Implied terms of employment
In common law contractual terms can be implied by custom and practice, fact and law.
Terms implied by custom and practice
Usual custom and practice in an industry,
profession or workplace can form the basis for
implied terms and conditions of employment. If the
custom or practice is so widely understood and
generally accepted within the area it may be
reasonable to presume all parties entering into the
contract understood it was a term or condition of
employmen.
Where such custom and practice is evident at the
time the contract is entered into, providing there is
no inconsistency with any express term of the
contract, the term will be implied even where one or
both of the parties are unaware of the existence of
the custom.
Terms implied in fact
Terms implied in fact are concerned about what the
parties would have intended. Terms implied in fact
may be terms that must be implied because it is
necessary to give business efficacy to the contract.
Although terms implied in fact are generally very
difficult to prove, and the criteria for implying a term
in fact depends on the type of contract, there is a
landmark test enunciated in BP Refinery
(Westernport) Pty Ltd v Shire of Hastings (1977)
180 CLR 266 which gives direction as to the criteria
considered when implying terms in fact.
The Privy Council in BP Refinery (Westernport) Pty
Ltd v Shire of Hastings (1977) set out 5
requirements that must be considered and exist
before a term will be implied in fact into a contract.
These 5 requirements must be satisfied as the
courts will rarely go behind the four corners of the
contract, and thus the BP Refinery case is authority
for when this will occur.
The five requirements are;
• It must be reasonable and equitable
• It must be necessary to give business efficacy 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
• It must not contradict any express terms of the
contract
Where this test is applied scrupulously, it is a very
difficult test to satisfy. It is insufficient that the term
be reasonable, it must be absolutely necessary
before the term will be implied.
This strict approach has been modified in
employment contracts which generally consist of
both written and oral elements. This new test was
enunciated in Byrne v Australian Airlines Ltd (1995)
185 CLR 410, where the test is now whether
implication of the particular term is necessary for
the reasonable or effective operation of a contract
of that nature in the circumstances of the case.
Whether this new test is in practice any easier and
less onerous to satisfy then the 5 requirements
listed in BP Refinery is debateable.
Terms implied in law
Terms implied in law are terms which the common
law establishes should be incorporated into every
contract of employment unless they are inconsistent
with the express terms agreed upon by the parties.
There are copious duties implied by law into every
contract of employment arising from the nature of
the employment relationship. Examples of
employee duties would include: duty of obedience;
duty of skill and care; duty of fidelity or faithful
service; and the duty of confidentiality and the
ownership and use of information. Employers also
have implied duties such as: duty to provide work;
duty to pay wages; duty of trust and confidence;
and reasonable treatment.
Terms will be implied by law where certain terms
are required as a matter of equity and fairness.
Terms implied in law, as with terms implied in fact,
are created to fill in the gaps not considered and
addressed within the employment relationship.