Contracts of Employment in the UK - Article Example

Abstract The essay discusses the development and the significance of the implied duty of trust and confidence with respect to the contracts of employment. The Employment Law of the United Kingdom is also evaluated from the perspective of the contracts of employment. Contracts of Employment In the contract of employment, confidence as well as mutual trust is considered to be implied terms and hence they are put in the category of contracts of employment. Besides the implied duty of trust and confidence, there are a number of other implied terms which falls in the purview of contract Furthermore, these implied terms such as confidence And trust can be easily differentiated from the tenets of expressed in terms. Some of the basic principles of implied terms include ideas such as the conduct between the employers and the employees, and likewise the obedience of the employee for the employer, the obligation of cooperation, and also the obligation of fidelity, which is reliant with the equity principles. In the United Kingdom, the contracts of employment’s primary motive are to put to parties at a suitable position for bargaining. Hence, the general idea of the contract law is to provide the parties involved in the contract, with goods and services which are beneficial for either of the parties. Deborah Lockton argues: ‘Smith and Wood while discussing the case is above argued that there has been an attack against legalism. They quote the procedural changes as an example, but argued that the main attack has been substantive and has occurred on three fronts: the classification of as many issues as possible as questions of fact; produce the disapproval of appellate court’s laying down guidelines for tribunals to follow in recurring cases; And the narrowing of the definition of what constitutes a perverse decision.’1 Richard Stone comments: ‘It seems that complete physical destruction may not be necessary if the subject matterhas been affected in a way which renders it useless. In Asfar v Blundell,27 for example, a cargo of dates was being carried on a boat which sank in the Thames. The cargo was recovered, but the dates were found to be in a state of fermentation, and contaminated with sewage. The judge found that they ‘had been so deteriorated that they had become something which was not merchantable as dates’. On that basis, there was a total loss of the dates, and the contract was frustrated.’2 The terms of trust and confidence are generally implied in the contracts of employment when terms such as these assist the businesses or the employers in improving and enhancing their business. One such example is the Shirlaw v Southern Foundries (1926) Ltd case, in which an implied term was included in the contract of employment. For example, if in a contract where both parties have agreed on the important terms, sometimes do not pay heed to the implied terms while making a bargain, an officious bystander who might be viewing this contract between the two parties, might feel are some important terms are being completely ignored by the two parties. Now, if the bystanders suggest that certain terms were not officially discussed, the parties involved in the contract might suppress the bystander by saying that the worst terms do not need to be discussed, since either party ensure that those terms are affirmed. This example clearly shows that certain implied terms such as confidence and trust are sometimes viewed in and objectionable manner. Richard Stone states: ‘At the beginning of this chapter, reference was made to the argument that the insistence on a requirement of intention in addition to the other elements of validly formed contract (offer, acceptance, consideration) is unnecessary. This view has been taken by, for example, Williston in the United States,49 and Hepple in the United Kingdom. Hepple argues that the problems with this area derive largely from a failure to take account of the particular approach to consideration adopted by Lord Atkin in Balfour v Balfour. He points out that, in defining consideration in terms of ‘mutual promises’ or as ‘a benefit received by one party or a loss suffered by the other’, Lord Atkin failed to add that the benefit or loss, or indeed the mutual promises, ‘must be received as the price for the other’. Hepple argues that many domestic agreements may involve mutual promises, ‘and yet not be ... contract[s] because the promise of the one party is not given as the price for the other’. In other words, the concept of the bargain is central to the test of enforceability of contracts under English law and the vital elements in the identification of a bargain are offer, acceptance and consideration. These three elements should be treated together as indicating a bargain. Thus an analysis which tries to separate out agreement (that is, offer and acceptance) from consideration is missing the point of why the courts started looking for evidence of these three elements in the first place.’ 3 It is also important for an implied term to be based on reason and presumed intention. However it is also true that the presumed intention is not a important requirement for a contract of employment to be successful. One such example where the presumed intention was proved to be unimportant was the case of Courtaulds Northern Spinning Ltd v Sibson and TGWU. In that case, it was stated that the tribunal or court did not necessarily have to be satisfied if the two parties involved in the contracts of employment agreed on an implied term which they considered as reasonable. Stella Vettori states: ‘As indicated above, most legal incident in English law have the origin and case law. Legal incidents were originally implied on the basis of the intension of the parties. These precedents were used to create legal incidents so that it was no longer necessary to look to the intention of parties in order to imply the term. Sometimes it is unclear whether return can be implied as the legal incident or whether it should be based on the intention of the parties.’4 There is yet another test called the business efficacy test. One such case is the case of Reigate v Union Manufacturing Co Ltd, wherein it was important to have an alternative test so as to give more efficiency to the contract of employment. Therefore it is accepted by most lawyers and experts that implied terms such as trust and confidence are extremely important for business to run smoothly, although implied terms are not always expressly desired. Implied terms can also be regarded as default rules. Deborah Lockton comments: ‘Smith and Woods’ final point is that there has been increasing disapproval of the appellate courts laying down guidelines for tribunals to follow. In the early days of the EAT, the forum laid down guidelines in a variety of cases to establish consistency and of approach in the lower tribunals.’5 The laws and the body of rules in the United Kingdom especially for businesses and employers are framed in such a way which compels businesses and employers to cooperate with another in the best possible manner. The notion of implied duty of trust and confidence is such that they help in binding the employee as well as the employer together and they are enforceable as well. Importantly, the implied duty of Trust and confidence promotes harmony in the working environment and maintains a perfect relationship between the employer and employee. The relevant case which proves the ability of implied terms to maintain harmony is the case of Secretary of State for Employment v ASLEF (No 2). Under the provisions laid down by the Industrial Relations Act of 1971, the Secretary of state for employment was given the prerogative for ordering a period wherein the industrial action was taken after a certain period of time, in the case where the employees had breached the terms of contract. In this case, the employees of the British rail were not communicating properly with the employers. The treat the union had taken the responsibility of the employees and were insisting that the employees did not breach the terms of contract since they were exactly following the rule book which was created by the British Rail. The trade union clarified that employees were conforming to one of the principles of the British rail, which was ‘Work to Rule’. However the employers knew that there was a breach of contract and hence Lord Denning passed a judgment in which it was stated that the employees who intentionally try to disrupt the operations of an undertaking by creating chaos and disorder, thereby causing loss to the undertaking, is guilty of breaching the contract. Lord Denning continued to defend his judgment by citing an example. In the example, a person who is an employer asks his driver who is an employee to drive him to a railway station. However the railway station is quite far off but fortunately there is enough time for the car to reach the station. If the driver had driven the car at normal speed, then it would have been possible for the employer to reach much before the departure of the train. The driver wilfully drove the car at are very slow speed thereby making the employer eventually miss the train. This is what is called a breach of contract beyond all doubt. Although the employer did not expressly tell the driver to hurry up, it has implied that the driver would have driven the car at a normal pace. Therefore the judgment passed by Lord Denning to prove that it is wrong for an employee to disrupt the operations of a business, without having a reasonable motive for doing so. Lord Denning further went on to say that it was not the responsibility or the duty of an employee to behave fairly to his employer. He believed that doing extra work for an employer was a step very far and was something which was not supposed to be an obligation of the employee. He said that an employee cannot be bound to do extra work which was not laid down by the contract. Hence an employee could always withdraw his that goodwill if the pleased to do so. Therefore this duty is one of the important criteria when creating the contracts of employment. The platform for mutual trust and confidence was once again explained by Buckley. Key said that an employee must work faithfully for his employers so as to serve the interests of the company and the commercial objectives of the company. This statement made it clear that Confidence and mutual trusts were and still are extremely important components for the creation of a contract of employment. The implied term of confidence and mutual trust can be viewed thoroughly from the cases of past. One such case is the Robinson v Crompton Parkinson case. In this particular case, there was an employee who had a perfectly unblemished record with the company and was respected by one and all in the company. However a case of Taft was filed against him by the employer one day and so this case was initiated. Eventually the employee was acquitted of the crime and the employee further went on to seek an apology from his employer. Since the employer did not apologize to the employee, the employee ended his contract of employment. For this particular case, Employment Appeal Tribunal gave a verdict that the implied duty of confidence and mutual trust was not applicable to this particular case. Yet another case where Employment Appeal Tribunal didn’t find that there was a serious break of the duty was the case of Courtaulds Northern Textiles v Andrew. In this case, the manager of the company had an argument that one of the foreman’s of the company, who incidentally had worked in the company for eighteen years. The manager ad said ‘You can’t do the bloody job anyway’ which was not regarded as a breach of duty since there was a clear context of that argument. Richard Stone states: ‘It is important to remember that to describe someone as an agent is to identify a relationship and not a job. Thus, although many agents will be appointed and described as such, many other ‘agents’ have this status simply from the responsibilities which arise out of their employment. The shop assistant who deals with customers is in that situation acting as agent for the owner of the shop. The company director who makes a contract on behalf of an incorporated company is equally acting as an agent. The company has a separate legal personality, but of course cannot itself physically make contracts. It has to act through human agents. It quickly becomes apparent that the concept of agency is of vital importance in all areas of commercial activity. Without it, dealings would become cumbersome, expensive and impractical. The Principles of European Contract Law deal with agency in Arts 3.101–3.304. Much of what is contained in these Articles is very close to the relevant common law principles, but where there are differences these are noted below in footnotes. The main areas of difference relate to the rights and liabilities of the ‘undisclosed principal’, and the right of the agent to delegate to a sub-agent.’6 There was another case in the United Kingdom which hit the headlines. The case was regarding that of Gardner v Beresford. In this particular case, the Employment Tribunal felt that there was a breach Of confidence and mutual trust. The case was regarding an employee who did not receive any pay hike, when all other employees and his colleagues had been given a pay hike. This was considered to be biased and hence the Employment Tribunal considered it a breach of confidence and trust. Another case where the Employment Tribunal adjudged that there was a breach of implied duty of confidence and mutual trust was the case of Post Office v Roberts. In this case, a senior officer refuses to promote to an employee without giving a valid reason for the refusal. Richard Stone remarks: ‘Much more stringent controls exist over tendering in a range of public sector contracts as a result of European Directives on the issue, which have been implemented in the United Kingdom by various sets of regulations. These Directives are primarily intended to ensure the free working of the European market – and in particular to avoid nationals of the same state as the party seeking the tenders having an advantage over those based in other member states.’7 Malik v the Bank of Credit and Commerce International SA is another case where the principle of the implied duty was once again put to the test. In this case, Bank of Credit and Commerce International was on down having prompted the cause of the growing corruption in the bank. The fraudulent dealings of the bank in the past eventually led to the closing of the bank and the employees of the bank sued the bank since they believe that was a breach of mutual trust and confidence and that this sudden shutting of the bank tarnished their reputations and their future prospects. This case was taken up by the House of Lords who concluded that was a mistake of the employer to conduct itself in such way which seriously damaged the relationship of trust between the employee and the bank. Therefore it is clearly evident that an employee and an employer have certain responsibilities and the must try to satisfy the implied duty of confidence and mutual trust. Richard Stone (2005, p. 212) notes: ‘An example of a term implied by law into an employment contract is to be found in Malik v BCCI. The employee had worked for the Bank of Credit and Commerce International which collapsed in 1991, amidst allegations that the bank had operated in a corrupt and dishonest manner. The employee claimed that having worked for BCCI had adversely affected his future employment prospects. On a trial of a preliminary issue as to whether the employee had any cause of action, it was confirmed by the House of Lords that there should be implied into contracts of employment a mutual obligation of ‘trust and confidence’. This obligation can be excluded or modified by the parties, but otherwise will operate as a ‘default’ clause in all contracts of employment. In this case, the implied term had not been amended by the parties, and was held to include the obligation that the employer should not: Without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. Thus, the employee did have the basis for a cause of action against his former employer for the damage caused by the way it was alleged the business had been run.’8 Richard Stone (2005, p. 382) states: ‘A further difference from the common law on restraint of trade is that in Passmore v Morland the Court of Appeal, in deciding whether a contract was void under Art 81 held that this could change depending on the surrounding circumstances. Here a beer-tie had originally been imposed on the tenant of a pub by a major brewer, and this appeared to be in breach of Art 81, because of the number of pubs owned by the brewer which were subject to a similar tie. Later, the brewery sold the pub to a much smaller brewer who only operated some 0.19% of licensed premises in the United Kingdom. The Court of Appeal held that although the tie had originally been void, it became valid when the pub was sold to the smaller brewer. In coming to this conclusion the court distinguished Shell UK Ltd v Lostock Garage Ltd,93 where the Court of Appeal had held that under the common law the status of an exclusive dealing had to be judged at the time that it was made, and that subsequent changes of circumstance could not affect that original assessment.’9 Thus, the breach of the implied duty of trust and confidence with reference to contracts of employment is applied to each and every contract. Does whenever there is a breach of this contract, the working relationship between the employee and employer suffers a great deal. Breaching the implied duty damage is the relationship between the two parties. For the employees, a breach in terms could eventually to resignation or a claim for constructive dismissal. Stella Vettori states: ‘A brief summary of the development of the law of contract ( and more specifically contracts regulating employment relationships) demonstrates of the role of contract has been adapted and interpreted by judges and at times supplemented by legislation in line with and in reaction to the changing social economic milieu. What has remained constant while the centuries, except of course in respect of slavery, are that the contract has always been a necessary foundation for the creation of the employment relationship. At different stages in history legislation has played a major role in regulating the employment relationship’10 Furthermore there are a number of web sites in the UK which also clearly expressed the nature of mutual trust and confidence. Mutual trust and confidence, all things considered, is something which helps in preventing the damage of relationship between the employer and employee. Stella Vettori notes: ‘From 1981 to 2001, the coverage of collectively bargained agreements in England declined from 83% of the workforce 35% of the workforce. This has resulted in an increase in the use of individual employment contracts for setting terms and conditions of employment. The renewed importance of the role of common law for the protection of employees has been acknowledged by the judiciary. In the case of Johnson v Unisys Ltd Lord Steyn made the remark that as a result of the decrease in coverage of collective bargaining: ‘… individual legal rights have now become the main source of protection of employees.’11 As it was discussed, that term can have a very Broad implications and it’s can include to ranges of conduct which can be sexual harassment Of colleagues and employees, disrespect and insubordination of a manager or employer by the employees, imposing of a certain disciplinary restriction on an employee without having a valid disciplinary process, verbally abusing an employee or employer and not performing the duties can all come under the purview of mutual trust and confidence. Thus the term would be breached whenever the accused party has failed to act or take a positive action against such aforementioned conducts. Therefore without the implied duty of confidence and mutual trust, it is virtually impossible for the parties associated with a contract to successfully maintain the contract of employment. Stella Vettori states: ‘Similarly, the question of whether the employer had reasonable and proper cause for certain conduct must be considered in the light of the impact that conduct had of the employee. As stated by Lord Steyn in Malik: In ascertaining whether or not the employer’s conduct constituted a breach of implied term of trust and confidence ‘It seems clear what is significant is the impact of the employers behavior of the employee rather than what the employer intended. Moreover the impact will be assessed objectively.’12 Richard Stone (2005, p. 156) comments: ‘If a contract envisages performance by a particular individual, as in a contract to paint a portrait, and no substitute is likely to be satisfactory, then the contract will generally be frustrated by the incapacity of the person concerned. Thus, in Condor v Barron Knights, the drummer with a pop group was taken ill. Medical opinion was that he would only be fit to work three or four nights a week, whereas the group had engagements for seven nights a week. It was held that his contract of employment was discharged by frustration. The drummer was incapable of performing his contract in the way intended.’ 13 All in all, mutual trust and confidence are implied terms; nonetheless they are important constituents for happy working relationship between employees and the employer. It’s an obligation which is mutually binding and is generally seen as a positive obligation.  If mutual trust and confidence was excluded from the contracts of employment, then there would most probably be as numerous instances where in the employer and employee was an act in ways which was against the spirit and essence of the contract of employment. Bibliography Books Vettori, S. The Employment Contract and the Changed World of Work (Ashgate Pub Co, Williston, 2007) Lockton, D. Employment Law (Palgrave Macmillan, New York 2006) Stone, R. 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