Many employers may have heard of implied terms or ‘custom and practice’, however, understanding what these terms really mean and their impact on your business is crucial in ensuring you are not creating yourself a problem for the future.
It is usual for the terms and conditions of employment to be clearly documented in a contract of employment, so that both parties are crystal clear on the rules of engagement from the outset. Read our blog on the importance of employment contracts for more information.
What are implied terms?
Not all terms are written down, there are some that exist because there is a mutual expectation or assumption by both parties that this term exists. For example, a duty of mutual trust and confidence, which is when both parties have an expectation that they will have a relationship based on honesty and trustworthiness. Duty of care is also an implied term, whereby employers have a duty to protect the health, safety and wellbeing of their employees, physically and psychologically. Should an employer be found to be in breach of these implied terms, this may lead to serious legal implications.
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What is custom and practice?
Custom and practice can be described as those unwritten rules that everyone follows – even if they haven’t been formally agreed and aren’t written down anywhere, or a practice or arrangement which has been happening for a long period of time that both parties seemingly accept and expect.
According to ACAS, customs and practices can become part of an employment contract if:
- The term is generally well-known in the business.
- The term is considered reasonable.
- The term is certain.
Whilst there is no fixed time stipulated by law to determine whether custom and practice can be applied, there are some indications that custom and practice may have been created. For example, within your business, do you have any customs or practices which:
- Have practiced for a long period of time and not only for a temporary basis?
- Although not written down are applied each and every time?
- Are known to both parties and communicated either verbally or by consistent and repeated implementation?
- That there is an expectation that they will be applied on every occasion.
If this is the case, then you may have created custom and practice in your organisation. Ultimately, it would be for an employment tribunal to determine if this were indeed the case, however, such cases can be costly and time-consuming to defend, so how can you strengthen your position and reduce the risk of such challenge?
Custom and Practice – things to consider
Bonus payments are a common area for the custom and practice argument to arise, particularly when there is nothing in writing, and where payment is made year in year out regardless, in the absence of any defined criteria and there is an expectation that this will be so. If you want to offer discretionary benefits such as overtime or bonus payments, clearly outline such discretionary benefits as non-contractual and ensure that discretion is applied.
Review any temporary practices and their application within a reasonable time frame, to ensure that they do not become the expectation and articulate such to your employees, following up in writing to ensure there is clarity on both sides.
If you have any employees being transferred under TUPE, ensure you carry out due diligence in determining whether any custom and practice is applicable, as you may be liable to continue this post transfer.
Where there are disagreements as to whether or not custom and practice applies, allow for the concern to be raised and managed in accordance with your grievance procedure.
It is vital that you, as an employer have a comprehensive and robust contract of employment and policies which clearly defines your position, stating that such terms and conditions, policies and procedures are discretionary and are subject to change by you.
In addition, review your arrangements and practices which are actually taking place across your business on a regular basis to ensure that custom and practice is not being created.
If you would like support with managing this within your business, please call us today to speak to a member of our experienced team, who will be happy to assist.