Employment Contracts

July 25th, 2018 by James Goudie KC

In James-Bowen v Commissioner of Police of the Metropolis (2018) UKSC 40 the Supreme Court addressed the implied duty of trust and confidence in employment contracts.  They said:-

“16.    The mutual obligation of employer and employee not, without reasonable and proper cause, to engage in conduct likely to destroy or seriously damage the relationship of trust and confidence required between employer and employee is a standardised term implied by law into all contracts of employment rather than a term implied from the particular provisions of a particular employment contract (Malik v Bank of Credit and Commerce International SA [1998] AC 20, per Lord Steyn at p 45D). It was described by Lord Nicholls in Malik at p 35A, as a portmanteau concept. In that case the House of Lords considered it the source of a more specific implied obligation on the part of the employer bank not to conduct its business in a dishonest and corrupt manner, the breach of which gave rise to a cause of action for damage to the economic and reputational interests of its employees. Similarly, in Eastwood v Magnox Electric plc [2004] UKHL 35; [2005] 1 AC 503 the House of Lords recognised an obligation on an employer, in the conduct of his business and in the treatment of his employees, to act responsibly and in good faith (per Lord Nicholls at para 11). The implied term has been held to give rise to an obligation on the part of an employer to act fairly when taking positive action directed at the very continuance of the employment relationship (Gogay v Hertfordshire County Council [2000] IRLR 703; McCabe v Cornwall County Council [2004] UKHL 35; [2005] 1 AC 503; Bristol City Council v Deadman [2007] EWCA Civ 822; [2007] IRLR 888; Yapp v Foreign and Commonwealth Office [2014] EWCA Civ 1512; [2015] IRLR 112; Stevens v University of Birmingham [2015] EWHC 2300 (QB); [2016] 4 All ER 258). Furthermore, any decision-making function entrusted to an employer must be exercised in accordance with the implied obligation of trust and confidence (Braganza v BP Shipping Ltd [2015] UKSC 17; [2015] 1 WLR 1661).”“19.    In Scally v Southern Health and Social Services Board [1992] 1 AC 294 … the doctors’ claim succeeded but it is noteworthy that it did so on the narrow ground that where a contract negotiated between an employer and a representative body contains a term conferring on an employee a valuable benefit contingent upon his acting to obtain it, of which he could not be expected to be otherwise aware, there was an implied obligation on the employer to take reasonable steps to publicise that term. It is significant that the House of Lords did not base its decision on a more general duty of care owed by an employer to protect the economic interests of employees.

  1. Similarly, in Crossley v Faithful & Gould Holdings Ltd [2004] ICR 1615 the Court of Appeal refused to derive from the mutual duty of trust and confidence a standard obligation, implied by law as a term of all contracts of employment, which requires an employer to take reasonable care for the economic well-being of his employees. … While an employer might assume responsibility under the Hedley Byrne principle, it was a quite different matter to impose on an employer the duty to give his employee financial advice or generally to safeguard his economic well-being.”

The Supreme Court rejected the employees’ argument that an employer is under a duty of care in tort to defend legal proceedings so as to protect the economic or reputational interests of his employees. An employer who wishes to defend a claim based on vicarious liability for the alleged conduct of his employees is entitled to defend the claim in the way he sees fit, notwithstanding that his employees will or may as a result be subjected to public criticism during the trial process. He is free to do so without having constantly to look over his shoulder for fear that his conduct of the defence may expose him to a claim by his employees. Decisions in the conduct of the defence, such as which inquiries to undertake, which experts to instruct, which witnesses to call or which resources to devote to resisting the claim, are essentially matters for the employer as defendant and should be taken free of anxiety as to possible future claims by the employees on the basis that the case should have been run differently.

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