The rights and duties of bothemployees and employers are set out in a contract of employment (often referredas ‘terms’ of contracts). Terms of employments can be found in express orimplied agreement, collective agreement and various statutory provisions. Allemployees have an employment contract which can be verbal, written or acombination of both.
An express term of a contracthas specific essentials such as an offer, acceptance of this offer,consideration, mutual agreement, (mental) capacity and the legally acceptanceof the terms set out in a contract. The law states that certain express termsmust be given to an employee in the form of a ‘written statement ofparticulars’ within two months of starting a new job. Once all the negotiationshave been completed, both parties expressly state the terms which form part ofa contract. This statement must contain particulars such as1–· The identity of the parties· The start date and the date of their continuousservices· Wages· Commissions and bonuses· Working hours · Nature of duties· Holiday· Overtime· Sick pay and maternity/paternity payIt is the courts and tribunalduties to look into the meaning of such express terms in a way that isconsistent with the law. General contractual rule is that agreed terms of acontract can only be amended by an agreement between both parties. If one ofthe party does not agree with the change it can be held as breach of contract.
Forexample, in Cole v Midland Display Ltd 2a manager who was an employee refused to do overtime without being paid, thecourt held that his dismissal was fair. The court stated that as he wasemployed as ‘staff’ meant that he was guaranteed to wages regardless if therework or not and in return he was required to do reasonable overtime without payif it was required. Employee’s duties An important implied term isthe duty to maintain mutual trust and confidence. In employment tribunals, thisis the most commonly relied upon implied terms and is often quoted by employeeswho claim constructive dismissal. The employer must not act in a way that couldlead to a damage or destroy the relationship with the employee. This wasdemonstrated in the Tullet Prebon Plc V BGC Brokers 2011 case in which thecourt of appeal stated that the obligation of trust and confidence can ariseeven before the commencement of employment. 3.Other examples of these are verbal and/or physical abuse, sexual harassment andfair treatment.
In Yapp v Foreign & commonwealth Office 2013 theplaintiff was suspended followed by a written warning, the defendant breachedthe ‘obligation of fair treatment’ in not conducting some basic investigationson the allegations of sexual misconduct against the claimant4.The duty of fidelity requiresthe employee to serve an employer faithfully at the best of their ability and aduty to be efficient and avoid negligence at work. (Dunn and Another v AAH Ltd2010. 5Thisonly applies in most cases during employment, not after termination ofemployment.
In Penwell Publishing UK Ltd V Ornstein and Others 2007 the highcourt specified that when an employee, (in this case, a journalist) createspersonal or business contacts on his employer’s computer system, the list anddatabase will belong to the employer. The employee was also in breach of goodfaith and fidelity, as he was in a situation where he could’ve prevented anex-employee from taking business away to a new company but failed to do so.6In Faccenda Chicken Ltd 1986 the defendant was a sales manager of theplaintiff and when his employment was terminated, he set up a similar businessselling chicken. He took 5 of the companies’ salesmen (which equated to half ofthe salesmen), two admin staff and the supervisor and started to compete withthe plaintiff. The company sued Fowler for breaking his contract, in particularthe implied good faith by copying a list of the customers and sought aninjunction to restrain Mr Fowler from using confidential information.
The courtfound in favour of the defendant and dismissed the case and specified that thesales information did not amount to trade secret and therefore not protected.If a company has ‘confidential information’ they don’t want an employee todisclose after termination they are advised to state that in their expressterms and it has to be an actual ‘trade secret’ not general knowledge.7When it comes towhistleblowing, there may be some circumstances where if an employee believesthat it is ‘in public interest’ to release information (which would potentiallybreach trust and confidence) they are protected under Employment Rights Act1998. In Chesterton V Normohamed 2017 the Court of appeal upheld the decisionof the tribunal and EAT, finding that a claimant can make a disclosure of public interest, even if by ‘public’ itonly consist of the employees within same workplace8.Legislation on this was passed in 1998 on protected disclosure and is now partof the ERA part IVA. According to section 43B, the following breaches have tobe identified and disclosed to an individual’s employer or to some other personwho holds some responsibility for the matter – · Damage to environment · Criminal offence· Danger to health and safety of any individual· Miscarriage of justice · Breach of legal obligation· Purposely hiding information regarding any ofthe above mentioned mattersGood faith is no longerrequired for making protected disclosure and it does not matter that afterinvestigation the worker’s disclosure is found to be mistaken. However,Employment Tribunals can deduct 25% of an award if the protected disclosure isfound to be made in bad faith or personal gain9.
In the case of Cavendish Munro Professional Risks Management Ltd v Geduld2010, the court ruled that facts had to be produced and ‘allegations’ alone,are not sufficient10.Employer’s dutiesEmployers have a duty to paywages to an employee and a failure to pay wages that are agreed and due to anemployee, is regarded as a breach of their contract of employment. This impliedterm is usually set out as an express term, however, if the contract does notstate this or has incorrect pay on this, then legislation will imply a termthat the claimant is entitled to at least the minimum wages for the workprovided as demonstrated in Driver V Air India 201111.An employee has a right to resign in these circumstances and claim for constructivedismissal. There is no general obligationfor an employer to provide work for an employee as long as their wages are paidbut there are some exceptions to this. Firstly, do their earnings depend on thework performed by the employee and do they require work to maintain thoseskills.
Secondly, if an employee holds a senior position and not being able towork can lead to potential loss of publicity or reputation.Employers are also expected totake reasonable care of an employee, not just physical care, also potentialpsychiatric harm such as stress as in the case of Dickins V O2 200912Employers are also required tonot breach trust and confidence and employers have a duty to not destroy the’mutual trust and confidence’ between the two parties without reasonable andproper cause (Courtaulds Northern Textiles Ltd v Andrew 197913.An employer is not obliged toprovide a reference by law, however where they are providing a reference, aduty of care is owed to the ex-employee to receive a true, fair and accuratereference (Bartholomew v London Borough of Hackney 199914.If a reference is given, implied terms states that the employer will exercisereasonable care in providing a reference, if a job is lost due to recklessreference from ex-employer, damages can be recovered for breach of this impliedterm.Occasionally courts and tribunalsare prepared to imply a term into the contract in cases where the parties didnot adequately reflect the intentions of the parties at the time of thecontract. In this situation, the court may be asked to imply terms into thecontract to fill the gaps in drafting.
Courts are reluctant to imply terms into a contract set between two parties at common law. It is the parties’ role toagree terms and conditions and it is believed that it’s not the role of thecourts or tribunals to rewrite their contract. There are some circumstanceswhere courts will imply a term into a contract at common law such as – Termsimplied through custom, terms implied in fact and terms implied at law15.
There may be certain termsthat are customary to a particular trade profession or locality. If thecontract falls within one of these categories and certain customary terms havenot been expressly stated then they may be implied. These generally derive fromcommon law and from specific statute law. An external observer looking at thebehaviour of the employees and the employer, must be able to conclude that bothparties must have intended their practice to be contractual right with legalforce. In Hutton V Warren, the plaintiff’s farm lease expired and he claimedallowance for seed and labour but there was no provision in the lease.
Thecourt had to establish if a contract was silent on a point, could a term beimplied? It was held that a term was implied, because of its local custom andit also found that the contract didn’t expressly state that allowance wouldn’tbe given either16.Terms implied in facts arebased on the alleged intentions of the two parties. The legal test for impliedterms are – the ‘business efficacy’ test and the ‘officious bystander’ test.
Inthe business efficacy tests, the courts looks at whether a contract would makesense without the business efficacy (make it workable). In the case ofMoorcock, it was argued that there was a term implied in a contract for anchoringa ship at the dock under which the owner guaranteed that reasonable steps hadbeen taken in checking the depth of the water and therefore it was safe for theclaimant to anchor their ship. The ship became damaged due to the rocks anduneven surface on the riverbed. The court implied a term in fact in this caseand held the defendant liable for the damages.
The court introduced thebusiness efficacy test and it is necessary in given a contract business effect.17The second test the ‘officiousbystander’ was suggested by Mackinnon LJ in the 1939 case of Shirlaw V SouthernFoundries where it was argued and accepted that there was an implied term in acontract. Shirlaw was a managing director employed on a 10-year fixed termcontract.
When the company was taken over by another company they altered theirpre-existing articles and permitted two directors and a secretary to remove adirector regardless of the terms set out in their contract. The company arguedthat they had a right to amend their articles of association under the S10companies Act 1929. They had followed all the standard procedure and given thestatutory right to amend their contracts without the interference of courts.The court held that it was implied terms of his employment that he wouldn’t bemoved from his role as managing director during his 10-year fixed term contractand won damages for breach of contract.
18Terms implied in law works abit differently, as they act like a ‘default rules’ for well-established typesof contractual relationships, i.e. between an employer and employee, aninsurance company and a customer purchasing insurance from that company, abuilder and client, a landlord and tenant etc. A default rule is the standardlayout of a contract that automatically transfers a large number of terms intoa contract without the need of negotiations. The case of Liverpool City CouncilV Irwin 1977 placed an emphasis on only implying a term by law into acontract when ‘it’s necessary to do so’ by courts. The plaintiff sued thedefendant for non-payment of rent and she counter-claimed for breach of a dutyto repair the common parts of the flat, the stair case, lifts and rubbishflutes. Nonetheless, the tenancy agreement didn’t make any mention of a duty torepair any part of the flat but did impose an obligation on the tenants.
TheHouse of Lord ended up implying in this case that the landlord (City council)had to take reasonable care to maintain common parts of the building and fromthis arose a legal incident in contract19.some conditions that have to be satisfied in the inclusion of an implied termare as follow- it must be reasonable and practical, it must be necessary togive business efficacy to the contract, so that the no term will be implied ifthe contract is effective without it, it must be clear and obvious, clear ofexpression and it mustn’t contradict any express terms of a contract. This wasfurther expanded in the 2009 Privy Council case of Belsize Telecom.20In this case, Lord Hoffman suggested that implied term should be taken to as’what the instrument, read as a whole against the relevant background, wouldreasonably understood to mean’. Which suggested that that the rules on implyingterms had been relaxed. However, implied term was again narrowed in Marks Plc V BNP Paribas 2013 and most recent case of Irish Bank V CamdenMarket 201721,which both focused on the ‘Cardinal’ rule that implied terms cannot contradictany express terms. In the case of Marks andSpencer V BNP Paribas, M (tenants) rented four floors of an office basedin central London, Paddington from BNP Paribas (landlord).
The case concernedwhether M could recover from Paribas rent relating to a period after thebreak date in its lease and end of the rent quarter. After paying the fullquarter’s rent for December 2011, M&S exercised its right under the breakclause to determine the lease on 24th January 2012. The break clause had twoconditions set out in it. Firstly, on the break date, there shouldn’t be anyarears of basic rent or VAT and secondly, payment of a break premium should beequivalent to annual rent.
The Supreme Court had to decide whether the tenantcould recover the portions of rent during the break date from 24thJanuary2012 to 24th March 2012 and to determine whether such termfor repayment could be implied in the four leases since there was no expressprovision. The tenant was initially successful in their claim, however this wasappealed to the Court of Appeal who reversed High Court’s decision. The SupremeCourt failed to take implied terms into consideration demanding the landlord torepay the tenant. While it would’ve been reasonable for the landlord to repaythe tenant with the proportion of rent relating to the period of break date, itwasn’t required to do so to give business efficacy to the contract.22To summarise in conclusion; thereseems to be a trend followed by the Supreme Court in giving judgement toimplied terms.
In Arnold V Briton 2015, again the Supreme Court declined todepart from the express terms of a lease from a holiday Chalet23.Lord Neuberger concluded that the natural meaning of the words used in theclause seemed clear and to depart from the natural meaning would resultinjustice against the defendant. It seemsfrom more recent cases that it is very unusual for terms to be implied bycourts. There are some cases where implied terms override express terms inparticular, for instance bonus payment, or customs/practices that have been adaptedover a period of time but never been expressed in a contract, however they arefar harder to prove in court.