What are Implied Terms?
Implied Terms are terms, which can be implied into a contract by custom and practice, between an employer and employee.
Implied terms are clauses which are not expressly written down in a contract of employment. If a particular practice is in place over a long period of time there can be an expectation that such a practice will continue.
What are Express Terms?
Express Terms are by contrast actual written terms in the contract.
Any argument that a clause is an implied term can be diluted if there is an express term to the contrary.
Various terms can be implied by
- Common Law
- Custom and Practice.
Legislation and Implied Terms
Legislation can imply terms in a contract where certain terms have not been expressed in a contract of employment.
Under the Payment of Wages Act 1991 for example if certain deductions are not authorised by the contract, they should not be taken from an employee.
Common Law and Implied Terms
Some recent case law is Bidvest Noonan (ROI) Ltd -v- Eleonor Rabonsa (2021) (ADJ-00014776 CA-00018946-001, 004)
In this case an employee argued that an internal company memo indicating that she would get increases in line with a sectorial order was held not to be breached (was not an unlawful deduction) as her salary was more than the sectorial order rate. She was successful in the WRC but was overturned in the Labour Court.
On appeal the Labour Court had regard to two tests in determining what constitutes an implied term of contract.
The two tests were
- Officious Bystander Test
- The officious bystander test as per Shirlow v. Southern Foundaries Ltd. (1939) 2K. B. 206, whereby an officious bystander, if shown a term that self-evidently should have been written into a contract but was not, would exclaim ‘Oh, of course’. This test was expanded upon in the Irish Supreme Court case of Sweeney v. Duggan (1997) ILRM 221 in which it was held that an implied term must be necessary to give effect to the contract and must not expressly offend the contract.
- Custom and Practice
- The second test of ‘custom and practice’ was examined in O’Reilly v. Irish Press, (1937) 71 I.L.T.R. 194 and was identified as a term that is so notorious, so well-known and acquiesced in so that it can be taken to be a term of contract.
The Labour Court overturned the WRC and found that her contractual rate of employment was inclusive of pay rates set out by the sectorial orders. She did not have an entitlement, on the facts, to further increases where those rates were already respected.
Custom and PracticeA good example of the type of custom and practice that could arise is set out in a recent decision of the WRC ADJ-00034765. Here a staff nurse had agreed seven years ago to take six hours of parental leave on a fortnightly basis. She was required to reapply every six months to confirm and took a case under the parental leave act. While she was not entitled to directly rely on the relevant part of the act her claim was partly upheld. This is the precise type of arrangement which would usually be indicative of an implied term.
Implied terms enable inclusions of terms not expressed in contract of employment.
They are then, by nature difficult to define precisely. It is clearer to say what they are not- they are not express terms. Rather they are terms that have been incorporated into the contract or must be read into the contract. The Courts have shown a reluctance to interfere with the express agreement reached by parties in the commercial world but in the employment world it must be stressed that there is an inequality in bargaining positions. This has been recognised by the ECJ recently around collective bargaining agreements in an ECJ Ruling in December 2022.
The conduct and circumstances of the parties is relevant as to whether a term is;
- Necessary to give effect to the contract
- Clearly mutually understood.
- Not in express breach of the contract.
- Established over a period of time.
There has been considerable recent ECJ development in the recognition of implied terms. It will be important for employees and employers to be aware that sometimes the contract contains provisions that may be read into the contract where this is necessary and proportionate and fair.