Work is one of the main ways individuals participate

Work is one of the main ways individuals participate in society and the workplace will be one of the principal communities to which a worker belongs. Judicial recognition of this has been slow to emerge. Traditionally the courts have focused very strongly on the employee’s financial interest in the relationship. By so doing they tended to ignore the fact that what workers gain from employment is not merely wages. For instance, ‘A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being^[1].” Therefore this assignment will consider whether or not the duty of trust and confidence should be implied into every employment contract on policy grounds. This will be achieved by a detailed discussion of the position of mutual trust and confidence, including its development into the employment relationship. It will consider in detail the judicial position of mutual trust and confidence, it will be argued that this has become synonymous with the duty of trust and confidence, and the rationale for its inclusion can be seen as that of public policy.

It is well known that an employer is subject to certain implied duties. One of the most important of these duties is the implied term of mutual trust and confidence, which as Cabrelli^[2] points out “which from the perspective of the obligations imposed upon the employer, has been expressed as a duty upon the employer not, without reasonable and proper cause, to act in such a way as would be calculated or likely to destroy or seriously damage the relationship of trust and confidence existing between the employer and its employees^[3]”

The breadth of the definition of the implied duty of trust and confidence has spawned much litigation in recent years. This implied term has also generated a great deal of academic attention, having been described as assuming a ‘central position in the law of the contract of employment^[4]‘, as being ‘undoubtedly the most powerful engine of movement in the modern law of employment contracts^[5]‘ and as forming the ‘cornerstone of the legal construction of the contract of employment^[6]‘.

There is a view that the implied term of trust and confidence may evolve to engulf the more ‘traditional’ implied terms and this has been well expressed in academic circles. For instance, Freedland points out that:

“Almost any particular implied term of the contract of employment could in theory be placed under … [the] umbrella [of the general obligation of mutual trust and confidence]; it remains to be seen how far this framework approach will lead to the swallowing up of existing, hitherto distinct, implied terms^[7]”.

Whilst there have been a number of notable recent common law developments, the most significant may well be the emergence of mutual trust and confidence. This is in part because ‘[T]he open-textured nature of the term makes it an ideal conduit through which the courts can channel their views as to how the employment relationship should operate^[8].’ For instance, Hepple suggests, with reference to the ECHR, that ‘since the court must act compatibly with convention rights, the duty of trust and confidence also embodies a duty to respect the convention rights of an employee^[9]‘. Another reason is the wide-range of situations which have been held to fall within the ambit of the term^[10]. Moreover, it may be that in time, ‘the obligation will come to be seen as the core common law duty which dictates how employees should be treated during the course of the employment relationship^[11]‘.

Trust and confidence’ is used to refer to a type of fiduciary relationship the key element of which is the duty to act in the interest of another. In employment law, however, trust and confidence has a different meaning. It refers to an obligation implied into all employment contracts, which requires the parties not to conduct themselves in a way which is likely or calculated to destroy the relationship of trust and confidence between them. As an implied term it is subject to the usual rules of implication, including the possibility that the parties may be able to exclude its application^[12]. Furthermore, the implied obligation of trust and confidence is mutual, in that both employer and employee must maintain a good working relationship. Fiduciary duties, on the other hand, are not mutual; they are always owed by one person to another.

The notion of trust and confidence developed out of the well-established requirement of co-operation. Despite its name, this duty was traditionally imposed on employees only, most notably in the form of the obligations of obedience and faithful service^[13]. In the mid to late 1970s the courts began to reverse the duty of co-operation and to impose new obligations on employers. At first this occurred in cases where there was a particular relationship between the parties^[14] or where the conduct of the employer was particularly serious^[15].

A general principle was formulated in Wood v Freeloader^[16], where the chairman of the tribunal held that ‘there is an implied duty of co-operation between employer and employee and in particular a duty implied by law that an employer will not do anything which would undermine the continuation of the confidential relationship between employer and employee’. The present formulation of the implied term was finally put forward in the case of Courtaulds Northern Textiles Ltd v Andrew^[17], and was accepted by the Court of Appeal in Lewis v Motorworld Garages Ltd^[18] and by the House of Lords in Malik v BCCI^[19].

It has, therefore, been argued that the concept of trust and confidence was developed in employment law through the adaptation of an existing contractual concept, without reference to fiduciary duties. In recent years both courts and academics have recognised that employment is in many respects not comparable to a straightforward exchange-based contract, and that therefore a significant degree of co-operation is required of both parties. However, contract remains at the heart of the employment relationship, and in classic contract law, the parties are only obliged to co-operate to the extent that is necessary to make performance of the agreement possible^[20]. In the context of employment this means that each party must have regard to the interests of the other, but, as Elias J rightly emphasised in Fishel, they need not put those interests ahead of their own.

In his paper ‘Beyond Exchange: The New Contract of Employment^[21]‘ Brodie raises the question as to ‘whether the law of the employment contract as a whole will continue to evolve so that the contract could be categorised as one of good faith. To put it another way, will the contract become one of good faith rather than merely a contract which contains elements of good faith’. This recognition of the implied term’s potential for further development is to be welcomed.

Linda Clarke has also formulated an argument for a changed perception of the employment relationship, on the basis of the implied term: ‘by recognising the employment relationship as a fiduciary one, it will be easier to argue for the extension of the implied term of mutual trust and confidence to cover positive duties to give employees information’. It is certainly true that the employee in University of Nottingham v Eyett^[22] would have been better off, had his employer been under a duty to volunteer information. However, this result can be achieved without turning employment into a fiduciary relationship. There is no reason why the implied obligation to maintain trust and confidence should not be used to impose positive duties on both employers and employees. If used to its full potential, it can provide an adequate degree of employee protection. Regarding employment as fiduciary in nature would, instead of advancing employee rights, carry serious negative connotations for employee autonomy, by exposing employees to a corresponding duty to provide information.

The case of Visa International Service Association v Paul^[23] is a case which is worthy of consideration here. In this case it was held that an employer breached the implied duty of trust and confidence where they failed to inform an employee of the emergence of a post for which she considered herself suitable. Indeed, it provides support for the emergence of an overarching and distinct concept of trust and confidence since it suggests that an employee can be successful if they raise a claim for recovery of economic loss for a failure of the employer to inform based on a repudiatory breach of the duty of trust and confidence^[24]. One view of the result in Visa International is that it conceptualises the duty of trust and confidence as an overarching premise distinct from the other ‘traditional’ implied duties.

An important issue which the courts and tribunals have had to consider is the import of an express term in a contract of employment which is, on the face of it, incompatible with an implied term. The question here is whether the latter is sufficient to disapply the former or vice versa-in other words, what happens in the case of a ‘clash of contractual terms’?

Johnstone is the most important case in this area and deals with this issue. In Johnstone, the written contract of employment stated that a junior doctor was under a duty to work 40 hours a week and that the employer had the discretion to compel the employee to work for a further 48 hours per week. What is noteworthy is that there was no express waiver of the implied duty to exercise reasonable care. Instead, the question was whether the express terms on working hours were disapplied by the implied duty to exercise reasonable care.

In Johnstone^[25], the judges in the Court of Appeal were divided on how to deal with the incompatibility issue. To summarise, in his dissenting judgement, Leggatt LJ held that an implied term could not supersede an express term. Conversely, Stuart-Smith LJ held that an express term could be disapplied by an implied term where the two conflicted and the implied term ought to prevail based on ‘principle’. Browne-Wilkinson V-C held that the implied term must coexist with the express term without conflict. The ‘Browne-Wilkinson’ approach can be reformulated in two ways: First, as another way of saying that an implied term cannot supersede an express term; or, alternatively, as holding that the scope of the employer’s implied duties required to be carved with reference to the express terms of the contract.

The question is whether the analysis in Johnstone translates to the implied duty of trust and confidence. The answer would appear to be that the effect of the incompatibility problem is resolved in the same way, regardless of the type of implied duty. Second, and shifting the focus from the generic employment contract to the implied duty of trust and confidence itself, the courts have indicated obiter that they will uphold exercises in contracting out of the implied duty. In Malik, Lord Steyn stated that the implied term of mutual trust and confidence operated as a default rule, and that the parties were free to exclude it or modify it^[26]. This analysis is entirely consistent with the decision of the House of Lords in Johnson v Unisys Ltd^[27]. Of course, there are limits to the doctrine of contracting out. For example, the argument in Horkulak v Cantor Fitzgerald International^[28] that the size of an employee’s remuneration and benefits package written into their contract of employment justified the disapplication of the duty of trust and confidence was not upheld. However, what we do have is an indication by the House of Lords that the implied duty is a default rule and as such susceptible to exclusion, modification or limitation. For this reason, the writer would submit that based on the conceptual underpinning of UCTA and the dicta of Lord Steyn in the House of Lords on a balanced view, contracting out of the implied duty of trust and confidence is possible.

There is a view that the mutual duty of trust and confidence is unavailable in a positive sense to compel the employer to take action or enjoin conduct. Instead, it is said that its main purpose is to prohibit conduct damaging to the employment relationship. The argument holds that one means of distinguishing between the two implied duties is by invoking the positive/negative dichotomy.

However, it is submitted that the assertion that the duty of trust and confidence only applies in a negative context, i.e. to hold that the conduct of the employer amounted to a repudiatory breach of contract is incorrect. There are many cases which demonstrate that omissions by an employer will also be sufficient to amount to a repudiatory breach of the duty of trust and confidence. For example, in Reed v Stedman^[29], the employer’s failure to investigate an employee’s complaints (to colleagues) of sexual harassment was enough to justify a finding of breach of trust and confidence. On the basis of the above cases^[30], it would appear that the positive/negative conduct dichotomy cannot be used as a means of denying evidence for the evolution of an abstractual, all-embracing concept of mutual trust and confidence which is equivalent to the sum of its parts.

An analysis of the law in this area and of academic opinion, demonstrates quite clearly the need for the duty of trust and confidence, it is difficult to see how an employment contract can succeed without such an implicit duty. This is a basic duty which in its simplest form requires the employer to respect the worker and for the worker to respect his employee, it is difficult to see how an employment relationship could be successful without this basic requirement, despite judicial opinion to the contrary. Therefore it must be concluded, that currently all successful employment relationships require this basic duty to succeed, and in response to the question posed public policy does require that such a duty be imposed into every successful employment contract. This would not only regulate the employment relationship but it would ensure that it was a happy and successful relationship, one that benefited society.

Bibliography

Cases

Croft v Consignia plc [2002] IRLR 851

Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84

Fyfe & McGrouther v Byrne [1977] IRLR 29

Isle of Wight Tourist Board v Coombes [1976] IRLR 413

Johnson v Unisys Limited [2001] IRLR 279

Johnstone v Bloomsbury Area Health Authority [1991] IRLR 118

Lewis v Motorworld Garages Ltd [1984] IRLR 465

Malik v BCCI [1997] IRLR 462

Nottingham v Eyett [1999] IRLR 87

Re Public Service Employee Relations Act [1987] 1 SCR

Reed v Stedman [1999] IRLR 299

TSB Bank v Harris [2000] IRLR 157

Visa International Service Association v Paul [2004] IRLR 42

Wood v Freeloader [1977] IRLR 455

Waltons v Morse & Dorrington [1997] IRLR 488

Journal Articles

Brodie D, (1998) “Beyond Exchange: The New Contract of Employment” 27 Industrial Law Journal 79

Burrows,(1968) “Contractual Co-operation and the Implied Term” 31 Modern Law Review 390

Brodie D,(1996) ‘The Heart of the Matter: Mutual Trust and Confidence’ 25 Industrial Law Journal 121

Collins H,(2003)”Employment Law”, Oxford: Oxford University Press Collins H,(2003)”Employment Law”, Oxford: Oxford University Press

Books

Bowers J & Honeyball S, (2002) “Bowers and Honeyball Textbook on L

Labour Law”, Oxford University Press

Cabrelli D, (2005) “The Implied Term of Mutual Trust and Confidence: An Emerging Overarching Principle?” Industrial Law Journal 34 (284)

Deakin s & Morris G, (2003) “Labour Law”, Third Edition, Lexis Nexis

Dudington J, (2003) “Employment Law”, Pearson Higher Education

Freedland M,(2003) “The Personal Employment Contract” Oxford: Oxford University Press

Lewis D & Sargeant M, (2005) “Employment Law” , Pearson Higher Education Press

Willey B, (2003) “Employment Law in Context”, Pearson Professional Education

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