A contract of employment is an agreement between you and your employer. There's always a contract between you and your employer, even if you don't have anything in writing, because you've agreed to work for your employer in return for them paying you.
The terms of an employment contract set out what you and your employer have agreed and what you can expect of each other; your rights and duties. There are several different types of terms and some don't need to be written down in your employment contract (although it is always best for them to be in writing to avoid confusion).
Where do contract terms come from?
Contract terms can come from a number of different sources. For example they could be:
- Verbally agreed (these are called 'express terms')
- In a written statement, contract or similar document. Key terms, such as work, location, hours, pay, holiday and notice periods legally have to be given to the employee in writing by the end of their second month of employment in the form of a written statement (these are also called express terms)
- In an employee handbook or on a company notice board (also express terms)
- In an offer letter from your employer, when you started work (also express terms)
- Required by law, for example, your employer must pay you at least the minimum wage and give you the right to holiday entitlement.
- In collective agreements (which are agreements between your employer and a trade union or staff association – you should be told which agreements apply to you – whether you are a member of the trade union or not)
There are also 'implied terms' in your contract that are probably not written down anywhere, but are understood to exist because of the conduct of the parties. They should be fairly obvious to both parties to the contract. If there’s nothing clearly agreed between you and your employer about a particular matter, it may be covered by an implied term.
Terms are implied into a contract in order to make the contract work, because they're obvious and by custom and practice. To see more details about custom and practice and what this means read our Guide here.
One of the most important implied terms is that of the ‘duty of mutual trust and confidence’.
This means that you and your employer rely on each other to be honest and respectful and shouldn't, without reasonable and proper cause, conduct yourselves in a manner calculated to destroy or seriously damage the mutual relationship of confidence and trust between you.
From an employee's point of view
As an employee, you agree to serve the employer loyally and in good faith and not to act against the employer's interests. This term exists throughout the employment, and includes:
- Not misusing the employer's property or resources
- Not soliciting the customers or clients of the employer in order to transfer their custom to you, the employee, once you have left employment
- Not setting up in direct competition with the employer (although the duty doesn't prevent an employee from seeking alternative employment whilst still employed)
- Not disrupting the employer's business (for example, where an employee persistently raises grievances)
- Damaging the reputation of the employer (In Adamson v Mitchells & Butlers Retail Ltd, a Manager’s behaviour undermined the employer’s trust and confidence in him to such an extent that it warranted summary dismissal. Adamson was the Pub Manager of one of the employer's flagship venues and was recorded on CCTV being pushed around in a wheelie bin by a female worker. He fell out the bin, damaged a door and embraced the worker. Although the Manager admitted that “it was a ridiculously stupid act” the Employment Tribunal found that this dismissal was fair because the employer had lost all trust and confidence in him to do his job).
- In an important case, The Post Office v Liddiard, where the Court of Appeal found that it was relevant to consider whether or not the employee’s conduct outside of work had brought the employer into disrepute. Liddiard was convicted of assaulting a French police officer during a football World Cup tournament and was identified by a national newspaper. He was consequently dismissed for bringing the Post Office into disrepute. The Employment Appeal Tribunal overturned the Employment Tribunal’s decision and said that this was a fair dismissal.
If an employer believes an employee has breached this term of trust and confidence and the breach is serious and substantial they can dismiss you.
From an employer's point of view
As an employer, you have obligations that cover many situations in which a balance has to be struck between an employer managing their business as they see fit, and the employee's interest in not being unfairly or improperly treated.
Examples of what may constitute an employer's breach of the duty of trust and confidence include:
- Unjustified criticism and/or continual criticism of the employee over a period of time
- Failure to investigate properly an employee's grievance or complaints (in a case in September 2013 – Blackburn v Aldi Stores Ltd – the Employment Appeal Tribunal found that failure to provide an impartial grievance appeal process could potentially amount to a breach of the implied term of trust and confidence and form the basis of a constructive dismissal claim; the same Manager had heard the Grievance and the Appeal; the EAT found that an organisation of Aldi’s size should be able to provide an independent hearing by a manager not previously involved in the case).
- Reprimanding a senior employee in front of other employees
- Failure to follow company procedures
- Unreasonable and unjustified workplace monitoring/surveillance of employees
- Deceiving an employee
- Limiting/undermining an employee's authority in key areas
- Subjecting an employee to excessive workloads
- Falsely accusing an employee of theft on the basis of flimsy evidence
- Giving unjustified warnings in order to dishearten an employee and drive him or her out of employment
- Causing psychiatric injury to an employee.
In essence, the duty covers the concept of fair dealing on the part of the employer. If the employer fundamentally breaches this trust and confidence, an employee may be justified in treating his or her contract as having been unlawfully breached, which may enable them to resign and claim constructive dismissal.
In a 2013 case, St Francis Hospice v Burn, an Employment Tribunal found that the employer acted unreasonably when it refused the employee's request to be allowed to be accompanied at a meeting with the management. This was not part of a disciplinary or grievance meeting where there is a statutory right to be accompanied.
The employer appealed and the Employment Appeal Tribunal agreed with the Tribunal - that by refusing the employee to be accompanied the employer had breached the implied term of trust and confidence in all circumstances. This case is very fact-specific, but the employee had had an extensive period of sickness absence and was highly anxious about attending the meeting; her GP had supported her request to be accompanied and the Tribunal found that her concerns were genuine.
If there has been a breach of trust and confidence
So what happens if an employee or employer breaches any of the implied terms of employment?
This will depend on the implied term in question and the seriousness of the breach. Employees are likely to use the breach to claim damages or as a means of justifying a constructive dismissal.
Employers are more likely to use a breach as a reason for instituting disciplinary action and/or justifying dismissal. They would need to show that the breach of the trust and confidence has had an effect on the employment relationship, to the point that the relationship is irrevocably damaged to justify a fair dismissal.
Employers must also demonstrate that the use of this breach as a fair means for dismissal (which would be an SOSR dismissal - "some other substantial reason") is genuine and not 'hiding' other issues, e.g. other types of misconduct.
The breakdown in trust must be substantial and employers need to ask what has caused the loss of confidence - it must be an effect or an outcome of the misconduct event, and this misconduct must not have been considered before. If an employee acts in breach of their obligation of trust and confidence, this doesn't mean that the employer's obligations are suspended or ceases - where the employee's misconduct is obvious, the Employer must still behave in a reasonable and fair manner.
If you are an employer and need ongoing professional help with any staff/freelance issues then talk to Lesley at The HR Kiosk - a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire us for as much time as you need.
Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.