Chapter 8: Implied Terms - The Foundation of the Employment Contract

Overview of Implied Terms in Employment Contracts

  • Definition: Implied terms are terms that are not explicitly stated in an employment contract but are nonetheless recognized by courts as integral to the agreement.
  • Importance: They fill gaps in contracts that may not cover every conceivable situation, especially in long-term employment scenarios.

Sources of Employment Contract Terms

  • Express Contract Terms: Clearly articulated in written contracts or verbally agreed upon.
  • Ancillary Documents: Includes employee handbooks and HR policies that can contain relevant terms and conditions tied to the employment contract.
  • Implied Contract Terms: Terms that the courts infer as being necessary for the contract to function smoothly, even though they are not explicitly stated.

Nature of Implied Terms

  • Implied terms are legally enforceable and fill voids in contracts for an array of situations, particularly when disputes arise.
  • Judges have the authority to imply terms to address gaps in the contract.
    • Terms Implied in Fact: Based on the presumed intentions of the parties (e.g., business efficacy test).
    • Terms Implied in Law: Based on broader policy reasons, such as an obligation for reasonable notice of termination.

Types of Implied Terms

1. Implied Terms Regulating Employee Conduct
  • Duty of Fidelity: Employees are obligated to obey lawful, reasonable orders from their employer.
    • Case Example: Steen v. British Columbia Housing Management Commission (1992) establishes that employees must follow employer directives unless illegal.
  • Loyalty to Employer's Economic Interest: Employees are required to act in a manner that benefits the employer financially.
    • Case Example: RBC Dominion Securities v. Merrill Lynch illustrates breaches when employees compete or misuse confidential information.
  • Implied obligations include punctuality, honesty, competence, sobriety at work, and non-harassment.
2. Implied Terms Regulating Employer Conduct
  • Reasonable Notice of Termination: Employers must provide reasonable notice to employees before terminating contracts.
  • Safe Work Environment: Employers are obligated to maintain safe working conditions, recognized through occupational health and safety regulations.
  • Compensation: Employers must pay for the labor performed by employees.
  • Non-Interference: Implied term prohibiting employers from preventing employees from completing their work.
    • Relevant in cases of unpaid suspensions and temporary layoffs, which may constitute constructive dismissal.
  • Decency and Respect: Employers are expected to treat employees with dignity, reflected in legal cases of constructive dismissal for workplace bullying.

Evolution of Implied Terms

  • New implied terms can emerge reflecting changing societal values (e.g., duty of decent treatment originated in the early 1990s).
  • Historical context: The power dynamics established by employers as depicted in judge's past rulings, including the legacy of master-servant laws.

Key Cases

  • Lloyd v. Imperial Parking: Established that employees have a right to be treated with respect; bullying behavior from an employer can justify constructive dismissal claims.
  • Bowen v. J.C. Clark: Highlighted the necessity of reasonable exercise of discretion by employers regarding bonuses and treating employees with respect during termination.

Conclusion

  • Understanding implied terms is essential for both employers and employees to navigate employment relationships legally and effectively.