What Is an Implied Term of Trust and Confidence in Employment Contracts?

An implied term of trust and confidence is a fundamental legal principle in UK employment contracts. It requires both employer and employee to act in a way that does not destroy or seriously damage the relationship of mutual trust between them.

Unlike express contractual terms, which are written into the employment contract, this obligation exists automatically in all employment relationships unless specifically modified (which is rare and legally constrained). It plays a central role in employment law, particularly in claims involving constructive dismissal, disciplinary processes, and workplace conduct disputes.

Breaches of this implied term are frequently relied upon in wrongful termination and employment tribunal claims in England and Wales.

Legal Basis of the Implied Term of Trust and Confidence

The implied term of trust and confidence is established through common law rather than statute. It has been developed through case law over time, including leading appellate decisions.

The modern formulation of the test is generally expressed as:

Neither party shall, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between employer and employee.

This principle applies to all employment contracts and is implied by law to ensure fairness and functionality in the employment relationship.

Purpose of the Implied Term

The implied term exists to preserve the working relationship between employer and employee. Employment is not treated as a purely commercial contract; it involves ongoing cooperation, mutual reliance, and a degree of personal trust.

Its main purposes include:

• Ensuring fair treatment in the workplace
• Preventing arbitrary or oppressive conduct by employers
• Protecting employees from hostile or degrading treatment
• Maintaining stability in employment relationships

It also supports the proper functioning of disciplinary, grievance, and performance management procedures.

When the Implied Term Is Breached

A breach occurs where an employer behaves in a way that seriously undermines trust and confidence. The conduct must be significant; minor disputes or reasonable management actions will not normally amount to a breach.

Common examples include:

• Unfair or arbitrary disciplinary action
• Failure to investigate allegations properly
• Bullying or harassment by management
• Humiliating or degrading treatment
• Unreasonable changes to working conditions
• Failure to address grievances
• Discriminatory behaviour or hostile conduct

The key question is whether the conduct is likely to destroy or seriously damage the employment relationship.

Employer Conduct That Does Not Breach the Term

Not all negative experiences at work amount to a breach. Employers are entitled to manage performance and organise business operations.

Examples of conduct that may not breach the implied term include:

• Reasonable disciplinary action following a fair process
• Legitimate business restructuring
• Performance management based on objective concerns
• Lawful and reasonable instruction changes
• Honest but critical feedback given appropriately

The distinction depends heavily on reasonableness and procedural fairness.

Legal Test Applied by Tribunals and Courts

Employment tribunals and courts apply an objective test when assessing breach:

• Was the employer's conduct likely to destroy or seriously damage trust and confidence?
• Did the employer have reasonable and proper cause for the conduct?
• Would a reasonable employee view the conduct as unacceptable in context?

The focus is not on the employer's intention alone, but on the effect of the conduct and whether it was justified.

Case law confirms that even unintentional conduct can breach the implied term if its impact is sufficiently serious.

Role in Constructive Dismissal Claims

The implied term of trust and confidence is central to constructive dismissal claims.

Constructive dismissal occurs where:

1. The employer commits a fundamental breach of contract (often breach of trust and confidence)
2. The employee resigns in response to that breach
3. The resignation is not delayed or affirmed

Common constructive dismissal scenarios include:

• Persistent bullying or harassment
• Unjustified demotion or pay reduction
• Failure to address serious grievances
• Hostile or exclusionary treatment

If the implied term is breached, it often forms the legal foundation for claiming that resignation was effectively a dismissal.

Impact on Wrongful Dismissal and Tribunal Claims

Although wrongful dismissal is primarily concerned with notice and contractual terms, breach of trust and confidence can still be relevant where:

• It leads to resignation rather than formal dismissal
• It forms part of the factual background in breach of contract claims
• It contributes to claims of unfair dismissal

In unfair dismissal cases, conduct breaching trust and confidence may also be relevant to procedural fairness and reasonableness of the employer's actions.

Damages and Remedies for Breach

A breach of the implied term does not automatically result in compensation. It must be linked to a legal claim such as constructive dismissal or breach of contract.

Where successful, potential remedies include:

• Loss of earnings (past and future)
• Notice pay (in wrongful dismissal cases)
• Compensation for financial losses arising from resignation or dismissal
• In discrimination-related cases, additional awards for injury to feelings may apply (where relevant statutory provisions apply)

The implied term itself is a legal foundation, not a standalone claim.

Limits of the Implied Term

The implied term of trust and confidence is not absolute. It is limited by the employer's legitimate business interests.

It does not prevent employers from:

• Managing performance fairly
• Disciplining employees lawfully
• Making reasonable organisational changes
• Acting within contractual rights

The key limitation is that actions must not be arbitrary, capricious, or without reasonable cause.

Evidence Used in Trust and Confidence Disputes

Tribunals rely heavily on evidence when assessing whether the implied term has been breached.

Common evidence includes:

• Emails and written correspondence
• Disciplinary records
• Witness statements
• HR documentation
• Grievance outcomes
• Workplace policies
• Audio or meeting notes (where legally obtained)

The consistency and credibility of this evidence are critical in determining breach.

Common Issues in Practice

Poor Communication

Miscommunication or unclear management instructions can sometimes be argued as a breach, but usually require additional aggravating factors.

Breakdown in Workplace Relationships

A gradual deterioration of relationships does not automatically amount to breach unless linked to employer conduct.

Procedural Failures

Failure to follow internal procedures often supports claims of breach, particularly where it leads to unfair treatment.

Key Takeaways

The implied term of trust and confidence is a core principle in UK employment law requiring employers and employees to avoid conduct that seriously undermines their working relationship. It applies automatically to all employment contracts and is central to constructive dismissal and many wrongful termination disputes.

A breach occurs where conduct is unreasonable, unjustified, or damaging to the employment relationship, and is assessed objectively by tribunals and courts. While employers retain the right to manage their workforce, they must do so in a way that preserves fairness and avoids destructive conduct.