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What is the implied term of trust and confidence in an employment contract?

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A contract of employment is comprised of more than just the express terms given to the employee in the document.  Employers should also be aware of implied terms, which are terms not expressly written in the contract but are implied into it by the common law or statute.  These implied terms impose additional responsibilities and breaching an implied term could lead to a costly tribunal claim. One implied term that is cited in many Employment Tribunal claims is the implied term of trust and confidence.  Our Employment Law team today review what this term in particular means with examples of how to minimise the risk of breaching it.

The implied term of trust and confidence (ITTC) developed through case law and was approved by the House of Lords in the case of Malik and another v Bank Of Credit & Commerce International SA (in compulsory liquidation) [1998] as meaning, the employer 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 between employer and employee.”

The ITTC is a mutual obligation and applies to both employers and employees from the commencement of the employment relationship, though it is more common for employees to bring a claim against their employer alleging a breach of the ITTC.  Employees can allege their employer breached the ITTC thereby justifying their resignation and allowing them to claim constructive unfair dismissal.

Can the ITTC be excluded from a contract of employment?

This question has not been definitively answered by case law, and so is uncertain. Generally, an express term of a contract will take precedence over a term implied at common law. However, it could be argued that the ITTC is necessary to all employment contracts and therefore cannot be excluded. As an employer, you should also consider the damage you could inflict on your reputation and employee relations if you attempt to expressly exclude the ITTC from your employment contracts.

What is the legal test for breach of the implied term of trust and confidence?

If either party breaches the implied term of trust and confidence, this may be regarded as a repudiation of the employment contract. A breach of the ITTC by the employer entitles the employee to resign and claim constructive dismissal.

The Employment Tribunal considers two questions when deciding whether conduct has breached the ITTC:

  1.  Was there a reasonable proper cause for the conduct?
  2. If not, was the conduct ‘calculated or likely to destroy or seriously damage trust and confidence’?

When considering the second question, the ET considers whether the conduct, judged objectively, had the effect of seriously damaging the trust and confidence between the parties. It is not necessary to show that the party intended to repudiate the contract, nor is it necessary to show they acted with malice.   

A breach of the ITTC does not have to be one incident.  It may be a culmination of a series of actions or omissions, which individually would not have amounted to a separate breach.  In such cases there will usually be a “last straw” incident which by itself may not amount to a breach of contract, but which together with previous conduct has caused your employee to end the employment relationship. In such cases, the ET will consider whether the series of acts taken together amount to a breach of the ITTC.

How could I breach of the implied term of trust and confidence?

The following are a few examples of conduct by employers that the ET has ruled amounted to a breach of the ITTC.

  • Bullying and abuse: Aggressive and abusive language and management style may breach the ITTC, as could your failure to take steps to prevent bullying by other employees.
  • Consultation: It may be a breach of trust and confidence where you have a duty to consult and you do not do so in good faith and with an open mind.
  • Discipline: It may be a breach to use disciplinary procedures oppressively, such as finding an employee guilty of gross misconduct when you don’t really believe they committed gross misconduct, or imposing a punishment that is disproportionate to the offence.
  • Suspension: Suspending an employee as a “knee jerk” reaction, without proper thought or investigation may also breach the ITTC.

Understanding the terms and conditions of your employment contracts can be complex, and it’s important that you receive adequate advice when drafting them or making amendments.  If you have any questions about the obligations imposed by the ITTC, what type of conduct will breach the ITTC or you have had an employee bring a claim in the tribunal against you, contact our Employment Team on 023 8071 7717 or email employment@warnergoodman.co.uk.

To receive regular Employment Law updates from the team regarding recent tribunal cases and legislation updates, you can subscribe to our weekly Employment Law Newsletter by completing our subscription form or emailing us at events@warnergoodman.co.uk

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.