Implied terms in employment contracts are terms that are not expressly (written or agreed to orally) included in the employment contract. They become part of the contract either because the law requires that they are included or due to the facts and circumstances that surrounds the particular employment relationship or because they are customary in the relevant industry.
Terms implied by law
The law creates a number of rights and obligations for employees and employers. For example, all national system employees (that is most people excluding most of the states’ public sectors and councils as well as most sole traders, partnerships, unincorporated entities and non-trading corporations in Western Australia) are entitled by law to certain working conditions. This includes (but is not limited to):
- A minimum wage
- Leave entitlements
- Maximum working hours
- Right to notice of employment termination
- Redundancy pay entitlements
- Freedom from bullying and harassment
- A safe workplace
Employment contracts of national system employees do not need to explicitly include these rights, because the law implies them into the contract. This means that if the employer does not uphold these rights, they have breached an implied term (or terms) of the contract.
The other side of the coin is that employees also have obligations to their employers that are implied into their contracts even if it isn’t expressly included. These include duties to:
- Follow lawful and reasonable directions from the employer
- Perform their work with skill and care
Terms implied by fact
Terms implied by fact are terms that are deemed necessary to give the employment contract efficacy. That is, the contract doesn’t work or make sense without them. These terms are based on the particular circumstances and relationship of the employer and employee. You might want to think of terms implied by fact as a useful tool that tribunals and courts to use to resolve employment contract disputes. However tribunals and courts do not imply terms lightly. They will only do so when they deem:
- The term to be reasonable and equitable (fair)
- The contract is not effective without it
- The term is so obvious it goes without saying
- It is capable of clear expression
- It doesn’t contradict another term of the contract
Terms implied by business industry custom or practice
Terms implied by industry custom or practice are the third and final type of implied term in an employment contract. To be implied into the employment contract, the term must be so widely practised in the business or industry that it is reasonable to assume that everyone is or should be aware of it. However the term will not be implied into the contract if it contradicts another express term in the contract.
If you need some advice on an employment contract or some help drafting one, please get in touch!