Reflections on the New Psychological Contract and the Ownership of Human Capital
Posted: 10 Jun 2002
It has become a cliche of the literature on the modern workplace that temporary, contingent, or precarious employment has replaced the long-term employment and job security that was thought to characterize white-collar, male employment in the mid-to-late twentieth century. In The New Psychological Contract: Implications of the Changing Workplace for Labor and Employment Law, Professor Katherine Van Wezel Stone argues that, although neither firms nor employees expect that employees will enjoy the employment security that supposedly characterized long-term employment relations of the last generation, firms now promise "employability security." That is, firms promise employees that the work they do will enhance their employability by giving them valuable training, experience, and contacts. This is "the new psychological contract" of employment.
This essay discusses the descriptive, prescriptive, and doctrinal implications of Stone's claims regarding the ownership of workplace intellectual property and human capital. The essay raises modest reservations about Stone's descriptive claim, but more significant concerns about the prescriptive and doctrinal implications with respect to trade secrets and the enforcement of restrictive covenants limiting competitive employment by former employees. The essay argues that, like other implied in fact contract theories that have been advocated as a basis for reforming the inequities of employment law, the new psychological contract theory is unlikely to effect lasting change because firms do and will require employees to expressly contract for non-portable human capital. Drawing on examples from the historical development of modern law regarding trade secrets and restrictive covenants, this essay questions the utility of implied contract theory to effect meaningful protections for employees. Unless courts are prepared to impose non-contractual rules about how much firms and employees can bargain for, no implied contract theory will significantly increase the portability of most employees' human capital or employees' control over the intellectual property they create at work.
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