Employers and employees are generally free to agree whatever contractual terms they wish, provided certain statutory rights are complied with, including the right not to be discriminated against on grounds of age, sex, sexual orientation, race, religion or disability. The United Kingdom law governing contracts of employment derives from three main sources common law, statute and law of the European Community. The main statutes governing employment is the Employment Rights Act 1996 (ERA), the Employment Act 2002, the Employment Relations Act 2004, and the Transfer of Undertakings (Protection of Employment) Regulations 2006. Legislation enacted to prevent discrimination includes the Disability Discrimination Act, 1995, the Sex Discrimination Act, 1975, the Race Relations Act, 1976, the Equal Pay Act, 1970, and the Fixed-term Employees Regulations 2002. Common law implies certain general terms into contracts of employment. The contract of employment is important in itself, in that it may give rise to a common law claim for its enforcement or for damages for its breach, but it’s equally important in areas of statutory employment law because the expression ’employee’ is defined by reference to the contractual relationship at common law. A contract of employment can be express or implied, and if it is express, it can be oral or in writing, sec. 230(2), ERA). There is no requirement for the contract to be in writing, but every employer must provide the employee with a written statement of the main terms of employment, sec. 1 (ERA 1996). The contract of employment may consist of both express terms and implied terms, where express terms are those terms agreed by the parties. Implied terms are those terms not expressly agreed by the parties but which can be attached to the contract of employment by common law or statutory, and which places obligations on both employers and employees. Such as the implied term of mutual trust and confidence, the employer`s duty of care and the employee`s duty of fidelity.
Implied terms in the contract of employment.
Under the common law and legislation the employees and employers obligated by implied duties. Where for example, the employee must give faithful and honest service, in Hivac v Park Royal Scientific  a competitor obtained an injunction preventing his staff from working in their spare time for the competition. And the employee must obey his employer’s lawful instructions, in Pepper v Webb  a gardener’s refusal to obey instructions was held to be a breach of his implied duty and warranted his summary dismissal. In Malik v B.C.C.I.  IRLR 462 in which the House of Lords held that if an employer conducts the business in a manner likely to destroy trust and confidence, and damage to the employee’s reputation thereby ensues to the prejudice of future employment prospects, damages will lie. In Goold (Pearmark) Ltd v McConnell  IRLR 516 the EAT established a new implied duty binding the employer to ensure the employee has a reasonable and prompt opportunity to obtain redress of any grievance. And a new obligation of disclosure was imposed on employers by the House of Lords in Scally v Southern Health and Services Board  4 All ER 563. Another breach of the implied duties arises when management fails to recognise and address the early indications of distress in the working environment. This was evident in British Aircraft Corporation v Austin  IRLR 332 where the employer committed a fundamental breach by failing promptly and sensibly to investigate the employee’s complaint about safety. In Malik v B.C.C.I.  IRLR 462 the House of Lords held that the operation by the employer of a corrupt and dishonest business constitutes a breach of the duty to maintain trust and confidence. The employer’s conduct does not have to be directed at the employee concerned who may even be unaware that the conduct is taking place. Lord Nicholls observed (at 464): “the objective standard provides the answer to the (respondents) submission that unless the employee’s confidence is actually undermined there is no breach. A breach occurs where the proscribed conduct takes place: here, by operating a dishonest and corrupt business. Proof of a subjective loss of confidence is not an essential element of the breach.” In Courtaulds Northern Textiles v Andrews  IRLR 84, the employer expressed a strong opinion on the employee’s incompetence which the employer did not believe. It was the employer’s dishonesty that constituted the breach of contract. In Wilson v Racher  ICR 428 it was held that a duty of mutual respect is imposed upon the parties to a contract of employment. Accordingly, in Palmanor Ltd v Cedron  ICR 1008 verbal abuse directed at an employee was held to be capable of constituting a fundamental breach of contract. Implied terms can also be in the context of health and safety duty. The employer’s obligations to provide a working environment which is reasonably suitable for the performance of the employees’ duties. In Waltons & Morse v Dorrington  IRLR 488 where the EAT reached that the term was breached even though there was no evidence of damage to the complainant’s health caused by the smoking of other workers. In this case the implied duty was to provide a comfortable working environment to assist in ensuring the productivity of a majority of the workforce. In Secretary of State v ASLEF No.2  2 All E R 949 it was decided that an employee who places a literal and exacting interpretation on the employer’s instructions with the purpose of injuring the employer’s business so as to secure a wage increase, breaches the implied duty to act in good faith. Employers are required to show that they have reasonable grounds for exercising an express contractual discretionary power. This was so in McLory v Post Office  ICR 758 where it was held that the employer’s express power to suspend, with or without pay, could only be exercised on reasonable grounds and last only for so long as those grounds endured. In substance, limitations based on reasonableness were also implied on efficiency grounds in United Bank Ltd. v Akhtar  IRLR 507. Here the junior and poorly paid employee was ordered to transfer to a distant location at very short notice with no re-location assistance from the employer (a matter which the contract expressly reserved to the discretion of the employer). The EAT implied terms precluding the employer from exercising the contractual discretion in a manner such as to make performance of the contract by the employee impossible.
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