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Implied terms: the duty of trust and confidence

The terms of a contract of employment can be found in a number of sources.  The main source will be an express agreement between the parties.  It is also often the case that terms are incorporated into the contract by reference, such as the terms of a collective agreement or a staff handbook.  The third key source are implied terms.  These terms are not expressly agreed, but as the name suggests, are implied into a contract by law as being a necessary characteristic of the contract, or by custom and practice of the employer, or by statute or in some cases by a court to reflect the perceived intentions of the parties, i.e. implied “in fact”. 

Most implied terms are relatively straightforward. 

The recent case of Department of Transport v Sparks and others (2016) provides guidance on how terms come to be incorporated by reference.  In that case, the terms in question were in a staff handbook.

Terms implied or modified by statute include by way of example: equality clauses in relation to equal pay as between genders; a maximum limit on working time and provision for rest breaks; and a duty to provide a minimum notice of termination.

Terms implied by law on employees include a duty of good fidelity and good faith; a basic duty of confidentiality in respect of highly confidential information and trade secrets; a duty to obey reasonable instructions; and a duty to exercise reasonable care and skill.

Terms implied by law on employers include a duty to provide work and to pay wages; a duty to provide a reasonable opportunity for resolution of grievances; and a duty to provide a suitable working environment.

However, an implied term which is known to be thorny is the implied duty of mutual trust and confidence.  It is accepted law that an employer or an employee must not, “without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of trust and confidence” that exists between them.  So we understand it should not be damaged, but what is it? There is no fixed definition of what the duty consists of.  Whether particular behaviour will breach the duty in any particular case is a matter of fact.  It is nevertheless important to understand when the duty may be breached as any breach is considered to be fundamental (i.e. repudiatory) entitling the injured party to accept the breach as terminating the employment contract.  If the injured party is the employee that could then give rise to claim for constructive unfair dismissal.

The duty is conveniently illustrated by the case law in which it has been found to be breached.

Breach of trust and confidence is more commonly alleged against employers and has included:

  • conducting business in a corrupt and dishonest way (resulting in damages to an employee’s future employment prospects);
  • capricious or inequitable behaviour in respect of remuneration;
  • spurious disciplinary allegations;
  • failure to provide an impartial grievance process;
  • written or verbal negative comments about an employee without reasonable and proper cause;
  • making a job impossible to perform.

On occasion there have also been cases where an employee has been guilty of a breach of trust and confidence entitling the employer to consider the employment terminated:

  • by forwarding pornographic images to third parties from a work email address;
  • (and in if this was not obvious) wrongly exaggerating sickness (in the recent EAT case of Metroline West v Ajaj (2016)).

The point being made is that it is possible for an employer or an employee to abide by the strict wording of their contract of employment, yet be in breach of it if it engages in inappropriate behaviour that is intended to or has the effect of destroying or seriously damaging employer/employee trust, without proper cause.  Employment contracts are made up of more than just the written document.

For further information on the issues raised in this article, please contact us on 020 7925 8080 or by email at info@spencer-wyatt.com.

+44 (0)20 7925 8080 info@spencer-wyatt.com