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Bellante, Don --- "Labour contract" [1999] ELECD 18; in Backhaus, G. Jürgen (ed), "The Elgar Companion to Law and Economics" (Edward Elgar Publishing, 1999)

Book Title: The Elgar Companion to Law and Economics

Editor(s): Backhaus, G. Jürgen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781858985169

Section: Chapter 11

Section Title: Labour contract

Author(s): Bellante, Don

Number of pages: 8

Extract:

11 Labour Contract
Don Bellante


In the United States and most of Western Europe, it is a minority of private-
sector workers who are covered by collectively bargained contracts. Even in
the unionized sector where formal explicit contracts exist, the contracts are
incomplete, in that they do not specify all of the terms of the employment
relationship. Outside the unionized sector, the `contract' between firm and
employee tends to be unwritten, implicit and therefore for the most part
unenforceable in courts of law, The primary task of the social scientist is to
explain why the implicit, incomplete form of contract is the overwhelmingly
dominant form, while the secondary (but more difficult) task is to explain the
consequences of the dominance of implicit over explicit labour contracts.
In one sense, the explanation as to why labour contracts tend to be implicit
seems obvious: if labour contracts are made explicit, they are generally
enforceable only on the employer, with employees free to abandon the em-
ployment contract at will. This lack of symmetry markedly distinguishes the
explicit labour contract from the commercial contract, and employers thus
would seem to have no incentive to offer explicit contracts. This explanation
is not entirely satisfactory, however, as, even under existing legal conven-
tions, employers might well have an incentive to offer explicit contracts even
though they would not bind employees. As long as workers value the security
that a formal contract would offer, there are gains to be made by the employer
in the form ...