Implied Terms

Overview of Implied Terms

This article deals with some commonly found provisions which are implied in employment contracts at common law. The matters referred may be the subject of an express contractual condition, which may modify or alter the common law position.

See the article on the implication of terms into employment contracts. In many cases, there will be implied terms specific to the particular workplace or circumstances.

Since the 1970s a large and increasing volume of mandatory legislation applies to employment contracts. They are implied by statute. It is usually not possible to reduce this “floor” of rights, although enhanced rights may be given. These rights are not dealt with here but are dealt with in detail in other sections.

Implied contractual rights may define fundamental aspects of the employment relationship. They deal with matters which appears so basic, that they are assumed. If there is a dispute, the court or other body will look to identify the nature and scope of the implied rights and apply them to the circumstances. The case laws show that the rights have evolved and continue to evolve with the nature of the employment relationship itself.


Work

At common law, there is no general duty to provide work. However, in some cases, the failure to provide work will constitute a breach of an implied term of the contract of employment.

If an employer does not provide work and opportunities appropriate to the position, there may be a breach of the employer’s implied obligations.  There may be an obligation to provide work where the role is of a nature that implies the development and training of the employee.

The issue may arise in the context of employees who are systematically deprived of work and opportunities. In many such cases, the deprivation is likely to breach the mutual duties of trust and confidence. It may have the object or the effect of undermining the employee.

There may be an obligation to provide work where the salary is based on commission It is generally implied that employees must adapt to change and technology in the workplace.  This may include new methods of undertaking the work. There is no implied right to undertake one type of defined of work in one type of matter, even if a change reduces job satisfaction.


Period / Duration of Employment

It is usually implied that an employment contract may be terminated by reasonable notice, even it appears to be for an unlimited term. There is a strong presumption that an employment contract can be terminated by either party by giving reasonable notice. Employment contracts may appear to be for an unlimited duration. They may say nothing at all about being terminated, but are usually nonetheless, subject to the implied mutual right to terminate by reasonable notice.

The contract wording is critical. It may provide clear tenure for a particular duration, in which event, it may be terminated for cause (serious breach) only. If the contract, by its clear terms is for a long or unlimited duration, then compensation may be payable in the event of early termination.

An employment contract can usually be terminated for serious breach, irrespective of the contract wording. Rights to terminate the contract for misconduct constituting a fundamental breach by the employee are likely to apply, irrespective of whether the contract for a fixed or indefinite term.

It is possible to agree a fixed term or fixed purpose contract to which modified  Unfair Dismissal Act rights apply. There must be a genuine fixed ot specific purpose. They cannot be used successively to circumvent employee’s unfair dismissal rights.


Probation

Employment contracts commonly provide for a probationary period, even where the contract is for an indefinite duration thereafter. It is usually contemplated that the employment may be terminated by notice within this period, given for any reason. The purpose is to allow the employee to appraise the whether the employee is suitable. However, apart from statutory rights, there need not be any good reason for termination of employment, where, as is almost always the case, ordinary notice suffices.

Statutory unfair dismissal rights usually apply after one year. The employee can usually be dismissed by giving notice only, within the first year. An objectively justified reason need not exist. There are exceptions where the dismissal is based on certain grounds such as pregnancy and union membership. A probation period may therefore in effect apply if the contract does not specifically provide greater security.


Pay

The employer’s obligation to pay the agreed wages or salary is basic. The employment contract should define the remuneration including, basic salary, overtime, bonuses, benefits in kind and other benefits.  A single failure to pay may or may not be a fundamental breach of contract.  If it is of any significant duration, it is likely to become a fundamental breach, if it is not so from the outset.

There is no statutory right to sick pay in Ireland. Disability or injury benefit may be payable under social welfare legislation. There may be a right to “sick pay” in the particular employment.  It may arise from the employer’s custom and practice. A right to sick pay may be implied in certain industries.

Where there is a right to sick pay, its duration, amount and its relationship with social welfare payments should be clarified. An employer may pay insurance to cover payments in the event of illness. The sick pay scheme should be compatible with social welfare and insurance available.

The courts have implied terms into employment contracts that an employee may not be dismissed on the grounds of sickness or incapacity in such a way as to subvert the entitlement to sick pay, permanent health and similar scheme. The courts have found that it was a breach of the employer’s implied obligations to seek to terminate employment during the sickness or incapacity, so as to deny entitlement under the scheme. A person may be dismissed for other good reasons during such period, but the other good reason must be the true reason.


Retirement

Anti-discrimination laws used to provide an exception for the mandatory cessation of employment at retirement age. It is now required to justify retirement objectively. The employment contract may provide for the retirement age. There may be provision for the variation of the retirement age.

Most occupations adopt a normal retirement age of 65 to 66 years. This coincides with the state pension and most private pension schemes which provide for commencement of benefits at those ages.

The normal retirement age may differ for particular occupations. In certain more stressful, hazardous activities, an earlier requirement age may apply. The pension scheme may provide for an earlier normal retirement date. In some employments, there may be provision for renewal of employment thereafter on an annual or bi-annual basis on the basis of medical examinations.


Grievance and Discipline

There may be a workplace grievance and disciplinary procedures. They are commonly provided for in an Employment Handbook and referred to in the employment contract.  There may, for example, be an obligation to raise grievances at supervisor or manager level before progressing the matter further. There may be provision for escalation of disputes to particular committees or bodies within the employer. The procedure may provide how complaints are to be dealt with and investigated.

Where a person holds an office established under law, such as that of a director or many public sector positions,  which appears to give unfettered authority to an employer to terminate the position without notice, the courts will imply a requirement for constitutional justice and fair procedures. The courts imply that that discipline and termination of employment must be undertaken in a manner that is consistent with the constitutional right to fair procedures in relation to decisions affecting his good name and livelihood.


Fair Procedures I

Constitutional justice may require that there be an oral hearing, in some cases. In other cases, the right to make written representations and receive replies 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

If the decision maker follows fair procedures, the courts will not generally interfere with the substantive decision.  Fair procedures are usually required, even where the position looks clear cut and where there appears to be no possible defence. It is only flagrant and exceptional circumstances, which would justify dismissal without a fair hearing.


Fair Procedures II

Under the principles of natural and constitutional justice,  the decision maker should be unbiased and have no interest in the matter which he adjudicates on and decides.  In the employment context,  there will often be no decision-maker available, without some interest or involvement in the matter.  In this case, the principle yields to necessity.

Where it is possible to provide a decision maker within the employer organisation, with no immediate or direct involvement in the disputed subject matter, constitutional justice will so require. For example, a prospective dismissal may arise as a consequence of alleged misbehaviour in the workplace. In this case, the decision maker should not have been involved in the incident under investigation. Another manager may be appropriate.

Fair procedures do not apply to the same extent to a probationer, as to an employee.


Follow Orders / Directions

There is an implied obligation on the employee to carry out all reasonable and lawful orders given by the employer. The employee is under an implied duty to obey lawful and reasonable management instructions: The orders, directions on instructions must be within the scope of the employment he has contracted to do.

An employee is not required to do anything illegal. The employer is liable to indemnify the employee if the employee is found to be liable to another party as a result of the unlawful act:

Failure to comply with a particular direction is not necessarily, nor is it likely to constitute a fundamental breach of contract, such as to justify immediate dismissal.  Fair procedures are usually required prior to the imposition of disciplinary sanctions or the termination of employment.


General Duties of Employees

An employee must take reasonable care for his own safety and that of his fellow employees at common law. The employer is also vicariously liability for breach of the employee’s duty to his fellow employees.  In recent times, the duty has been extended to covers harassment, bullying and psychological injuries caused by one employee to another.

An employee has a duty to exercise reasonable skill in undertaking the duties of the employment. He must work and apply the skills appropriate to the position. He must exercise due care and attention in the performance of his obligations.

An employee may be obliged to keep his skills up to date.  Where an employee holds himself out as being skilled in a particular area, he must exhibit the skills and ability in the area which he professes.

An employee is generally required to adapt to changing circumstances, technology and work methods.  He may be obliged to retrain or update skills, subject to the employer providing the necessary training and time to learn.  If the change is too radical, it may fall outside the scope of the employment contract.


Trust and Confidence

Employers and employees owe each other mutual obligations of trust and confidence. Each must maintain the trust and confidence that must necessarily underpin an employment relationship. This reflects the general obligations of parties to contracts which require cooperative interaction.

Neither party may without reasonable and proper cause, conduct himself in a manner which I calculated to destroy or seriously damage the relationship of confidence and trust between the parties.  Breach of the duty is considered from an objective perspective. The intentions and motives of the parties are not necessarily the primary consideration.

There was held to be a breach of the duty of good faith and confidence, where the employer failed to give information to its employees about the possibility of purchasing certain additional pension benefits on favourable terms.


Fidelity and Loyalty

The employee’s duty of trust and confidence imports a duty of fidelity and loyalty to his employer. The duty of trust and confidence require that he act in good faith. He owes quasi-fiduciary duties. For example, an employee who receives a secret payment from a customer is likely to breach his duty of fidelity. The employee must generally account to his employer for such sums.

An employee may generally work outside of working hours with another employer or for himself. However, if the other position is inconsistent with duties owed to the principal employer (e.g. use of confidential information), there may be a breach of the duty of fidelity, and it may not be permitted.

The employee owes a duty of good faith / fidelity to the employer while still employed.  This precludes taking action, which is harmful to the employer’s business, including competing with it.  The copying of key information such as client lists and confidential information prior to leaving employment may constitute a breach of the duty.

The duty of fidelity usually requires that trade secrets and highly confidential information must not be disclosed or used, even after the cessation of employment.  For example, a butler who sold secrets and personal information about his employers to a national paper was found to be in breach of the duty.

The employer is entitled to take steps with a view to life after termination of employment, even while still employed. Such steps are limited by the duty of good faith and loyalty. For example, this may preclude the employee from taking advantage of access to information for the purpose of future business in competition with the employer (such as the making of customer lists).


Changes in Employment

It is a basic principle of contract law that one party cannot change a contract without the consent of the other. A contract may be changed by express or implied consent or by acquiescence with the new arrangements.

There is a presumption that an employer may change the general nature or organisation of work.  Work may be conducted in one way at one time, but technology may require a variation of the manner in which the work is undertaken. An employee is expecting to adapt itself to new working methods and techniques in the course of employment.

The contract deals with the immediate relationship such as hourly rate of pay, holidays, sick leave, etc. The law is reluctant to imply provisions in relation to promotion and career development etc. as contractual obligations.  These are deemed incidental matters.

A fundamental change in the nature of employment may be a breach of contract. However, changes in work practices and the manner in which the work is done are unlikely to be a breach of contract. Generally, requiring work to be done during an otherwise idle period for which payment is made, would not generally be a breach of contract.


References and Sources

Primary References

Employment Law  Meenan  2014 Ch. 4

Employment Law Supplement Meenan 2016

Employment Law Regan & Murphy  2009 ( 2nd Ed 2017) Ch.3

Employment Law in Ireland Cox & Ryan 2009 Ch.4

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 (Looseleaf) 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