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 employment law issues for the future.
It is usual for the terms and conditions of employment to be clearly documented in a written contract of employment, so that both parties are crystal clear on the rules of engagement from the outset.
In order to comply with the Employment Rights Act 1996 and the subsequent requirements of the Good Work Plan 2020, employers must include a minimum set of express terms within the employment contract or written statement of particulars which will include pay (at least the national minimum wage), working hours, all benefits including paid holiday and notice. 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. Therefore, a contractual term does not necessarily need to be written down for it to be legally binding.
Custom and practice examples include, 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 and duty of care, 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 and reputational damage.
What is custom and practice in employment law?
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. Custom and practice case law exists to guide the tribunal in their decision. For example, Bond and another v CAV Ltd  said that implied terms must be “reasonable, certain and notorious” and Solectron Scotland v Roper  followed with “because there is a sense of legal obligation to do so.”
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?
Examples of Custom and Practice
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.
We see disputes where temporary working pattern changes, flexible working and home working arrangements are offered informally but not reviewed. The expectations of the parties are unwritten which can cause confusion and frustration at a later date. It is recommended that such changes are managed as clear temporary changes with an end date that is actioned or that the change is considered via a formal statutory flexible working process.
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.
How TUPE affects custom and practice
TUPE stands for Transfer of Undertakings (Protection of Employment) Regulations 2006. It is a piece of legislation which protects the rights of employees when the work they do is transferred to another company.
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.
The impact of custom and practice on employment contracts
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.
Whilst the majority of terms will be written in your employment documents, it is key to be in touch with the long-standing actual working practices in your organisation. By reviewing the arrangements and practices on a regular basis, you can stay in control of whether custom and practice is 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.