Shaping Contracts for Work: The Normative Influence of Terms Implied by Law

In Shaping Contracts for Work, Gabrielle Golding has produced a monograph that focuses front and centre on the rationale(s) for, scope, content and duration of obligations imposed on employers and employees in terms of the implied terms in law of the contract of employment. Of course, prior to the publication of this monograph, it is no exaggeration to say that there had been a great deal of academic literature concentrating on that topic. But what sets this book apart is the fact that it is the first to do so from a comparative perspective, taking in Australian common law developments. This is significant, since as readers will be aware, when the High Court of Australia in Commonwealth Bank of Australia v Barker [2014] HCA 32 was asked to recognise the implied term of mutual trust and confidence that had been endorsed by the UK House of Lords in Malik v BCCI in 1997 ([1997] UKHL 23), it explicitly refused to do so. In that way, Australian labour law diverged radically from its English roots. One of the issues that this book confronts is whether a deviation of this nature is an aberration or something of a common occurrence in the context of implied terms in law. To that extent, this book will be essential reading for not only English and Australian labour and employment lawyers, but also comparative law students of the common law who are interested in the factors that shape, influence and justify its many inter-jurisdictional twists and turns, and ebbs and flows.

The first section of the book is divided into two chapters. In the first chapter, the discussion explains the distinction between express and implied terms and sets outs the division of the latter into implied terms in fact, by custom-usage and in law [pp 18–31]. The differences in the exercises of implication and interpretation are subsequently covered [pp 31–34] before Ch 2 turns to consider the underlying justification for the implication of terms in law and the significance and nature of that process [pp 36–45]. The principal argument here is that the courts engage in a form of judicial law-making whenever they receive and accept an implied term in law. In the second section of the book, Golding moves on to describe each of the implied terms in law, devoting Ch 3 to that task and splitting them into duties imposed on the employee, the employer and mutually [pp 59–80]. However, the implied term in law of mutual trust and confidence forms no part of the discussion in Ch 3, since it is dealt with exclusively in Ch 4. Structurally, some may quibble about the wisdom of hiving off the coverage of the implied term of mutual trust and confidence (and of good faith) into Ch 4. However, given the significance of that implied term and the abundance of case law, I would argue that this approach is justifiable. In fact, even more so in light of the analysis of the Australian legal position and the reasons given by the High Court of Australia for snubbing such an implied term in its aforementioned decision in Commonwealth Bank of Australia v Barker [2014] HCA 32.

The third section of the monograph is concerned with some of the specific uncertainties inherent within, and difficulties that crop up in, the law relating to the recognition, content and scope of implied terms in law. For example, in Ch 5, the discussion centres on the fact that the courts have identified no concrete criteria to distinguish a contract of employment as a ‘class of contract’ from other contracts for the personal performance of work in the context of the implication of terms into the contract of employment [pp 117–156]. The author reaches the conclusion that the notion of distinct ‘classes of contract’ is an unhelpful criterion and that for it to continue to be a viable concept, the courts will have to put some flesh on its bones to aid future understanding [pp 156–157]. Turning to Ch 6, having charted the historical development of the ‘necessity’ criterion for the establishment of an implied term in law [pp 159–162], with a large degree of authority, Golding claims that the domestic and Australian employment rules on what is demanded to meet that test not only fail to live up to their promise, but also to guarantee a minimum baseline threshold of legal clarity [pp 163–172]. To that extent, what it is exactly that motivates the courts to act in such an activist manner is left unsaid. On the face of the various judgments in which an implied term in law of the contract of employment has been recognised, the courts have also referred to the force of ‘wider’ or ‘general’ policy considerations. The account in Ch 6 subjects that jurisprudence and case law on what makes it a necessity to recognise an implied term in law to doctrinal analysis and illustrates how the judiciary have afforded scant guidance in that regard, with some of their motivations being rooted in securing the basic functionality of the contract of employment (eg the English courts) and others in political or policy-based factors (eg the Australian courts). In the final section of Ch 6, Golding poses a pertinent question, which is how it can be logically coherent to permit an employer or employee to adopt an express term of the contract of employment that specifically derogates or excludes an implied term in law, which the courts have obviously (a priori) declared to be a necessity for the proper functioning of the contract of employment or based on significant policy concerns [pp 172–178]. Perhaps this is not as confusing as it first seems and that the answer to this question is to say that in recognising a particular implied term in law as a necessity, the courts are simply declaring that it is an essential term in the absence of an exclusionary express term. And where such an express term is present, that the courts are simply saying that the implied term no longer retains the status of necessity.

In the penultimate Ch 7 of the monograph, the discussion moves on to address whether the implication of terms in law should be the role of the common law or legislation. Golding identifies the various considerations in favour of both the common law adopting an activist law-making role [pp 184–187] and those in favour of leaving this task to statute [pp 187–189]. The chapter concludes by calling for an enhanced and coherent set of interactions between statute and common law as a means of supporting the judiciary in the future in asserting their law-making function. In that way, the book clings to the underlying claim that the fashioning of the implied terms in law should remain an exercise in judicial law-making. On one view, this is somewhat surprising, given the tendency to cast the judiciary as conservative, conscious of the constitutional limits of their role, and generally reluctant to interfere in the bargains struck by contracting parties. However, in the case of implied terms in law of the contract of employment, it can be taken as read that this is what the courts clearly are doing when they create new obligations and rights. And Golding would appear to be making an additional normative claim, ie that the courts should be supported in continuing to perform that role.

In the concluding chapter of the book, Golding considers the overlap between different implied terms in law, but the discussion here is restricted to the ‘good faith’ implied term in Australian employment law and how it interacts with the implied term of mutual trust and confidence. This issue is less of a concern in English law where the implied term of mutual trust and confidence is understood to incorporate a good faith element, but is a much deeper conceptual problem in Australian law as a result of the rejection of trust and confidence in the Commonwealth Bank case. Another dimension of the ‘overlap’ question that would have undoubtedly benefitted from additional consideration concerns the intersection in English law between the Braganza ‘implied term’ or ‘criterion’ (named after the UK Supreme Court case of Braganza v BP Shipping Ltd. [2015] UKSC 17, [2015] 1 WLR 1661) and the implied term of mutual trust and confidence. Contemporary debates in labour law (and contract law) scholarship have honed in on whether the court’s review of an employer’s exercise of discretion or power pursuant to Braganza (on the basis that the employer’s discretion has been exercised irrationally, perversely, arbitrarily or contrary to good faith) is a standalone implied term in law of the contract of employment, or a facet of, or element incorporated within, the implied term of mutual trust and confidence (see A. Bogg and M. Freedland, ‘Pensions Law, IBM v Dalgleish and the Public/Private Divide’ in S. Agnew, P. Davies and C. Mitchell, (eds) Pensions: Law, Policy, and Practice (Oxford: Hart/Bloomsbury, 2020) 223, 225–227), or something else (such as a criteria forming part of the process of interpretation of contracts). This is an ongoing debate in English law, and it would have been interesting to hear the author’s thoughts on this important issue.

To draw this review to a close, suffice to say that Golding’s monograph provides deep insights into some of the struggles and challenges that are faced by practising lawyers seeking to convince a court to imply a novel term in law into the contract of employment. The discussion also underscores the ability of the common law implication exercise to penetrate deep within the field of labour law. Although the monograph does not seek to provide a comprehensive analysis of all of the enduring questions that are posed by the exercise of the judicial law-making function in recognising implied terms in law, each of the chapters are presented within a coherent framework that is ably developed. In addition, the book provides some compelling arguments concerning the future development of the law governing the implication of terms in law. For example, the claim that the courts need to elaborate a clearer set of organising principles that explain when it will be justifiable for them to recognise a new implied term in law (and when it will not) is supported by persuasive arguments. And this latter theme of instilling greater legal certainty into the implication recognition process is extended in the monograph to a call for a universal and consistent set of criteria for the identification of a contract of employment as a class of contract that is distinguishable from other personal service contracts. In this work, various suggestions are made that might usefully identify the aforementioned principles and boundaries. And in doing so, although Golding does not open up the debate about the rights and obligations created by implied terms in law, undoubtedly, she does take the analysis much further in this monograph than it has been to date, pushing the boundaries of scholarship in doing so. For all of these reasons, Golding’s book is one of great significance for all labour law scholars.