What are Implied Terms in Contracts of Employment?

Implied Terms of Contracts – What Are They?Contract

In addition to the express terms of a common law contract of employment, the contract may also include implied terms.   Implied terms are contractually enforceable provisions which are taken to be part of the contract of employment.

Terms may be implied by fact, implied by custom, implied by the common law, or implied by statute.  These terms do not need to be written into the contract to be enforceable.

The criteria for implying a term in fact include the following:

  • It must be reasonable and equitable;
  • It must be necessary to give business efficacy to the contract;
  • It must be so obvious, that it “goes without saying”;
  • It must be capable of clear expression; and
  • It must not contradict any expressed term of the contract.

The test at present is whether the implication of a particular term is necessary for the effective operation of a contract of employment.

Courts have held that employees are under legal duties to be obedient and faithful and must provide care and skill to their employer.  The main employee duties are:

  1. obedience,
  2. fidelity, and
  3. care and skill.

1. An employer has the power to give orders to employees and expect them to be obeyed.  This is balanced by employers having to act fairly and reasonably.

2. The duty of fidelity includes:

  • employees must serve their employer in good faith,
  • employees must act to protect their employer’s interests,
  • employees must not make secret profits at their employer’s expense, and
  • employees must not disclose confidential information of their employer
  • employees must not use their employer’s time for their own self-serving purposes.

3. Employees are expected to carry out their tasks and achieve a standard of skill and competence that can reasonably be expected of someone with their experience and training, including not to unreasonably cause injury or damage in the course of doing their work.

An employer’s duties involve:

  • providing a safe working environment for his or her employees,
  • a duty to provide work for the purposes of the employment contract,
  • a duty to be an employer of good conscience,
  • to act fairly and in good faith (this is an emerging doctrine in the courts).

As mentioned earlier, terms in an employment contract can also be implied by custom.  There must be evidence that the custom is so well known that everyone making the contract in that situation can reasonably be presumed to have imported that term into the contract of employment.  This is due to the fact that much of the daily operations of employment are governed by informal understandings and generally by cooperation between the parties.  Employer policies and codes of conduct may be relevant here, for example, an employee may claim redundancy amounts through the incorporation of his/her employer redundancy policy that was introduced to him/her at an induction to the new employment.

NOTE: To ensure that matters are not left to the Courts to decide (or imply) employers should ensure that all important matters are dealt with in the employment contract expressly (i.e. in writing), so to provide certainty in the terms of the relationship.  Drafting of employment contracts is a critical process that requires consideration and care.


About Pendlebury Workplace Law

Brooke is a specialist workplace relations lawyer practising in the Sydney CBD. Brooke has developed a practice over many years that deals extensively with bullying, harassment, and discrimination issues within the workplace. Brooke also provides workplace training and is a trained workplace mediator, and conducts independent workplace investigations.
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