Implication of Terms

Implied Terms in Employment Contracts

If there is a written employment contract, which appears to cover all relevant matters, then it is presumed to comprise the entire agreement. Few employees have a comprehensive written contract covering all relevant matters. Accordingly, even apart from statute, terms may be implied into the employment contract. The statutory minimum rights must apply, and any term which is inconsistent with them will be automatically varied.

There are a number of types of implied employment contract terms. The most pervasive are those implied by employment legislation. They are dealt with in other articles in this guide. They include the rights not to be unfairly dismissed, freedom from discrimination, rights on redundancy, minimum notice, minimum pay, holidays and statutory leave.

Contractual terms may be implied into the employment contract under common law principles. Terms may be implied into the contract on the basis of the presumed intentions of the parties, efficacy/ necessity, custom and practice or by collective agreement.

The implied term must be consistent with the express terms of the employment contract. The courts have articulated a number of bases on which terms may be implied. Differing and overlapping rationale is employed to some extent.


Some Terms Implied by Statute I

Statute law has created an ever-increasing range of implied rights in employment contracts.  Most of these rights may not be varied by a contract to the contrary.  Generally, enhanced provision may be made by the terms of the contract.  However, the statutory “floor” of minimum rights is usually mandatory.

See the other articles in relation to the wide range of implied statutory rights. What follows is a brief reference to some of these rights

The Employment Equality Acts implies a right to equal treatment and to equal pay for equal and comparable work.  The Employment Permits Act requires non-EU employees to have permits as before they work in the State.as a condition for working in the State.  The Payment of Wages Act requires a written statement of and regulate payments and deductions.


Some Terms Implied by Statute II

The Maternity Protection Acts, Parental Leave Acts, Adoptive Leave Acts and Carers Leave Act provide for rights to leave from work in the event of childbirth, adoption and parental needs, with a right to return to employment.  The Organisation of Working Act prescribes maximum working hours.  The National Minimum Wage Acts prescribes the national minimum wage.

The Industrial Relations Act provides for the making of registered employment agreements and regulated employment orders. They prescribe the detailed terms and conditions of employment applicable in certain sectors.

The Minimum Notice and Terms of Employment Act provides for minimum periods of notice on termination of employment.  The Redundancy Payments Acts provide statutory rights to payments, on termination of employment on account of redundancy.  The Unfair Dismissal Act provides the important right not to be unfairly dismissed.


Some Terms Implied by Statute III

A range of other legislation provides for consultation by employers with employees at certain times and in relation to certain matters. This includes the Employees (Provision of Information and Consultation) Act and the Protection of Employees on Transfer of Undertakings Regulations.

The Protection of Employees (Part-Time Work) Act, Protection of Employees (Fixed-Term Work) Act provides pro rata rights and entitlements to those working respectively, under part time and fixed term contracts.

Health Safety and Welfare legislation and common law duties of employers’ liability imply a range of terms into a contract of employment in relation to occupational health and safety. They cover not only the employer’s duty but also an employee’s duty to conduct himself with reasonable care and attention.


Self-Evident / Bystander Test

Where the parties have failed to express necessary terms by oversight or carelessness, the Court may be willing to imply the required terms.  A term may be implied on the basis that it is overwhelmingly self-evident.  It must be such that if it was pointed out by an officious bystander, the parties would immediately accept that it was so self-evidently part of the contract, that it did not need to be expressly set out.

This test of implication is often made by reference to a hypothetical so-called “officious bystander”.  The terms are implied where they are so necessarily inevitable and obviously, part of what is agreed, that if some officious bystander were to ask the parties, they would testily respond them with a comment of “oh, of course”. The term must be so obvious that it goes without saying.  Hence, the testy reply to the officious bystander on the part of both parties.

The Court may not substitute its contract. The term must be overwhelming self-evident and be such that both parties would have accepted it if raised without hesitation. In practice, this test overlaps the below-mentioned tests, although it is narrower in scope. It does not apply to less obvious matters.


Efficacy Test

Terms may be incorporated on the basis of necessity or efficacy (in order to make the agreement workable). In order to be incorporated in this way, the term must be necessary so that the contract would be ineffective without it. The term must be obvious and must “go without saying”. It must not contradict the express terms of the contract.

The test is referred to as the efficacy (or business efficacy) test.  The contract is interpreted in such a way as to give effect to what is necessarily agreed. The term must be reasonable. The law implies the terms which are necessary to make the contract effective. In many cases, the term may be logically necessary and follow inevitably from what was expressly agreed.

Some courts have equated the business efficacy and officious bystander tests. Other courts have taken the approach that the tests are separate and this is probably the better approach. If the parties were not aware of the matter to be implied, then necessarily, it does not satisfy the officious bystander test.  The courts may be willing imply such terms as a matter of business efficacy.


Presumed Intention Test

Terms may be implied into the contract on the basis of the presumed intentions of the parties.  This basis overlaps the officious bystander and efficacy/necessity basis of implication. Where the parties clearly intended to enter an agreement, the court implies in terms which are necessarily required to give effect to that intention.  It is presumed that the parties intended to make the agreement workable and the court implies terms which are necessary for this purpose.

An implied term based on the presumed intention of the parties often relates to a matter which is a necessary incident of the contract. Where an employee alleged in an Irish case that there was an implied obligation on directors of a then liquidated company to obtain employer’s liability insurance, it was held that the implication of such a term was not an absolutely necessary requirement and the argument was rejected.

There is significant overlap with the “officious bystander” and efficacy tests. The court implies that which necessarily follows from the presumed common intention of the parties as found from the words used and the circumstances. The matter must have been intended by the parties but not expressed.  The test proceeds on the basis of the objective of the contract and what the parties must have intended to give effect to it.

As with contract law generally, the process of discerning the parties’ intention is retrospective and is determined objectively from the parties’ words and conduct. The parties’ actual subjective intention is not necessarily relevant.

As with the other bases of implication, the term implied must be capable of clear expression.  It must not contradict the express terms of the contract.  It must be reasonable and equitable. It must be necessary to give efficacy to the contract.   It must be sufficiently certain.  It must not be at variance with or contradict the express or implied terms of the contract.


Implication from Custom and Usage

Terms may be implied into employment contracts by custom, usage and practice. Many industries or workplaces have particular customs or practices which may be incorporated into the terms of the employment contract. The custom or practice may be specific to the workplace.

The custom and usage of the particular trade or business or the workplace may supplement the agreement and inform it.  However, terms deriving from custom may be incorporated.  The custom is presumed to reflect the intentions of the parties.  Accordingly, if the contract is inconsistent with it or excludes it, then the custom may not be incorporated.

In order for a custom to apply, it must have acquired such notoriety that the parties must be taken to have known it and intended to form part of the contract.  It must be certain and reasonable.  It must be proved by clear evidence.   If a custom is unreasonable, it is harder to prove its existence and application.  In some cases, the courts will take judicial notice of a very well-established custom.


Collective Agreements I

In unionised employment, there are commonly collective agreements, which deal with matters that may become terms and conditions of the employed contract. Where collective agreements are varied, the varied collective agreement may be incorporated into the contract. However, the varied terms cannot usually be incorporated, if the employee objects.

Questions may arise as to whether individual contracts of employment incorporate terms

from collective agreements. The general principles of incorporation of contractual terms apply. There must be sufficient clear reference and words or other evidence that he terms are to be brought in and will apply to the individual employment contract. This may be so even if the agreements themselves are not binding.


Collective Agreements II

There is a presumption that collective agreements are not intended to be legally binding. They are more commonly in the nature of aspirations or understandings in principle. They may nonetheless contain terms that are separately incorporated in the contract of employment.

If a term in a collective agreement is precise and it can be inferred that it is intended to create legal relations, it may be binding. The test as to whether the agreement is intended to be binding is objective.

A collective agreement as such, would be enforceable only between the parties, generally the employer and union. However, in principle, although rarely in practice, the union may act as agent for the employees. More commonly terms of employment in the collective agreement are incorporated indirectly into individual employment contracts, by later implied offer and acceptance.

A collective agreement between an employer and a union may be incorporated into the contract of employment. Generally, a change in the agreement will become part of the contract by acquiescence and being acted on. If, however, an employee objects to the change, then he will not be bound by it. The employer is entitled to assume the employee’s consent unless he specifically objects to it.


Industrial Relations Act

The Industrial Relations legislation provides that terms and conditions can be made part of an employment contract automatically. See the articles in relation to Joint Labour Committees and registered employment agreements. There are some other instances in the public or semi-state sector where legislation in the particular sector bears directly on employment contracts.

Registered Employment Agreements apply automatically to all the relevant group or type of employees in the sector, job type and grade to which they apply. The Labour Court may register and agreement, provided

  • there is substantial agreement between the parties representing interests of employees and employers;
  • that it should be registered;
  • that it applies to all workers of a particular type or class;
  • the court is satisfied that it is desirable and expedient to have a separate agreement for that class;
  • the agreement is not intended to unduly restrict employment of the class or ensure the protection of inefficient or unduly costly work methods;
  • the agreement provides that if there is a trade dispute, there will be no strike or  lockout until the dispute has been submitted for negotiation in the manner specified an agreement.

Terms Implied by Constitution

Where a person holds an office established under law, the courts will imply a requirement for constitutional justice and fair procedures. The courts interpret the legislation in a manner that is consistent with the constitutional right to fair procedures in relation to decisions affecting his good name and livelihood.

Constitutional justice may require that there be an oral hearing, in some cases. In other cases, the right to make written representations which are considered, may suffice. There may be a right to be represented by legal representatives, union representatives or others.  Legal representation will not always or even often, be required in internal investigations.

Constitutional justice entails a right to challenge an accuser. The person whose good name or livelihood is in issue may be entitled to a copy of the evidence against him. He may have the right to cross-examine the opposing or accusing party, the right to give rebutting evidence and the right to address the decision maker in its own defence. He may be entitled to exercise these rights through Counsel in appropriate circumstances

In effect, the principles of natural and constitutional justice operate through the fair procedure requirements under the Unfair Dismissals Act.  Even if there is no implied term in an employee’s contract for fair procedures in relation to dismissal, then the effect of the Unfair Dismissals Act and the relevant codes of practice, is to require fair procedures. Failure by the employer to do so, leaves the employee at risk of a finding of unfair dismissal.


References and Sources

Primary References

Employment Law Meenan 2014

Employment Law Supplement       Meenan 2016

Employment Law Regan & Murphy 2009 (2nd Ed 2017)

Employment Law in Ireland Cox & Ryan 2009

Other Irish Books

Employment Law Forde & Byrne 2009

Principles of Irish Employment Law         Daly & Doherty   2010

Employment Law Contracts (Book & CD-ROM)        Beauchamps, Solicitors          2011

Periodicals and Reports

Employment Law Yearbook (annual) Arthur Cox

Employment Law Reports

Irish Employment Law Journal

Employment Law Review

Legislation

Dismissal & Redundancy Consolidated Legislation   Barrett, G   2007

Irish Employment legislation (Loose-leaf)         Kerr  1999-

Employment Rights Legislation (IEL offprint)   Kerr  2006

Shorter Guides

Employment Law Nutshell    Donovan, D         2016

Employees: Know Your Rights Eardly     2008

Essentials of Irish Labour Law Faulkner 2013

Websites

Workplace Relations Commission http://www.lrc.ie/en/

Irish Human Rights and Equality Commission https://www.ihrec.ie/

Health and Safety Authority http://www.hsa.ie/eng/

UK Texts

Textbook on Employment Law, Honeyball, et al. 13th Ed. 2014

Labour Law, Deakin and Morris 5th Ed. 2012

Employment Law, Smith and Wood 13th Ed 2017

Selwyn’s law of Employment Emir A 19 Ed. 2016

Employment law: the essentials. Lewis D Sargeant M and Schwab M 11 Ed.2011

Labour Law Collins H, Ewing K D and McColgan 2012

Industrial relations law reports. (IRLR): Law Section,

Employment law Benny R Jefferson M and Sargent 5th Ed.  2012

Pitt’s Employment Law 10th Ed. Gwyneth Pitt  2016

CLP Legal Practice Guides: Employment Law 2016 Gillian Phillips, Karen Scott

Cases and Materials on Employment Law 10th Ed. Richard Painter, Ann E. M. Holmes 2015

Blackstone’s Statutes on Employment Law 2015 – 2016 Richard Kidner

Drafting Employment Contracts 3rd Ed. Gillian Howard 2017

The Contract of Employment Edited by Mark Freedland, Alan Bogg, David Cabrelli, Hugh Collins, Nicola Countouris, A.C.L. Davies, Simon Deakin, Jeremias Prassl 2016

UK Practitioner Services

Tolley’s Employment Handbook 2017 Mrs Justice Slade 2017

Butterworths Employment Law Handbook 2017 Peter Wallington 2017

Blackstone’s Employment Law Practice 2017 Edited by Gavin Mansfield, John Bowers, John Macmillan 2017

UK Periodicals and Reports

The Employment Law Review 8th Ed.   Erika C. Collins 2017

Industrial Relations Law Reports

Employment Law in Context: Text and Materials 2nd Ed. David Cabrelli 2016