Implied contracts in the workplace: definition and examples | Enty
You know those TV ads with the “Terms and conditions apply” whispered at lightning speed? Imagine if those terms were never actually written, just assumed. That’s what happens with implied contracts. They’re the fine print you never wrote—expectations born out of casual comments, consistent behaviors, and workplace habits. “Of course you’ll get that bonus,” you say once—and suddenly, it’s law in your employee’s mind. So let’s dig deep, HR pros and business leaders. How do these unspoken agreements take hold, and how can you stop them before they become legal landmines?
This blog post explores the definition of implied contracts, their types, workplace examples, legal enforceability, and how to prevent unintended liabilities. By the end, you'll be well-equipped to identify and address implied contracts in the workplace to maintain clarity and legal compliance.
What are implied contracts?
An implied contract is an unwritten agreement that arises from the actions, behaviors, or circumstances of the involved parties. While not formally documented, implied contracts are often legally binding if they meet specific criteria, such as mutual understanding and good faith.
Unlike a written employment contract—which outlines employee-employer obligations in explicit terms—an implied contract relies on unwritten expectations or norms developed over time. These implicit agreements occur when behavior or consistency creates a reasonable belief of certain promises or terms.
For example, an implied contract might exist if a long-term employee is led to believe they will not be terminated without cause, even though no official paperwork states this.
Key characteristics of implied contracts include:
Non-verbal or behavioral agreement
Based on prior actions, policies, or norms
Can be recognized as legally binding if reasonable expectations are established
Now that we've defined implied contracts, let's break them down further by examining their types.
Let’s face it—verbal agreements and workplace norms can be a ticking legal time bomb. Enty simplifies your contracts with customizable templates, allowing you to create professional, compliant agreements tailored to your business needs. From defining terms to streamlining digital signatures, Enty ensures clarity and consistency every step of the way.
Types of implied contracts
Implied contracts are split into two main categories—implied-in-fact contracts and implied-in-law contracts.
1. Implied-in-fact contracts
Implied-in-fact contracts arise from the conduct of the parties involved. These agreements are inferred through actions, circumstances, or shared understandings, even if nothing formal is documented.
Example:
A manager consistently promises an annual bonus to employees based on performance but doesn’t include it in written policies. After years of this practice, workers may perceive receiving a bonus as a contractual entitlement.
2. Implied-in-law contracts
Unlike implied-in-fact contracts, implied-in-law contracts—also called "quasi-contracts"—are formed not by agreement or intent but by law to prevent unjust enrichment. These contracts are designed to impose fairness and ensure one party doesn’t unfairly benefit at the expense of another.
Example:
An hourly contractor performs additional tasks outside their scope of work with the employer's tacit approval. Courts may require compensation under implied-in-law provisions to avoid exploiting the contractor’s efforts.
Both categories of implied contracts underscore the importance of transparency and well-defined policies in workplace scenarios.
Examples of implied contracts in the workplace
Understanding real-life scenarios is key to recognizing how implied contracts might surface in your workplace. Below are examples where implied contracts frequently arise:
1. Verbal assurances
When a recruiter informs a candidate, “You’ll have a long-term role with us as long as you perform well,” there’s potential for the employee to interpret the statement as an implicit agreement regarding job security.
2. Consistent practices
If a company consistently provides certain benefits—such as bonuses or sabbaticals—without officially documenting them in contracts or policies, employees might begin to expect these benefits as implied rights.
3. Policy implementation
Employee handbooks or company policies with vague wording can unintentionally set the stage for implied contracts. For instance, a handbook stating “We only terminate employees for just cause” can lead to employees assuming this as a binding promise, even if no written employment contract states so.
4. Work culture
Certain workplace norms, like consistently approving remote work requests without formal agreements, can lead employees to assume they have an implied right to remote work flexibility moving forward.
Recognizing these examples in practice helps HR teams and managers proactively address the potential for misunderstandings.
Legal enforceability of implied contracts
The legal enforceability of implied contracts depends on several factors, including consistency of behavior, the reasonableness of expectations, and applicable labor laws.
Courts often examine whether:
Both parties shared mutual intent or understanding
The implied terms align with fairness and equity
A reasonable person would interpret the behavior or communication as binding
It’s essential to note that misconceptions surrounding implied contracts can create liabilities. For instance, courts might deem implied terms enforceable if an employee was promised job security or unwritten benefits, even in the absence of formal agreements.
On the other hand, businesses can limit unintended consequences of implied contracts through well-structured employment practices, as we’ll discuss in upcoming sections.
With Enty, you can formalize expectations through clear policies and documentation. Whether you need robust employee contracts or frequent updates to handbooks, Enty’s platform helps you draft, edit, and send documents in minutes—keeping your business protected from implied contract pitfalls.
Implications for employers and employees
Both employers and employees need to consider the implications of implied contracts to maintain productive and legally compliant workplaces.
For employers:
Risk of miscommunication: ambiguity in verbal promises, repeated behaviors, or informal agreements can lead to conflicting expectations. For instance, consistently allowing an employee to leave early on Fridays without formal approval may unintentionally set a precedent that is later perceived as a right.
Legal exposure: courts may uphold implied contracts in cases where employees feel misled or unfairly treated. A manager’s verbal assurance of job security, consistent salary increases, or benefits—even if undocumented—could be interpreted as an enforceable agreement if the employee relied on those assurances.
Policy overlaps: implied clauses can sometimes contradict or undermine written employment contracts. For example, an employee handbook may state that promotions are performance-based, but if management regularly promotes employees based on seniority, this unwritten practice could create an implied expectation that leads to disputes.
For employees:
Understanding rights and responsibilities: employees must be aware of the limitations of implied contracts. While verbal assurances and workplace customs may sometimes carry legal weight, they are harder to prove and enforce without supporting documentation.
Managing assumptions: misunderstandings often arise when employees assume entitlements that were never formally agreed upon. For instance, regularly receiving overtime pay for specific tasks might not guarantee the same practice will continue indefinitely unless formally stated in a contract. Employees should clarify any uncertainties with their employer to avoid disappointment or disputes.
Balancing flexibility and security: while implied contracts can offer flexibility in workplace dynamics, employees should weigh the risks of relying on unwritten agreements, particularly during job transitions, promotions, or role changes. Seeking transparency and written agreements where possible is a proactive way to avoid conflicts later.
Ultimately, fostering open communication and ensuring alignment between workplace practices and formal policies is the best way for both employers and employees to avoid the pitfalls of implied contracts. Employers should reinforce written agreements through consistent actions, while employees should proactively seek clarification to secure their rights. By addressing these concerns, both parties can build trust, maintain compliance, and create a positive working environment.
Preventing unintended implied contracts
Prevention is the best defense against unintended implied contracts. Here are steps employers can take to limit risks and encourage transparency.
1. Standardize written employment contracts
Always supplement employment relationships with clear, concise written agreements. These contracts should outline exact terms of service, benefits, payment structures, and company expectations. By detailing the scope of employment—such as job responsibilities, performance benchmarks, and termination clauses—you create clarity and leave little room for ambiguity.
Ensure contracts are updated regularly to reflect any changes in company policies, roles, or compensation structures.
Clearly define “at-will” employment terms where applicable, specifying that verbal assurances or past practices don’t alter the nature of the agreement.
With Enty, you can effortlessly standardize your contracts to maintain consistency across all your agreements, ensuring compliance and clarity. If your business requires a more tailored approach, Enty also allows you to customize contracts to fit unique needs—whether it’s adding specific clauses, adjusting terms, or reflecting personalized conditions. This flexibility empowers you to create agreements that work best for your business while maintaining a professional and reliable foundation.
2. Review employee handbooks
Conduct regular audits of employee manuals and workplace policies to ensure they don’t contain vague or overly generous language that could be misconstrued as implied promises.
For instance, avoid using terms like “guaranteed bonuses” or “job security,” unless these benefits are explicitly defined and formalized.
Keep policies aligned with current laws and industry standards to ensure consistency.
Include disclaimers clarifying that employee handbooks are not contracts but guidelines for company operations.
3. Provide thorough training for managers
Train hiring managers, supervisors, and HR professionals to avoid making casual verbal declarations, informal promises, or inconsistent practices that could later manifest as perceived contractual obligations. Managers should:
Be cautious with language during performance reviews or job interviews, avoiding phrases like “you’ll definitely be promoted next year” unless documented in a formal agreement.
Understand the legal risks of their statements and behaviors to prevent unintentional commitments.
Maintain consistency across teams to avoid preferential treatment or unspoken entitlements.
4. Leverage technology for consistency and documentation
Modern technology can be a powerful tool in preventing implied contracts and ensuring consistency across employment practices.
Use software to centralize and document all employment-related communications, contracts, and performance reviews. This helps reduce miscommunication and keeps all records in one accessible place.
Implement digital acknowledgment systems where employees sign off on policies, contract updates, or handbook changes, ensuring mutual understanding of terms.
Standardize onboarding platforms to ensure new employees receive the same documentation, training, and messaging, minimizing room for assumptions or disparities.
Automate tracking of workplace trends, such as overtime hours or bonus structures, to identify informal practices that need formalization.
When it comes to contract management, Enty offers a streamlined solution to create, customize, and manage employment contracts with ease. From tailoring agreements to your specific needs to securely collecting e-signatures, Enty ensures your contracts remain consistent, compliant, and professional. With automated updates and centralized storage, you’ll always have the most up-to-date documents at your fingertips.But that’s not it - beyond contracts, Enty serves as an all-in-one platform to manage your business finances, invoices, and other back-office processes. From generating branded invoices to tracking payments and managing cash flow, Enty’s tools simplify your operations so you can focus on growing your business.
5. Foster transparent communication
Encourage open discussion between managers and employees to clarify terms, expectations, and mutual understandings regarding employment conditions. Transparency helps reduce misunderstandings and reinforces trust.
Document key conversations related to job offers, promotions, raises, or benefits to avoid later disputes. Encourage employees to ask for clarification if they are unsure about verbal promises or perceived entitlements. Adopt a proactive feedback system, ensuring managers communicate clear, consistent messages to their teams.
6. Track and monitor practices
Avoid unintended precedents by keeping track of trends or behaviors that could evolve into workplace norms. For example, if annual bonuses are typically provided, create formal policy guidelines to standardize expectations.
By prioritizing these preventive measures, businesses can better safeguard themselves against liability while fostering a professional, transparent environment.
Final thoughts
Implied contracts may be unwritten, but their consequences are very real. Whether it’s a verbal promise that snowballed into an expectation or a company culture that quietly set a precedent, these invisible agreements can pose significant challenges for businesses and employees alike. By fostering transparency, reinforcing clear policies, and proactively addressing potential misunderstandings, companies can protect themselves from unintended obligations. Ready to take control? Review your employment agreements, tighten those policies, and create a workplace where clarity reigns supreme.
