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Douglas Brodie

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Douglas Brodie

This introductory chapter explains the aims and structure of the work. It draws attention to the importance of judicial identification of the key attributes of the contract in explaining its evolution in recent years. It also highlights the importance in decision making of the values of the contract in the eyes of the judiciary. The chapter goes on to explain that the work will look at other potential catalysts for reform drawn from the law of obligations more widely. In particular relational contract scholarship will be looked to along with norms of good faith and fair dealing. Enterprise liability is also seen as a potential catalyst.

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Douglas Brodie

It is the contention of this work that the values articulated by the judiciary as underpinning the employment contract will continue to be key in influencing the evolution of the contract. The same can be said where the key attributes of the relationship are concerned. Case law in recent years vouches for the veracity of these propositions and demonstrates a continuing causality. The chapter also considers whether relational contract scholarship will influence discussion around key values and in particular considers the concepts of `internal’ and `external norms’. Reference to this body of literature also allows us to explore the question of whether the values articulated by the judiciary approximate to what the parties themselves actually believe to be appropriate. The conclusion is reached that this dimension of relational theory is unlikely to have practical consequences. Instead, the judicial view of the appropriate content of the contract will continue to hold sway. It can though, to borrow from the language of relational contract scholarship, be viewed as an external norm. The chapter concludes by addressing the question of contracting-out and notes that judicial inventiveness where the creation of primary obligations is concerned has yet to be fully matched by boldness in dealing with the permissibility of derogation. At the same time it can be doubted whether the issue can be said to be a significant practical problem.

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Douglas Brodie

An important question for this project is the significance and implications of recent discussion of re-categorisation of the contract. Should the judges opt for some form of re-categorisation it would not be surprising if extensive changes to the content of the contract emerged. It is certainly now accepted that the contract can be viewed as relational but it is far from clear what that tells us. Chapters Six to Eight explore some of the changes that might be expected to come about as a result. It should be said at the outset that the view is taken that recourse to the language of relational contracts is to a significant extent simply descriptive of the existing law. A further question of re-categorisation is more nascent but also potentially much more fundamental. The orthodox view is that entry into an employment contract, of itself, does not give rise to a fiduciary relationship. One of the current controversies concerning the law of the employment contract is whether that orthodoxy is misconceived and we should move instead to a position whereby the contract gives rise to a fiduciary relationship. Clearly, the consequences of that classification being accepted would be highly significant. It is certainly the case that in some jurisdictions a greater proportion of employees are being found to be fiduciaries than is the case in the UK. Similar thinking though has resulted in changes to the obligations owed by senior employees. Chapter Two assesses how the law is likely to develop and concludes that re-categorisation of the employment relationship as fiduciary in character is unlikely; nor would it be appropriate. At the same time there would appear to have been a degree of unitary backlash to the changes to the contract that have been to the benefit of employees. The implied term of fidelity appears to becoming more onerous; at least where the position of senior employees is at stake.

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Douglas Brodie

Enterprise liability has not yet had but may have an impact on the law of the employment contract. Where the law of tort is concerned we have seen an increase in the range of individuals that the law compels the employer to be responsible for. Chapter 3 considers whether it is likely that the employer will now become responsible to those individuals as well. Recourse to enterprise liability involves consideration of what constitutes the enterprise. Tort law has been forced to come to grips with the fact that an employer may often act through the medium of workers who are not employees. As a result, the law of vicarious liability has been reformed and the employer has become responsible for those in analogous relationships. The courts accept that failure to change would mean that the fundamental aims of the law would thwarted. The traditional rule that vicarious liability does not arise in respect of the acts of independent contractors does remain in place though the boundary has moved somewhat. The chapter considers whether such developments will have an impact on the law of the employment contract. It also considers whether more general concerns about the coverage of the common law may bring about a change in definition.

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Douglas Brodie

Discussion of enterprise liability is also hugely relevant to questions of risk allocation. Where the law of tort is concerned, it has acted to reallocate risk between enterprises and third parties to the benefit of the latter. Reforms to the law of vicarious liability have extended the employer’s responsibility for harm inflicted by his staff and provided greater protection to those who have suffered loss as a result. There is no reason in principle why the same arguments could not function to change the position between employer and employee. They would appear to be just as applicable. Chapter four explores the position where psychiatric harm is concerned. The chapter concern aspects of the law of the employment contract which, from the employee perspective, appear to operate inequitably and have long been in need of modernisation. It should be said that hitherto discussion in the case law has, by and large, not made mention of enterprise liability.

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Douglas Brodie

This chapter continues the discussion which was commenced in the previous chapter on the potential significance of enterprise liability to risk allocation questions. Chapter five deals with the position in respect of financial losses and explains that, historically, the law has not sought to protect the employee. In recent years employees have begun to benefit from a number of specific exceptions and the chapter explores whether enterprise liability might prompt the emergence of new principles.

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Douglas Brodie

Whilst the law of the employment contract continues to be derived from the general body of contract law doctrine, some would say that the latter’s rules and concepts are not framed in a way which facilitates the needs of an ongoing relationship. It has been argued that `contract law was and is relatively well adapted to dealing with discrete transactions. However, it was and is ill-equipped to deal with problems arising out of contractual relations.’ Chapter Six tackles issues surrounding the variation of contractual terms and seeks to use the topic as a case study to assess whether such criticism is well made. An assessment is made as to the extent to which the current law is consonant with the expectations of relational contract theory and whether the law would function more effectively if it was more heavily weighted in favour of relational duties. In recent years, the courts have been willing, on occasion, to modify general principles to prevent contractual doctrine being at odds with the dynamics of employment relations. The foregoing approach notwithstanding, those dynamics continue to throw up challenges for conventional legal analysis. The conclusion is reached that the criticism of the traditional contractual framework is exaggerated and a good deal more flexibility is shown than is often allowed for.

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Douglas Brodie

Chapter Seven examines the law on termination from a relational perspective. One would expect the law to function in a manner that was supportive of the relationship continuing and serve as a restraint on ease of exit. It would be consistent with relational contracting if the default rules of the common law insisted that there be good cause before a power to terminate was invoked or that there be a right to a hearing; such a development has of course been blocked in the UK by Johnson v Unisys. Had the common law been allowed to develop naturally the position taken by the courts would almost certainly have been different. Thus we find that in some jurisdictions, where coherence with statute has not been in issue, the courts have restricted the capacity to terminate other forms of relational contracts (such as a franchise) by the creation of default rules of the fair dealing type. Those rules mean that preservation of the relation is furthered by insisting upon propriety of means. Nevertheless, Johnson aside, it is apparent that common law developments are supportive of the relationship being maintained; the approach to regulation of suspension has advanced to be more understanding and protective of the interests of employees. The decision in Geys v Societe Generale confirms the validity of modern developments that allow for interlocutory orders to help support the continuation of the relationship in a range of situations. The law of wrongful dismissal has been very much in the shadow of the statutory remedy of unfair dismissal ever since the latter was enacted. There are some signs (albeit somewhat tentative) that the law may be beginning to modernise. Canadian developments are looked to as an indicator of how the position might change. Chapter Seven also discusses other issues such as the possible emergence of a right of cure. At first glance, the creation of such a right would seem to be firmly in line with relational contracting. A relationship should not be cast aside where the matter in contention between the parties can be readily addressed and there is a willingness to do so. The chapter suggests that a development of this sort would be problematic given the nature of employment relationship; other forms of contract may call for different solutions. This helps serves as a reminder that relational contract scholarship is in effect a critique. Appropriate doctrinal development requires a highly critical lens to be applied.

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Douglas Brodie

Chapter Eight is closely related to Chapter Seven and reviews several aspects of the law of damages. The radical developments in the content of the primary obligations of the employment contract (such as the creation of the implied obligation of trust and confidence) have been much less evident when we turn to remedies. The nature of the contract is considered in determining what an appropriate range of remedies should be and takes as its starting point the relational perspective that the parties gain significant non-economic benefits from an employment contract. What can be gained by the parties from such a relationship is far greater than is the case with a discrete economic exchange. Crucially, personal relations come strongly into play and the parties ‘derive complex personal non-economic satisfactions and engage in social exchange, as well as … economic exchange’. The relational perspective in this regard is also shared by the judges as we saw earlier in the chapter. What common law reforms would be supportive of this position? The chapter considers the role of damages in claims for injury to feelings and reputation as well as the possible introduction of punitive damages. It also offers a critical appraisal of the restricted basis of recovery should an employee be successful in a wrongful dismissal claim. The way in which the risks of the employer’s enterprise are allocated is also considered and recovery in cases of psychiatric harm examined. The policy driven decision in Hatton v Sutherland is questioned and the enterprise liability focussed approach discussed in Chapter Four commended. Statute has intervened on a number of occasions in the employment context where damages are concerned and this gives rise to the question whether the prospects of further common law reform have thereby been excluded. The view is taken that statutory intervention has only given rise to `partial pre-emption’ and further change at common law remains a genuine possibility.