Your employment contracts may seem watertight, but implied terms can cause major headaches if you don’t understand what they are or realise they affect you.
Seb Mattern is InHouse Legals’ Head of HR. He knows from experience that what is not written in your employment contracts can still be legally binding.
While you may have the most detailed employment contract template and you believe that every single issue that could potentially arise is covered by well-worded clauses, often grievances centre around terms that are not stated but are implied. In fact, Tribunal cases are won by disgruntled employees due to breaches of implied terms on a regular basis.
So what are implied terms, what kind of circumstances do they cover and what should you do to ensure you don’t fall foul of these “unwritten” legalities?
Mutual Trust & Confidence
A breach of the duty to maintain mutual trust and confidence by an employer often leads to claims for Constructive Dismissal or Wrongful Dismissal (Breach of Contract).
Examples of damaging or destroying the mutual trust and confidence include:
- Issuing a disciplinary warning when unwarranted or where the disciplinary procedure (either internal or ACAS Code of Practice) is not followed
- Failing to support an employee who has been harassed by a fellow colleague.
- In Clark v Nomura International plc [2000] IRLR 766, the court found that a bonus clause stating “discretionary bonus scheme which is not guaranteed in any way and is dependent upon individual performance” meant that the employer breached the mutual trust and confidence with its employees when it took into consideration other factors in relation to the bonus payment – in this case the overall performance of the business.
Custom & Practice
Custom & Practice means that implied terms have been created over time even though they have never been stated in the contract. Say for instance an employer has always closed the office between Christmas and New Year without requiring its employees to take annual leave. Then one year, it becomes apparent over a packet of office mince pies in early December that this year things are a bit different. Orders are streaming in, clients, it seems, are working through the break and – erm – you’ll be in on Boxing Day won’t you?.
Cue a rapid exit of Tidings of Comfort and Joy. Your employees might well view this as a breach of contract and – yep – the law may well agree with them!
The same thing goes if you were to expect people who have always viewed the business at this time of year as Closed for the Festivities to use their annual leave to cover the time off. It doesn’t matter if it’s not in their contract. If they can show it’s always been this way then they have grounds to go after you for Breach of Contract.
Sick pay is another tricky area in this way – and it doesn’t matter one bit if you have a clause in the contract that says it’s discretionary, if you have always paid in similar circumstances then that discretion no longer exists.
If you want to make changes to the way things have always been done in your business then you need to go about it formally and well in advance.
Playing (and paying) fair
The moral of this tale of implied terms is, however great your relationships are with those who work for you, if you want them to stay that way – never forget that employment is a formal relationship governed by the law
I’m really excited to have started Tiger Law, we come from a different place to the traditional law firms, even those who say they’re new and different. We’re also not so futuristic that we’re automated and faceless.
Vanessa Challess, Principal, Tiger Law
Keeping it happy
Don’t lose sleep over whether you are doing everything right or worse still, feel the law is out to get you, it’s there to keep the crucial relationships, upon which we all depend as we make a living, clear and just.
Good HR management is all about ensuring your relationships with your staff are smooth and worry-free so you can all operate at your productive best.
A happy workplace is a tremendous asset to any business – and employment tribunals are extremely expensive! But humans being what they are a little care is needed. With foresight these situations can be avoided.
There comes a time in every successful business when a helping hand with HR Compliance is not just a “nice to have” but a necessity.
That’s where Tiger HR comes in.
We’re here to stand behind you and help out when needed. Whether you need support with a change that must be made, or someone to keep an efficient and watchful eye on your employee relations so you can keep your mind on the job, give us a call and let’s review your contracts and any changes you plan to make to make sure there are no legal potholes lurking.
01233 227 356