Definition
Terms that form part of an employment contract even though they are not expressly written or agreed, arising from statute, common law, custom and practice, or business efficacy.
UK Context
The implied term of mutual trust and confidence is a cornerstone of UK employment law, established in Malik v BCCI (1997). Breach of this term is the basis for most constructive dismissal claims. UK courts have also developed important implied terms regarding the employer's duty to exercise discretion rationally (Braganza v BP, 2015) and the duty not to exercise a power for an improper purpose. Statutory implied terms cannot be excluded or reduced by contract.
Best Practices
- Draft employment contracts carefully to address all key terms expressly rather than relying on implied terms
- Include clear language about discretionary benefits to prevent them becoming implied contractual terms through custom and practice
- Train managers on the implied duty of mutual trust and confidence and behaviours that could breach it
- Review any long-standing practices regularly to assess whether they may have become contractually binding
- Seek legal advice before changing practices that may have become implied terms
Frequently Asked Questions
What is the implied term of mutual trust and confidence?
This is an implied term in every employment contract requiring the employer not to act in a way that is calculated or likely to destroy or seriously damage the relationship of confidence and trust with the employee, without reasonable and proper cause. It was established by the House of Lords in Malik v BCCI (1997) and is the foundation of most constructive dismissal claims.
Can a discretionary bonus become a contractual entitlement?
Yes, if a discretionary bonus has been paid consistently over several years, employees may argue it has become an implied contractual term through custom and practice. To prevent this, employers should include clear contractual language stating the bonus is genuinely discretionary, vary the amount, and occasionally withhold payment when justified.
Can implied terms override express terms?
Generally no, express terms take precedence over implied terms. However, statutory implied terms cannot be excluded by express terms. Additionally, the implied term of mutual trust and confidence can limit how an employer exercises an express contractual power, requiring the power to be exercised in good faith and not arbitrarily.