Table of Contents
The employment relationship between you and your employee will be governed by both express terms contained in a written employment agreement as well as several implied terms that exist by law, fact and customs or practices. Implied terms in employment contracts can be difficult to navigate, given that they are not expressly stated but rather inherently exist as part of the employment relationship. This article will set out how a term is implied in an employment contract and will provide some examples of common implied terms.
How Is A Term Implied In A Contract?
Terms Implied by Fact
Terms that are implied by fact are typically not expressly included in the employment agreement but are required to deal with a specific issue properly. For example, an employee may need to assume certain rights and obligations in order to carry out a function.
The courts have established that in order for terms to be implied by fact, they must be:
- reasonable and equitable;
- necessary to give business efficacy;
- so obvious that they ‘go without saying’; and
- capable of clear expression.
Additionally, terms that are implied by fact must not contradict any other express terms in the contract.
For example, a common term implied by fact is where a company assumes the right to suspend an employee on full pay whilst they are the subject of a workplace investigation. As this term will be implied where it is reasonable, it will depend on a case-by-case basis. However, if your worker has allegedly engaged in misconduct and is posing a risk to the health and safety of others, you will usually be able to rely on this implied term.
Terms Implied by Law
Terms implied by law are terms that exist in the law and govern the relationship between you and your employee, regardless of whether they exist as express terms in the employment contract. Consequently, it is imperative to keep up to date with new laws and court decisions to ensure you are aware of your obligations.
Most importantly, you should be aware of your obligations under the National Employment Standards and any amendments to the Fair Work Act 2009 that place further restrictions on your business.
Terms Implied by Customs and Practice
Terms are implied by custom when it is a common practice in your industry or workplace to follow a specific principle.
To imply a term through customs, you must:
- show the custom or usage exists;
- prove the term is well-known enough that everyone in the trade would reasonably assume that it is part of the employment agreement and;
- ensure that it does not contradict any express terms in the contract.
Evidently, the requirements for proving that a term is implied by custom pose a relatively high threshold. As a result, terms implied in this manner are less common.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Examples Of Implied Terms
1. Duty to Obey Lawful and Reasonable Directions
Each employee has a general implied duty to follow the lawful and reasonable directions that you, as their employer, provide. Whether a direction is lawful is dictated by whether the actions required to be carried out are in accordance with applicable legislation and allowed under an employment contract. Whether a direction is reasonable will be entirely dependent on the specific circumstances and should be determined on a case-by-case basis.
For example, in Kuru v Cheltenham Manor, it was held that the employee breached their employer’s lawful and reasonable direction. The employer required employees to wear personal protective equipment and observe social distancing measures during the height of the COVID-19 pandemic, as they were working in an aged care facility. It was determined that this direction was reasonable considering the vulnerability of the aged care facility residents.
2. Duty to Provide Wages to Your Staff
Unsurprisingly, you must pay your staff wages. This term is implied by law, as the national employment standards set out your employees’ minimum entitlements. This includes that you must provide either the national minimum wage or minimum pay rate in the relevant award.
Therefore, you should ensure that you understand the minimum rate of pay that applies to all of your employees. Even where an employee agrees, you cannot lawfully pay them less than their minimum entitlements at law.
3. Duty to Provide a Safe Workspace
As an employer, you are responsible for the health and safety of your employees. In a recent case, an employer was fined $75,000 for breaching their responsibilities to provide a safe workplace. This occurred when an employee suffered severe hand injuries while using a Makita circular saw. The employee was only given a verbal induction as to how to use the saw and was not given any specific instruction or training.
The court found that the employer had breached their responsibility to provide a safe workplace because they did not:
- inform the employee of the relevant safety procedures for using the saw;
- provide specific instructions for appropriately using the saw; and
- ensure that a supervisor was present to oversee the use of the saw.
Overall, this shows the importance of ensuring that your workplace is safe. Additionally, you must understand your work health and safety obligations, as these terms are implied by law.
4. Duty of Confidentiality
It is best practice to include express terms regarding confidentiality in your written agreement. However, there is also an implied duty by law that your employees do not disclose any of your business’ confidential information. You can be assured that employees cannot disclose any information that is not available in the public domain.
Continue reading this article below the formKey Takeaways
As an employer, you are expected to honour both express and implied terms in your employment contract. It is essential to be aware of the terms that can be implied by law, fact and custom. Examples of terms that are implied include the duty to provide wages toy our staff and a safe workspace. Additionally, your employees also have implied obligations, such as respecting your lawful and reasonable directions. If you breach implied terms, you may face penalties.
If you need help understanding your requirements as an employer, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
We appreciate your feedback – your submission has been successfully received.
