"The contribution of the common law to the employment revolution has been the evolution of implied terms in the contract of employment. The most far reaching is this implied term of mutual trust and confidence." Per Lord Hoffman Johnson v. Unisys [2001] 2 WLR 1076 (at 1091 para 36). This implied term has been defined by Brown-Wilkinson J in Woods v. WM Car Services (Peterborough) Ltd [1982] ICR 693 as follows.
"Employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee." Lord Steyn for the House of Lords subsequently endorsed this formulation of the term in Mahmud and Malik v BCCI [1997] ICR 606 (at 621 para D).
It can be argued that one of the principal reasons for the development of this implied term lies in the ideology that surrounds contracts of employment. Proponents of this view believe that, irrespective of what language is used to describe it, a capitalist society can only function if the intrinsic conflict between the owners of capital and workers is allowed to exist. However this analysis does not adequately explain why this implied term should have been developed only in the last 25 years. The judiciary have now recognised that contracts of employment embrace more than a purely financial relationship against a background of unequal bargaining power.
"An employment contract creates a close personal relationship where there is often a disparity of power between the parties," per Lord Nicholls in Malik (at 613 para E). This would suggest that it is the recognition that the employment relationship extends beyond the merely commercial that has prompted the judiciary to recognise the implied duty of mutual respect between the parties, see Wilson v. Racher [1974] ICR 428. An understanding of this "disparity of power" is central to an appreciation of the practical limit to the application of the doctrine. Whilst "it imposes reciprocal duties on the employer and the employee"per Lord Steyn in Malik (at 621 para C), hence use of the word "mutual," in practice this inequality between the parties ensures that it is more likely that an employer will be found to have breached the implied term because the burden is not borne equally. This is not simply a reflection of the context of the disputes, arising as they do as a consequence of an unfair dismissal or constructive dismissal claim. I submit that the courts are addressing this inequality in bargaining power, for reasons of public policy. In this regard they are taking a lead from the development of statute law, addressing the same point.
A case often cited as authority for the proposition that the implied term of trust and confidence extends equally to employees is British Telecom v. Ticehurst [1992] IRLR 219. Ticehurt was claiming wages from BT that had been withheld following her participation in industrial action. Gibson L J in the Court of Appeal found for BT on the grounds that Mrs Ticehurst's refusal to sign an undertaking to work normally was contrary to her implied duty to her employer. He approved the dicta of Buckley L J in Secretary of State for Employment v. ASLEF No 2 [1972] 2 QB 455 that "An implied term to serve the employer faithfully within the requirements of the contract" defined the relevant duty, (para 52).
Significantly, having identified the employees duty in this way, Gibson L J qualified the duty by adding "It is necessary to imply such a term in the case of a manager who is given charge of the work of employees and who therefore must necessarily be trusted to exercise her judgement and discretion...faithfully in the interests of the employers." Mrs Ticehurst was a manager of forty employees. This would suggest that should employers seek to rely on Ticehurst in the future they might best be advised that this case could easily be distinguished. In this regard I submit that Ticehurst does not expand the reach of the implied term as far as is sometimes supposed.
The implied term is rooted in contract law. The implications of this are manifold. Firstly, the term is fundamental to the employment relationship and any breach is highly likely to repudiate the contract, see Morrow v. Safeway Stores PLC [2002] IRLR 9.
Secondly, both limbs of the bifurcated term need to be satisfied to prove breach. The conduct of the employer must destroy or seriously damage the employment relationship, and there must have been no reasonable and proper cause for this conduct, see Gogay v. Hertfordshire C.C. [2001] IRLR 727 at para 53.
It follows from this contractual orthodoxy that an employer could use an express contractual term to exclude the operation of an implied term in the employment contracts of its employees. However in United Bank Ltd v. Akhtar [1989] IRLR 507 the terms of a mobility clause were held to imply a duty to the employer to provide, inter alia, reasonable notice to the employee of impending relocation, notwithstanding the wording of an express contractual clause to the contrary. In other words the implied term appeared capable of transcending the express words of the contract contrary to established contract law. Knox J appeared to be conscious of this when he stated, "It seems to us that there is a clear distinction between implying a term which negatives a provision which is expressly stated in the contract and implying a term which controls the exercise of discretion expressly conferred," (para 44). It is submitted that this distinction is rather subtle. In the later, and similar, case of White v. Reflecting Roadstuds Ltd [1991] ICR 733, another EAT decision (though differently constituted), Wood J preferred the alternative ground identified by Knox J, that an employer should not exercise his discretion in such a way as to make it impossible for the employee to perform his part of the contract, as the reason for the decision in that case. In effect he distinguished United Bank, in order to find for the employer in White.
Consequently Brodie has suggested that the implied term seems to be capable of modifying the relationship between express and implied terms, but that this would not allow the implied term to usurp the express term. ("Legal Coherence and the Employment Revolution" Brodie D. LQR 2001 117 (Oct) at 604.)
In Johnson Lord Hoffman stated, "Implied terms may supplement the express terms of the contract but cannot contradict them." Whilst Brodie contends that this is primarily aimed at the termination process (because the case concerned a claim for unfair dismissal which was subject to a statutory provision) it serves to identify two limits to the reach of the implied term. Firstly, "Implied terms operate as default rules. The parties are free to exclude or modify them," per Lord Steyn in Malik, (at 621 para A). Secondly, that implied terms cannot thwart statutory provision, see Johnson.
In Scally v. Southern Health and Social Services Board [1991] ICR 771 an employer was held to be under a positive duty to provide information about the rights of new employees to purchase additional pension benefits. Lord Bridge was conscious that "Formulation of an implied term of this kind...must necessarily be too wide in its ambit to be acceptable as of general application," (at 781 para G). His Lordship went on to describe the conditions that he would apply in order to define with sufficient precision the category of contractual relationship where such a duty could be implied.
These conditions were cited and applied by the Chancery Division in Nottingham University v. Eyett [1999] ICR 721 where, on similar facts, it was held that the claimant "undoubtedly knew of the existence of his early retirement rights" Per Hart J, (at 728 para G) and that "he was able to work out for himself how best to avail himself of those rights." He thus failed the third condition arising in Scally. There are echoes here of the orthodox approach to contract law where it is recognised that it is left to the parties to protect their own interests. However, with great respect to Brodie, the House of Lords in Scally did not modify this principle. Indeed Lord Bridge commented that had the appropriate documentation been distributed to the plaintiffs ""Whatever the shortcomings of those documents, I do not see how the plaintiffs could have succeeded," (at 780 para G). By implication the plaintiffs in this circumstance would have been expected to protect themselves. It is submitted that this interpretation accords with orthodox contractual principle. Though not cited in Eyett directly this ratio proved fatal to Eyett's claim, because he had received the appropriate documents.
In retrospect Eyett's claim was ambitious. He had hoped to extend the limited positive duty established in Scally as far as requiring an employer to notify employees directly of the consequences of their own decisions. In failing, Eyett demonstrated another limit to the reach of the implied duty.
Clarke has criticised the Eyett decision implying that it was inequitable. ("Mutual Trust and Confidence, Fiduciary Relationships and the Duty of Disclosure" Clarke L. 1999 28 ILJ 348.) It is submitted that the preferred view is that the court applied the conditions laid down in Scally, itself a principled decision. Unfortunately for Mr Eyett he did not satisfy the conditions on the facts.
In reviewing the limits of the reach of the implied duty of trust and confidence, I have shown that its primary function is to impose obligations on the employer. The judiciary have extended these obligations in recent years incrementally and with regard to orthodox legal principles.
I submit that in Malik, Lord Steyn chose his words most carefully when he stated, "The major importance of the implied duty of trust and confidence lies in its impact on the employer," (at 621 para H). In doing so his Lordship recognised the widening scope of the employment relationship. Lord Nicholls referred to the employee's vulnerability and emphasised that employment matters are of "vital concern to most people," (at 613 para D.) This can be contrasted with the language used in the ASLEF case that emphasised the commercial objectives of employment contracts. It is submitted that it is the growing recognition of the importance of the employment relationship to the employee that is driving the development of the implied duty of trust and confidence, a burden that in practice is not shared equally. This is because both Parliament and the judiciary recognise the inequality of bargaining power between the parties.
Although the House of Lords in Johnson stopped short of rendering the implied term of mutual trust and confidence a mandatory term on the grounds of public policy, this could happen in the future. The fluvial nature of the term provides ample scope for further development.
Simon Duncan
Department of Law
City University, London.