (See Chapter 4: Guarantee pay). This explains why an employer cannot suspend an employee without pay as a disciplinary sanction unless a written contract term expressly allows this. (For a recent example, see the case of Rice Shack Limited v Obi [2018] UKEAT/0240/17/DM, summarised on page 42.) 





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 334. 





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. 




In Rawlinson v Brightside Group Limited [2017] UKEAT/0142/17/DA, lying to an employee about the true reason for their dismissal was a fundamental breach of the implied duty of trust and confidence. In this case, the employer lied that the reason for dismissal was a restructuring, when the true reason was concerns over performance. Lies were told to “soften the blow”, but also to ensure a smooth handover of responsibilities during the notice period. Either way, lying was a fundamental breach of the contract. 




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 if it falls short of those standards, as this next case demonstrates: 





Where a term has not been negotiated individually with employees, the employer has an implied duty to take reasonable steps to bring it to their attention (Scally and others v Southern Health and Social Services Board [1991] IRLR 522). This ruling concerned four doctors who were unaware of their right to purchase extra 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 keep 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, hacking or identity theft. Failure to keep this data secure is also a breach of data protection laws and is likely to be a breach of the right to privacy. In WM Morrison Supermarkets v Various Claimants [2018] EWCA Civ 2339, the Court of Appeal confirmed that an employer (whether or not a data controller) can be held vicariously liable for breaches of data protection law, misuse of private information and breach of confidence committed by an employee in the course of their employment. This is the case even even though the employer is not itself at fault and is the target of the breach (see Chapter 15: Data Protection). 





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 a personal injury, and foreseeability of stress (as opposed to psychiatric injury) will not make an employer liable (Sutherland v Hatton [2002] IRLR 263). 





An employer will not be liable for psychiatric injury caused by work unless that injury was reasonably foreseeable (see for example, Barber v Somerset CC [2004] UKHL 13). There must be enough concrete evidence of the risk to put a reasonable employer on notice that psychiatric injury is likely unless they act to change the situation. In general, the law allows employers to assume that an apparently healthy employee with no history of psychiatric ill-health can cope with “even a very serious setback at work” without developing a depressive illness (Yapp v the Foreign and Commonwealth Office [2014] EWCA Civ 1512). In practice, these are complex and difficult cases to win.




Employers who know or should have known that an employee is at risk of psychiatric harm cannot escape liability simply by offering counselling or occupational health services if they fail to take other steps to remove the risk of harm, such as reducing work overload (Dickins v O2 plc [2008] EWCA Civ 1144).




Reps should also remember the HSE Management Standards on Workplace Stress. The six Standards: demands, control, support, relationships, role and managing change, provide a useful framework with which to hold employers to account. Guidance on the Standards is available on the HSE website and from the TUC.




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 in the employment tribunal is preferable to a contract or negligence claim in the civil courts. However, time limits are far shorter in the employment tribunal — just three months — as opposed to three years for a personal injury claim in the civil courts (see Chapter 7: Discrimination).