Beyond the written contract

Implied terms, custom & practice

Starting a new employee is an exciting time. Lots to do, finally you get the contract of employment signed by both you and the employee and that covers everything. Or does it?

This article looks at terms which can affect the employment contract without having been written down. These can arise through two main areas; namely 1. Implied terms and 2. Custom & Practice.

Lets examine implied terms first.

Implied terms

Because a written contract cannot cover every possible eventuality, the practice has evolved of incorporating certain terms in to the agreement which are not written down. This does not happen by chance. There are ground rules which must exist in order for a term to become implied. Let’s examine a few of these.

Conduct of the parties after the contract is made.

The parties may conduct themselves in such a way as to imply the existence of a term, even though it was not written into the contract. There must be the intention to create a binding term. This can arise, for example, where an employer changes the role of the employee without reference to the contract of employment. The employee by his/her actions accepts the change without saying or doing anything. Where this contioues long enough, the change will be deemed to be part of the contract.

The officious bystander

It is so obvious that a bystander can see it.

Business efficacy

Where it is essential to the performance of the task. This could be an essential qualification or skill.

Terms implied by statute

Where a term is not mentioned in a contract but is covered in a statute (law) the statute will apply. For example statutory leave entitlements. Health & Safety.

Terms implied by law

These are basic terms which the law expects the parties to uphold. For example, loyalty, confidentiality, follow reasonable direction, provide work, pay on time,grievance procedure,minimum wage, mutual trust

Custom & Practice

Strictly speaking custom & practice is an implied term. We have given it a seperate category in order to emphasise its importance.

To establish that a term is part of a contract under this heading, you need to show that it is “reasonable, notorious and certain” . This phrase comes from case law. Notorious is read as well known. It is a practice that has arisen over time. The parties have conducted themselves in such a way as to imply that the behaviour is binding even though nothing has been said or written down. The annual bonus can come under this heading if the employer is not careful.The payment of overtime is another candidate.

Any custom & practice must be longstanding and followed by the parties over a long time. It must be reasonable and continuous over a long period of time, with few if any deviations. There must be an expectation that if action A is taken result B will occur. It can be difficult to establish.

Generally an implied term cannot overide an express written term.

Employers should take care when drafting contracts to ensure that as many terms as possible are covered. It is better to seek the advice of an expert now rather than later, when a problem has arisen.

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