Free 2.1 Law Essay: (Masters Level)
"And the implied obligation as formulated is apt to cover the great diversity of situations in which a balance has to be struck between an employer's interest in managing his business as he sees fit, and the employee's interest in not being unfairly and improperly exploited" (Lord Steyn in Malik v BCCI  IRLR 462 HL). Critically assess the extent to which the courts have been successful in achieving this balance through the use of the implied term of mutual trust and confidence.
The master-servant relationship of the eighteenth and nineteenth century had embodied an extensive conception of the employer's implied powers of direction and discipline, backed up by sanctions administered by the local magistracy. The Act of 1747 gave the local magistrates the power to order payment of wages due, on the one hand, but also to punish the servant or labourer for any "misdemeanour, miscarriage or ill behaviour" by the abatement of wages or imprisonment for up to one month; they could also discharge the servant from his contract. The Act of 1758 extended this jurisdiction to cover servants in agriculture hired for less than one year and made it an offence for the servant to quit before the end of the agreed contract term. This created a very one sided relationship in which the role of the servant very much depended on the orders of the master.
Some years later the notion of mutual trust and confidence developed out of the well-established requirement of co-operation. The duty of mutual trust and confidence and is based around the concept of reasonableness and is now known to be the central concept of employment relationship both by statute and common law. Where the employer is seeking to exercise power under an express term there is an expecting reasonableness by the court that will be exercised. The modern concept of mutual trust and confidence is used to impose positive duties upon both the employer and the employee. The duty of mutual trust and confidence is rather a nebulous duty and much o the case law has arisen in the context of unfair dismissal claims based on constructive dismissal. However, despite its name, this duty was traditionally imposed on employees only, most notably in the form of the obligations of obedience and faithful service. In the courts began to turn around the duty of co-operation and imposed new obligations on employers. Firstly this occurred in cases where there was a particular relationship between the parties , or where the conduct of the employer was particularly serious . This was followed by the formulation of a general principle when the employment tribunal held
"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 emergence of the implied obligation of mutual trust and confidence means that the personal element in employment is reflected in the content of the employment contract. There will be a serious breach of the duty of mutual trust (and so if the contract) if the employer victimises the employee, acts capriciously towards the employee, maliciously undermines an employee's authority in front of subordinates, harasses the employee and so on. Brodie points out that "The obligation acknowledges the human factor in employment relations by promoting the dignity of the worker ".
It is suggested "[T]he open-textured nature of the term [of mutual trust and confidence] makes it an ideal conduit through which the courts can channel their views as to how the employment relationship should operate. '
Therefore what is clear from all the case law in this area of bad faith and the ambit of the duty of mutual trust and confidence is still open to a wide range of arguments and applications and that the "pure contract" approach is at the same variance with analysis of the same topic employed in unfair dismissal cases. Others suggest that its emergence as a fundamental employment contract term has more to do with the enactment of the European Convention on Human Rights into domestic law "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 ". The European Convention on Human Rights imposes multiple obligations on the employee, and the implied term of mutual trust and confidence can be used to encompass those not covered by discrimination legislation.
In the case of Malik Lord Steyn observed that "the implied obligation as formulated is apt to cover the great diversity of situations in which a balance has to be struck between an employer's interest in managing his business as he sees fit and the employee's interest in not being unfairly and improperly exploited ".
The obligation of mutual trust and confidence has demonstrated that the court is prepared to recognised that employment relations are distinct from commercial relations. The existence of the obligation is consistent with the promotion of co-operation and provides a means by which both the interests of employer and employed are taken into account. In Malik Lord Steyn saw it as having a role in preventing exploitation of workers. Lord Nicholls regarded it as a tool to prevent employers mistreating employees by 'harsh and oppressive behaviour or by any other form of conduct which is unacceptable today as falling below the standards set by the implied trust and confidence term '.
Express and Echo Publications v Tanton was a case that was concerned with whether or not the relationship in question was one of employment or self-employment. The contract provided that the worker was not obliged to perform the services personally but if he was disinclined or unable to drive he had to supply a replacement driver. This the court held prevented the relationship being one of employment since it is necessary for a contract of employment to contain an obligation on the part of the employee to provide his services personally'. This view of the effect of the power of delegation was treated as being supported by the existence of the obligation of mutual trust and confidence: 'This is consistent with a requirement of personal service in a contract of service .' This last statement is legal recognition of the personal element in employment relations. Similarly in Neary v Dean of Westminster Lord Jauncy suggests that the obligation of mutual trust has influenced the test for summary dismissal, when he said:
"that conduct amounting to gross misconduct justifying dismissal must so undermine the trust and confidence which is inherent in the particular contract of employment that the master should no longer be required to retain the servant in his employment ".
As mentioned above this is judicial recognition that one function of the obligation of mutual trust and confidence is to prevent exploitation of employees. Its concern therefore is to prevent the abuse of power, a far cry from the days of the master and servant relationship,:
'The common law will not permit abuse of power. This is the basis of judicial review, and it reflects also the basis of all those private law doctrines where public policy has been held to restrain one man's hold over another .
The duty of mutual trust and confidence can therefore be seen to concerned in particular with questions of dignity and respect and as promoting the autonomy of employees in the employment relationship. The case of Powell v London Borough of Brent , suggests that the role of mutual trust and confidence can be regarded as protecting status. The Decisions in Hughes v London Borough of Southwark and Anderson v Pringle show that the courts are prepared to extend the principle of mutual trust and confidence to protection of job security. This was also seen in the case of French v Barclays Bank plc the Court of Appeal applied such principles to the case where an employee had been directed to move cross country within the organisation and had been granted a discretionary relocation bridging loan by his employer which was then withdrawn when the employee had difficulty selling his house. The employee was forced to sell his house at a lower value than anticipated and so sued for breach of contract in respect of the shortfall. He succeeded on the grounds that the bank had breached the duty of mutual trust by seeking to change the arrangement once the employee had relied upon it. This is therefore not a duty to act reasonably, but simply a duty to give fair treatment under the terms of the contract. What the courts are looking or is to establish a breach of contract which makes further continuance of the relationship impossible. This will not always be the same as a finding of unreasonableness; especially if express terms allow the employer to take that particular action. Thus it may seem unreasonable to move employees across the country every two or there years, but it is less likely to constitute a breach of contract if there is a mobility clause in the contract. Matters such as a right to harass or discriminate cannot of course form part of an express term.
The role of mutual trust and confidence in the employment relationship, is perhaps most evidently used by the court in cases where the employer seeks to exercise discretionary powers under the contract of employment it seems particularly important to guard against abuse of power given the imbalance of power that is almost inevitable in the employment relationship. This is demonstrated in the case of Roy v Kensington and Chelsea and Westminster Family Practitioner Committee where Lord Lowry said that "the doctor had a right to a fair and legally correct consideration by the Committee of his claim to payment for the work he had done." Furthermore cases such as United Bank v Akhtar , Imperial Group Pension Trust v Imperial Tobacco and National Grid v Mayes are suggestive of the courts eagerness to restrain discretionary powers given to the employer through the employment contract, by enforcing the implied term of mutual trust and confidence.
Conversely in situation aspects of employment law, the old relationship of master-servant still exists and has to some extent influenced the interpretation of modern employment protection legislation. This is particularly apparent in the context of unfair dismissal legislation, for example, employers' interests in restructuring the enterprise, which may necessitate significant changes to the terms and conditions of their workforce, are accorded primary importance to the extent that they may even supersede the employees` contractual rights.
In recent years both courts and academics have recognised that employment is not comparable to a straightforward exchange-based contract, and that therefore a significant degree of co-operation is required from both parties. However, contract remains at the heart of the employment relationship, the parties are only obliged to co-operate to the extent that is necessary to make performance of the agreement possible. In the context of employment this means that each party must have regard to the interests of the other although they need not put those interests ahead of their own.
Clarke argues that "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 "
Despite this negative analysis mutual trust and confidence has moved to the heart of the
employment relationship. Mutual trust and confidence combats abuse of power and exploitation which is a risk in exchange relations. The courts have used the implied term of mutual trust and confidence to ensure the equality of the relationship in many circumstances. This implied term ensures the balance of power in the employment relationship is not tipped in the employers favour. Whilst we have seen that in some circumstances such as "economic restructuring" the law still favours the master-servant relationship, it must be remembered that the employer is still involved in assessing the commercial viability of his business. Despite this the inclusion of the implied term of mutual trust and confidence enjoins the parties to behave well towards one another and if they actually do so their relationship is likely to be a stronger one. Therefore in conclusion it can be seen that the implied term of mutual trust and confidence is an important term and one which the basis of all employment relationships are formed. Its growing importance will ensure that employees rights are adequately protected. Therefore the mutual trust and confidence rule is now the centre of employment law and its growing importance cannot be underestimated.
Anderson v Pringle  IRLR 64
Express and Echo Publications v Tanton  IRLR 367
Fyfe & McGrouther v Byrne  IRLR 29
Hughes v London Borough of Southwark  IRLR 55
Isle of Wight Tourist Board v Coombes  IRLR 413
Imperial Group Pension Trust v Imperial Tobacco  ICR 524
Malik v BCCI  AC 20
National Grid v Mayes  ICR 174
Neary v Dean of Westminster  IRLR 288
Powell v London Borough of Brent  IRLR 466
Roy v Kensington and Chelsea and Westminster Family Practitioner Committee  1 AC 624
Secretary of State for Employment v Associated Society of Locomotive Engineers and Firemen (No 2)  2 QB 455
United Bank v Akhtar  IRLR 507
Wood v Freeloader  IRLR 455
Brodie D (1996), "The Heart of the Matter: Mutual Trust and Confidence" 1996. 25 (121)
Brodie D, (2001), "Mutual Trust and the Value of the Employment Contract", Industrial Law Journal 2001.30 (84)
Clarke L, (1999) "Mutual Trust and Confidence, Fiduciary Relationships and the Duty of Disclosure" Industrial Law Journal 1999.28 (348)
Laws J,(1997) "Public Law and Employment Law: Abuse of Power" Public Law 455 at 464.
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