The Interaction Of Implied And Express Terms In Employment Contract And The Effect Of Public Policy Notes
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THE INTERACTION OF IMPLIED AND EXPRESS TERMS IN
EMPLOYMENT CONTRACTS AND THE EFFECT OF PUBLIC POLICY Preparation: In order to prepare for this seminar you should read from one or two of the textbooks in the general reading listed below. You should then look at and consider the four questions that will be discussed. For each question you should read any specific material cited.
Selwyn chapters 3, 10 & pp. 541-553*
Deakin & Morris chapter 4, pp. 217-338 and 347-350*
Painter & Holmes chapter 3*
Collins chapter 5*
Honeyball & Bowers chapter 3*
Pitt, pp. 145-148*
Smith & Wood pp.91-100 and120-134*
W W McBryde, The Law of Contract in Scotland (3rd edn, W Green, 2007) pp. 515 - 539 Freedland (2nd ed. 2003) The Personal Employment Contract pp. 113-195 D. Brodie, The Employment Contract: Legal Principles, Drafting, And Interpretation (Oxford: OUP, 2005) pp. 78
- 80, 185-6, 203 - 215 and 119 - 143*
D. Brodie, The Contract of Employment (Thomson/W Green, SULI, 2008) chapters 13 & 16 David Cabrelli, Commercial Agreements in Scotland: Law and Practice (W Green, 2006) pp. 133 - 142
P. Sales, "Covenants Restricting Recruitment of Employees and the Doctrine of Restraint of Trade" (1988) 104 Law Quarterly Review 600 S. Smith, "Reconstructing Restraint of Trade" (1995) 15 Oxford Journal of Legal Studies 565 Loraine Watson, 'Employees and the Unfair Contract Terms Act' (1995) 24 ILJ 323*
Douglas Brodie, "Beyond Exchange: the New Contract of Employment" (1998) 27 ILJ 79*
David Cabrelli, "Severability clauses: The blue pencil option" (2001) 6 (3) Scottish Law & Practice Quarterly 231 - 236 David Cabrelli, "Post-Termination Covenants in the Spotlight Again" (2004) 33 ILJ 167*
David Cabrelli, "The Common Law Control of Garden Leave Clauses: Public Policy or Trust and Confidence?" (2005) 70 (Dec) Green's Employment Law Bulletin 2 David Cabrelli, "The Implied Duty of Mutual Trust and Confidence: An Emerging Overarching Principle?" (2005) 34 ILJ 284 at 290 - 296*
Charles Wynn-Evans, "Discretionary Bonus Awards, UCTA and the Duty to Give Reasons" (2007) 36 ILJ 207 Douglas Brodie, "The Employment Contract and Unfair Contracts Legislation" (2007) 27 Legal Studies 95*
Mathew Boyle, "The Relational Principle of Trust and Confidence" (2007) 27 Oxford Journal of Legal Studies 633 Douglas Brodie, "Mutual Trust and Confidence: Catalysts, Constraints and Commonality" (2008) 37 ILJ 329
Question 1: What happens when express terms and implied terms conflict with each other? Do the express terms of an employment contract always prevail? How does the position differ from general contract law doctrine on the same point?
Johnstone v Bloomsbury Health Authority  2 All ER 293  IRLR 118  ICR 269*
Johnson v Unisys Ltd  1 A.C. 518, 539 at para.  per Lord Hoffmann (HL)*
Barber v Somerset County Council  2 All ER 385, 397-398 at paras. - per Lord Rodger*
Consistent Group Ltd. v Kalwak  IRLR 505, 510 at para.  per Rimer LJ*
Kulkarni v Milton Keynes Hospital NHS Trust  IRLR 829, 838 at para.  per Smith LJ*
Question 2: What kinds of express terms of a written contract of employment have been found to conflict with the implied terms of the contract of employment?
Specific Reading: David Cabrelli, "The Common Law Control of Garden Leave Clauses: Public Policy or Trust and Confidence?" (2005) 70 (Dec) Green's Employment Law Bulletin 2 O'Brien v Associated Fire Alarms  1 All ER 93  1 WLR 1916 Courtaulds Northern Spinning Ltd v Sibson  ICR 451  IRLR 305 Rank Xerox Ltd v Churchill  IRLR 280 United Bank v Akhtar  IRLR 507*
White v Reflecting Roadstuds Ltd  IRLR 331 Johnstone v Bloomsbury Health Authority  2 All ER 293  IRLR 118  ICR 269*
Barber v Somerset County Council  IRLR 475  2 All ER 385  1 WLR 1089*
TFS Derivatives Limited v Morgan  IRLR 246*
Land Securities Trillium Ltd. v Thornley  IRLR 765*
Milne v Link Asset & Security Co. Ltd.  All ER (D) 143 (Sep)*
Takacs v Barclays Services Jersey Ltd.  IRLR 877*
Luke v Stoke on Trent City Council  IRLR 305 Socimer International Bank Ltd. v Standard Bank London Ltd.  1 Lloyd's Rep. 558, 577 at para.  per Rix LJ Brown v GMB at para.  per Elias J - Full Official Transcript of this case is available from Westlaw*
Evans v Home Office  IRLR 59 Question 3: Does the Unfair Contract Terms Act 1997 apply to contracts of employment? Is there a difference between Scots law and English law on this point? Do you agree with the position?
Specific Reading: Loraine Watson, 'Employees and the Unfair Contract Terms Act' (1995) 24 ILJ 323*
Douglas Brodie, "Beyond Exchange: the New Contract of Employment" (1998) 27 ILJ 79*
Freedland (2nd ed. 2003) The Personal Employment Contract pp. 190-191*
D. Brodie, The Employment Contract: Legal Principles, Drafting, And Interpretation (Oxford: OUP, 2005) at 78- 80 and 211 - 215*
David Cabrelli, "The Implied Duty of Mutual Trust and Confidence: An Emerging Overarching Principle?" (2005) 34 ILJ 284 at 290 - 296*
Charles Wynn-Evans, "Discretionary Bonus Awards, UCTA and the Duty to Give Reasons" (2007) 36 ILJ 207 Douglas Brodie, "Square Pegs, Round Holes and the Unfair Contract Terms Act" (2007) 76(Jan) Green's Employment Law Bulletin 2*
Douglas Brodie, "The Employment Contract and Unfair Contracts Legislation" (2007) 27 Legal Studies 95*
D. Brodie, The Contract of Employment (Thomson/W Green, SULI, 2008) chapter 17*
Smith v British European Airways Corporation  2 KB 893 Brodin v A/R Seljan  SLT 198 Chapman v Aberdeen Construction Group  IRLR 505*
Commerzbank AG v Keen  IRLR 132*
Question 4: On what basis do the Courts control the enforceability of restrictive covenants? Is it the implied terms of the contract of employment - or some other doctrine?
If an employer wrongfully repudiates an employee's contract of employment, are they entitled to enforce a restrictive covenant against that employee?
List the kinds of restrictive covenants which are encountered in practice. If a court holds that a particular portion of a restrictive covenant is unenforceable, will the court be prepared to sever that particular offending portion from the contract?
Specific Reading: W W McBryde, The Law of Contract in Scotland (3rd edn, W Green, 2007) at 515 - 539 David Cabrelli, "Severability clauses: The blue pencil option" (2001) 6 (3) Scottish Law & Practice Quarterly 231-236 Linda Clarke, "Repudiation of Contract and Breach of Confidence: General Billposting v Atkinson Revisited" (2003) 32 ILJ 43 David Cabrelli, "Post-Termination Covenants in the Spotlight Again" (2004) 33 ILJ 167*
D. Brodie, The Employment Contract: Legal Principles, Drafting, And Interpretation (Oxford: OUP, 2005) at 119143 David Cabrelli, Commercial Agreements in Scotland: Law and Practice (W Green, 2006) at 133-142 D. Brodie, The Contract of Employment (Thomson/W Green, SULI, 2008) chapter 13*
General Billposting v Atkinson  AC 118*
Herbert Morris Ltd v Saxleby  1 AC 688*
Hinton & Higgs Ltd. v Murphy  IRLR 519 Office Angels Ltd. v Rainer Thomas  IRLR 214 Living Design (Home Improvements) Ltd. v Davidson  IRLR 69 Rock Refrigeration v Jones  1 All ER 1 Axiom Business Computers Ltd. v Frederick 2003 GWD 37-1021 Dunedin Independent plc v Welsh  CSOH 174 Thomas v Farr plc  IRLR 419 Christie Owen & Davies plc v Walton  CSOH 37
Lonmar Global Risks v West  IRLR 138 Loraine Watson, 'EmployEEs and the Unfair Contract Terms Act' (1995) 24 ILJ 323*
Douglas Brodie, "Beyond Exchange: the New Contract of Employment" (1998) 27 ILJ
79* at 85-6*
"ABSTRACT This article seeks to explore how the contract of employment might develop in the light of
Malik v BCCI  3 All ER 1. The nature of the obligation of mutual trust and
confidence is explored and the importance of Scally v Southern Health Board  1
AC294 is discussed. The article considers whether the courts would permit the parties to
contractout of mutual trust and confidence. It is argued that, on public policy grounds, any
such attempt should be illegitimate. The article then moves on to consider what the
contract of employment will look like it if continues to evolve towards being a contract of
good faith. It is suggested that this might involve more extensive obligations being owed by
EmployEEs as well as EmployERs. One instance of this might be over disclosure of
information; both at the time of the formation of the contract and during the period it
subsists. The article reviews cases where EmployER's discretionary powers have been
restricted by the obligation of mutual trust and confidence and considers whether this
might be extended to control the EmployER's prerogative over termination of the contract.
It is suggested that valuable comparisons can be made with the law relating to the contract
of trade union membership. The article also considers the significance that the existence
of employment protection legislation holds for the development of the common law.
5. CONCLUSION The emergence of mutual trust and confidence is a development to be welcomed
unreservedly in employment law. It serves to challenge abuse of power, and promotes the
dignity of the EmployEE.114 The application of the term is likely to be consistent with the
principle of natural justice.115 Its emergence in the UK is consistent with good faith playing a
greater role in the law of contract as a whole.116 It is also significant that the law of
employment regulates longterm relationships. Campbell and Harris ' . . . see a longterm
contract as an analogy to a partnership. The parties are not aiming at utilitymaximisation
directly through the performance of specified obligations; rather, they are aiming at utility
maximisation indirectly through longterm cooperative behaviour manifested in trust and
not in reliance on obligations specified in advance'. 117 What is most intriguing of all, for
employment lawyers, is whether the law of the employment contract as a whole will
continue to evolve so that the contract could be categorised as one of good faith. To put it
another way, will the contract become one of good faith rather than merely a contract
which contains elements of good faith. Certainly the judiciary are becoming more willing to
find a place for good faith within the law of contract. 118 Writing in the Law Quarterly Review
Lord Steyn observed that'... where in specific contexts duties of good faith are imposed on
parties our legal system can readily accommodate such a well tried notion. After all, there
is not a world of a difference between the objective requirement of good faith and the
reasonable expectations of parties'.119 In years to come Malik may be regarded as the
beginning of a new era in employment law.120 It is also intriguing to speculate as to what
effect a whole hearted movement to good faith would have on the rights and obligations of
the employment contract. Hitherto, the evolution of mutual trust and confidence has been
very much to the benefit of EmployEEs. One might pause to consider whether, as the term
continues to evolve, that will continue to be the case. Underlying notions of
'interdependence, caring and commitment' may lead to the implication of obligations more
consistent with a unitary model of employment relations rather than one based on
pluralism. One must also note something of a paradox. The strengthening of employment rights sits
uneasily with the contemporary employment market where job insecurity is rife. Forms of
employment, such as fixed terms contracts, abound which diminish greatly the EmployEE's
stake in the enterprise. In Malik itself judicial cognisance was taken of the fact that 'Jobs of
all descriptions are less secure than formerly, people change jobs more frequently, and the
job market is not always buoyant. Everyone knows this.'121 In a sense such employment
practices constitute the most radical form of contractingout of fundamental obligations. 114 Whelan v Waitaki  2 NZLR 74. 115 Auckland Shop EmployEEs Union v Woolworths  2 NZLR 372. 116 Beatson and Friedmann, op cit at 1415. 117 'Flexibility in LongTerm Contractual Relationships: The Role of Cooperation' (1993) 20 Journal of Law and Society 166 at 167. 118 And see Atiyah, op cit at 213. 119 Lord Steyn, 'Contract Law: Fulfilling the Reasonable Expectations of Honest Men' (1997) 113 LQR 433 at 439. 120" One might also note that Art 6 of the Works Council Directive uses the phrase "negotiate in a spirit of cooperation". 121 Op cit at 8, per Lord Nicholls."
David Cabrelli, "PostTermination Covenants in the Spotlight Again" (2004) 33 ILJ
"1. INTRODUCTION The recent case of Axiom Business Computers Ltd v Frederick1 which came before the
Outer House of the Court of Session in Scotland considered two restrictive covenants
contained within a sales director's terms and conditions of employment.
The first covenant restricted her from working for a competitor of her EmployER after the
termination of her employment.
The second covenant which restricted her from soliciting customers of the EmployER was
the subject of much more debate in the Outer House of the Court of Session. The judgment of Lord Bracadale in Axiom analyses a number of the common law cases
on contracts in restraint of trade and raises, in particular, a number of interesting points in
respect of the enforceability of restraints on EmployEEs from canvassing, soliciting or
dealing with customers of their former EmployER. In particular, it again raises the
questions as to whether a covenant which attempts to restrict the EmployEE from
(i) with whom they initiated contact or negotiations,
(ii) with whom they had had no contact or dealings, or
(iii) who had been past customers of the EmployER prior to the commencement of their
will be treated as enforceable by the courts. This case note explores these issues and others.
4. CONCLUSION Axiom reiterates how difficult it is to draft a noncompetition covenant in appropriate terms.
Surprisingly, Axiom suggests that where a clause prohibiting
(i) the disclosure of nonconfidential information and
(ii) the solicitation of the EmployER's customers is contained within an EmployEE's
contract of employment,
this will render any supplementary further noncompetition covenant too wide. In addition,
the absence of a temporal restriction and concise description of the market the EmployER
was seeking to protect in a noncompetition covenant will be fatal. Axiom also demonstrates the difference between the treatment of noncompetition
covenants and those proscribing the EmployEE from soliciting customers of the
EmployER. The courts adopt a more relaxed attitude to covenants of the latter type,
especially those restricting an EmployEE from canvassing or dealing with prospective
(i) with whom they initiated contact or negotiations and
(ii) subject to the cases of Austin Knight and Gledhow, with whom they had had no
contact or dealings.
As ever, the enforceability of such covenants will depend on the nature of the EmployER's
legitimate business interest and whether the covenant is no more than adequate to protect
David Cabrelli, "The Implied Duty of Mutual Trust and Confidence: An Emerging
Overarching Principle?" (2005) 34 ILJ 284 at 290 296*
Question 1 What happens when express terms and implied terms conflict with each other?
Do the express terms of an employment contract always prevail?
How does the position differ from general contract law doctrine on the same
• Gap Filling o Where there are no Express Terms o Where it is so obvious that it would have been included o Business efficacy Express terms trump implied terms (Johnstone, Akhtar) EXCEPTIONS Express term may be subject to implied term (Akhtar) "If there are areas where strict adherence to contractual rights can produce inequitable
results, traditional contract doctrines may be circumvented. Consequently, the courts have thus developed and expanded the doctrine of the implied
term of trust and respect which is sometimes used to override strict contractual obligations,
on the basis that the exercise of contractual powers by management is subject to that
power being exercised reasonably and not in an unconscionable manner." (Selwyn, 3.2) "Under the law of employment, contractual terms are subject to an overriding obligation of
trust and respect." (Selwyn, 3.24)
Johnstone v Bloomsbury Health Authority  ICR 269  IRLR 118*
Junior Doctor 40 hour week + 48 hours overtime
Express term subject to implied term Express/implied terms must be exercised concurrently BrowneWilkinson Coexisting Interaction between Express/Implied terms. Contractual term has to be exercised in recognition of duty of care.
Duty to Exercise Care - Excessive Workload Concerning: duty to exercise reasonable care, express terms, psychiatric wellbeing
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