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Implied Terms vs Express Terms in Employment Contracts
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. Such 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 ethicacy to the contract so that no term will be implied if the contract is effective without it;
- 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 is a difficult one to fulfil because parties must establish that not only were their actions reasonable but that they would have settled on the fact in dispute and no other.
The test at present is whether the implication of a particular term is necessary for the effective operation of a contract of employment.
Essentially, terms employed in law are default judicial rules which are to remain in place in the absence of any agreement by the parties in respect of the contract. They are implied in law to make a contract effective. Australian courts have held that employees are under legal duties to be obedient, faithful and must provide care and skill to their employer. This is balanced by employers having to act fairly and reasonably.
The main employee duties are obedience, fidelity, and care and skill.
An employer has the power to give orders to employees and expect them to be obeyed.
The duty of fidelity is constituted by several obligations imposed on employees whilst they are in the employment of their employer. Essentially, they must serve their employer in good faith, they must act to protect their employer’s interests, they must not make secret profits at his or her employer’s expense, and they must not disclose confidential information of their employer nor use his or her employer’s time for their own self-serving purposes.
Employees are also 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, and also a duty to be an employer of good conscience.
Australian employers are increasingly under an implied duty to act fairly and in good faith. This is an emerging doctrine in the courts. The doctrine has been accepted in the United Kingdom. However, no senior appeal court in Australia has yet declared that the doctrine of trust and confidence is part of employment law. It is likely, however, that such a doctrine will be allowed in some form. For instance, there is existing authority in Australia for similar duties where, for instance, an employer breaches the employment contract to act in good conscience and in good faith to employees where the employer has arbitrarily refused to offer an employee certain benefits made available to other workers and where employees are demoted without good reason upon their return from maternity leave.
Finally, terms in an employment contract can also be implied by custom and practice. The test is quite onerous. There must be evidence that the custom in question is so well followed by the parties making the contract that they can reasonably be expected to have imported the disputed term into the contract of employment.
The custom must be 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 in this respect. For example, an employee may state a claim to obtain redundancy through the incorporation of his or her employer policy that was introduced to him or her at an induction to the new employment.