Law guide: Employment

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Implied terms

Implied terms

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Implied terms

Even where a particular point is made in a contract or a written statement of the terms of the contract prepared by an employer, there are certain duties and obligations that are read into the contract and apply to you and your employee.

Employer's duties

Duty to pay wages

This is perhaps the most important of an employer's implied duties. As an employer, you have an implied duty to pay all your employees for the work they have completed.

If an employment contract provides sick pay, but does not specify the length of time that it will be paid for, then a court or tribunal may decide for how long it shall be payable. The general presumption is that an employer will only pay sick pay for a reasonable amount of time. What is a reasonable amount of time is determined by the industry that the employee works in and any other circumstance that a court or tribunal finds to be relevant.

Duty to provide work

There is no general obligation on an employer to provide work for the employee as long as their wages are paid. The duty to provide work can exist where:

  • An employee has skills which require work to be provided to maintain those skills
  • The employee holds a senior position
  • An employee's bonus or other benefit are determined by appraising how well they have performed their duties, which requires them to be provided with work

Equally, if your employee is paid by commission, or is a piece worker, there is an implied duty to provide them with work. In these circumstances an employer should not withhold work, if it is available. This duty also applies to skilled workers, who may need work to maintain their level of skill through work.

Duty to indemnify employee

You are under a duty to indemnify your employee for expenses and liabilities incurred by him or her in the course of his or her employment.

Duty to take care of employee's health and safety

Employers must take reasonable care of their employees' health and safety. There are many specific acts and regulations which cover working conditions and safety at work. Failure of an employer to act in accordance with the relevant legislation may in certain circumstances lead to criminal proceedings and fines.

For more information about an employer's statutory duties under health and safety legislation see: The Health and Safety Executive

Mutual trust and confidence

Employers must not, without reasonable and proper cause conduct themselves in a way that is likely to destroy or damage the relationship of mutual trust and confidence that exists between an employer and an employee. Examples of such behaviour are:

  • Physical and verbal abuse
  • Sexual harassment and the failure to support someone who is the victim of sexual harassment at work
  • Moving a senior employee into an inadequate office or location
  • Imposing an unwarranted disciplinary sanction or failing to follow a disciplinary procedure

An employer's behaviour must be very serious in order to breach the implied term of mutual trust and confidence. In a response to a breach, an employee may resign and claim constructive dismissal and if successful the employer will be responsible for compensation.

Duty to take reasonable care in giving references

There is usually no obligation on an employer to provide an employee with a reference. If an employer does provide a reference to a third party, that employer owes a duty to the employee who is the subject of the reference (and to the recipient of the reference).

When giving a reference an employee must ensure that it is true, accurate and fair. The reference must not give a misleading or unfair impression overall. In addition, there is an implied term that the information on which it is based shall be verified and that it will be compiled with reasonable care.

If a reference is not compiled reasonably and carefully an employer may be liable for any economic loss suffered as a result of a negligent misstatement. An employer can be sued by an employee for an inaccurate reference either for breach of an implied term or in negligence. Employers should also ensure that the reference they give is not discriminatory in any way.

Provision of a grievance procedure

There is an implied term in all contracts of employment that employees' grievances will be dealt with promptly and properly. For more information on grievance procedures see: Grievances.

Notice

Where an employee's contract specifies a period of notice that must be given in order to terminate the contract of employment this must be given or an employer will have acted in breach of contract. Where a contract is silent as to the amount of notice required to terminate the employment agreement there is an implied term that reasonable notice will be given. This may be greater than the statutory minimum in some cases.

For further information on notice periods see: The employment contract

Employee's duties

Personal service

An employee must be ready and willing to work and cannot delegate or assign his or her duties. Sickness will not breach this duty.

Obedience

Employees must carry out reasonable and lawful orders given by or on behalf of his or her employer.

Whether an order is reasonable depends on the circumstances and whether the employee is obliged under the terms of his or her contract to comply with it.

An employee will not be obliged to comply with unreasonable or illegal orders.

Competence

There is an implied term that an employee will be reasonably competent to do his or her job. Incompetence will be a breach of contract and depending on the seriousness of the breach may result in an employer dismissing an employee.

Due diligence and care

Employees must exercise reasonable care and skill in the performance of their duties and must take care of the employer's property. An employee will be in breach of this duty if he or she performs the duties negligently. Employers are vicariously liable for the actions of their employees. This means that legal responsibility is imposed on the employer even though the act or omission was that of the employee. In such circumstances the employee's negligent act or omission must have occurred during the course of his or her employment.

Fidelity/good faith

This implied term applies during employment but not once it has terminated. Any action by an employee which seriously damages an employer's business will be in breach of this term. Common examples are:

  • Carrying on a business that is in competition with the employer
  • Misuse of business client lists

Competition

Unless your employees are expressly prohibited from doing so, taking a job outside working hours is not necessarily a breach of the duty of fidelity, even where that job involves working for a competitor. It will depend on how damaging that other employment is to your business.

For there to be a breach of the duty of fidelity, your employees must normally occupy a position where they have access to confidential information or trade secrets, such that you are at risk of such information being passed to a competitor.

After completion of employment, an employee may of course compete with you without restriction. Any restrictive covenant, which attempts to restrict such competition, is subject to the doctrines of restraint of trade.

Honesty

Employees must behave honestly. To determine the extent of this duty and the seriousness of any alleged breach the nature of the employer, role of the employee and degree of trust required will be relevant.

Secret profits

An employee must not make a secret profit or take a bribe. This would constitute a breach of trust. You would be entitled in such circumstances to compel your employee to account to you for the secret profit or bribe.

Trade secrets and confidential information

Employees will also breach their duty of fidelity if they use or reveal trade secrets or other information, which by its nature is confidential or which has been impressed upon them as being confidential. However, information of a trivial or mundane character, or information that is available from public sources, cannot be turned into confidential information, even by an express term of the contract.

After employment has ceased, an employee is only prohibited from revealing or using your trade secrets or highly confidential information equivalent to a trade secret. If for example the employee has compiled a list of your customers after leaving your employ, the list will not be treated as a trade secret and the employee will not be in breach of the duty of fidelity. To protect your business in these circumstances, you should ensure you have express terms relating to confidential information.