How to avoid ‘custom and practice’ changes creeping into employment contracts

Clarity on what the terms and conditions of employment actually are is key to managing employees effectively and fairly. But sometimes terms are not clear where things have changed over time and not been properly documented. Here is some advice for avoiding embedding custom and practice changes:

What is a custom and practice change?

Whilst most terms and conditions of employment are ‘express’ terms, which are clearly set out and agreed, there can also be what is known as ‘implied’ terms. A regular event, occurrence benefit may be seen to be an implied term of the employment contract as a result of custom and practice – if it happens regularly, predictably and everyone relies on it.  Even if there has not been clear agreement of the implied term, if the custom and practice is well-established and regularly applied, it could potentially become part of the employees’ employment contracts.

Common custom and practices could include:

  • Regular shift patterns
  • Extra holiday given over the Christmas period
  • Early finish on a Friday
  • Bonuses or sick pay

Terms implied through custom and practice can be implied because of the conduct of the parties – for example if the contract is silent on working days but someone always works three days a week Monday – Wednesday, those will become contractual.  Terms can also be implied through regular custom in the workplace, such as the extra holiday over Christmas example above.

Implied terms fill in ‘gaps’ in the contract, and do not replace express terms.

What are the dangers of custom and practice changes?

While everyone is happy with the arrangement, it may not be a problem at all, but here are some of the reasons why custom and practice changes should be avoided:

  • If terms are not clearly set out in writing, the likelihood of dispute or disagreement is higher.
  • Often the reason something isn’t in writing is because the employer doesn’t intend it to be contractual, and finding out that it is in fact contractual leaves you unprepared
  • If you want to change something, such as remove a reward or benefit that has been implied into the contract through custom and practice, the process is no easier than changing an express term of the contract, and actually could be more difficult as establishing exactly what the current terms are is not necessarily straightforward.
  • Buying employees out of custom and practice changes can be a costly endeavour and, if the custom relates to a reward or benefit, often more costly than the actual benefit!

How can custom and practice contractual changes be avoided in the first place?

It is always best to avoid encouraging the development of custom and practices to ensure things you would prefer to remain discretionary do not become a contractual right for the employee, and to avoid disputes over terms.  This can be done as follows:

  • Remember custom and practice implied terms do not override express terms in the contract. Being as clear as possible in the employment contract will leave a lot less ‘room’ for custom and practice changes to creep in. Frequently employers think being less clear in a contract is better, but actually the opposite is often true.
  • If you want to retain flexibility on things like hours and shifts, exercise that flexibility regularly to avoid drifting into fixed shift patterns. But if you’re finding the fixed shift patterns fine anyway, don’t be afraid to confirm that in writing, rather than trying to retain flexibility out of principle.
  • If you want to offer a reward or event and don’t want it to become contractual, explain the reason for the additional reward/event and be clear that is it not contractual and is purely discretionary and related to the particular circumstances.
  • Monitor activities and practices that you want to remain discretionary and ensure that discretion is being exercised and that managers aren’t drifting into applying the same thing every time. Ensure managers and senior staff are aware of the dangers of custom and practice changes.
  • If you implement a change that you would like to be able to revoke later, rather than keeping it verbal only, put it in writing, specifically stating that it is time-limited or discretionary and can be revoked. That clearly sets out your intention not to be bound by the new arrangement.

There are no time limitations in employment law for how long a benefit or event has to have occurred within a business for it to become an implied term.  If taken to an employment tribunal, the decision is made on a case by case basis and the evidence that can be given to show its merit.

If you would like more information and/or advice on avoiding custom and practice changes, or on changing something you are worried may have become an implied term, please get in touch.