Did You Know? Employment Contracts Can Be Implied Through Conduct?

Dear Readers,

Welcome to the second issue of “Did You Know?” – powered by The Legal Editorial Daily, where we explore key insights into employment law that could impact both employers and employees. In this issue, we delve into the concept of implied contracts. Let’s explore how conduct, rather than just signed paperwork, can sometimes establish a legally binding employment relationship.

In employment law, contracts don’t always need to be explicitly signed to be legally binding. Sometimes, an employment contract can be implied through the actions and conduct of the parties involved. This is particularly important in situations where formal documentation is absent, but both parties act in a manner that suggests the existence of an agreement.

An implied contract is created when an employer’s behavior leads an employee to reasonably expect continued employment under the same terms as their previous contract. For example, when an employer continues to pay wages, provide benefits, or allow an employee to perform duties beyond the original contract period, it may imply an extension of that contract, even without a written agreement or explicit renewal.

This concept often relies on the principle of quasi-mutual assent, which essentially states that if one party’s conduct reasonably leads another to believe a contract exists, the actions can form the basis of a legally binding agreement. This means that in the absence of a formal contract extension or written agreement, the conduct of the employer – such as continuing to pay wages or provide benefits – can imply that the contract is still in effect.

For instance, an employer who continues to pay an employee’s salary after the contract expires, without informing them that the contract has ended, may be seen as implying the continuation of employment. Similarly, an employee who continues to work under these circumstances may reasonably assume that their employment has been extended, even without formal communication.

A key case that illustrates this principle is Alemayehou v. The Director of Public Service Management and Others (2005) (2) BLR 199 (HC). In this case, the Botswana High Court applied the doctrine of quasi-mutual assent, holding that the employer’s conduct, specifically continuing to pay half salary without formal notice of contract termination, created a reasonable expectation on the part of the employee that their contract was extended.

Employers should be cautious about inadvertently creating implied contracts through their conduct, especially when they do not intend to extend the terms of employment. Clear communication regarding contract termination is vital to avoid confusion. On the other hand, employees should be aware that their continued work or acceptance of benefits can sometimes be interpreted as tacit acceptance of an ongoing contract.

In conclusion, while written contracts are the most straightforward and reliable way to formalize employment terms, actions can speak louder than words. The behavior of both employers and employees can sometimes imply the existence of a contract, highlighting the importance of understanding both explicit agreements and the potential legal impact of conduct.