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Bellante, Don --- "Labour Contracts" [2005] ELECD 142; in Backhaus, G. Jürgen (ed), "The Elgar Companion to Law and Economics, Second Edition" (Edward Elgar Publishing, 2005)

Book Title: The Elgar Companion to Law and Economics, Second Edition

Editor(s): Backhaus, G. Jürgen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845420321

Section: Chapter 18

Section Title: Labour Contracts

Author(s): Bellante, Don

Number of pages: 8

Extract:

18 Labour contracts
Don Bellante


In the United States and in much of Western Europe, only a minority of
private sector workers 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 they are made explicit, they are generally enforceable only
on the employer, with employees free to abandon the employment contract at
will. This lack of symmetry markedly distinguishes the explicit labour con-
tract from the commercial contract, and employers thus would seem to have
no incentive to offer explicit contracts. This explanation is not entirely satis-
factory, however, as, even under existing legal conventions, employers might
well have an incentive to offer explicit contracts even though such contracts
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 of ...