Employment as a Relational Contract
57 Pages Posted: 1 Jun 2005
Employment scholarship focuses too much on laws and not enough on norms. Yet norms capture the complete terms of employment more accurately than most legal contracts. Virtually every aspect of the employment relation that falls outside the realm of contract lawyers - corporate culture, office politics, trust, future planning, and the complex social matrix of organizational life - are the exclusive domain of norms. Bundled together, work norms form a contract, a relational contract, which is more important to the parties in most situations than any formal written agreement.
Whereas scholars have frequently examined legal aspects of employment contracts, employment at will, and wrongful discharge, little attention has been paid to systematically developing an enforceable theory of employment norms. This article fills this scholarly gap by defining employment as a relational contract forged by the behavior of the parties. Part I of this article defines employment as a relational contract. Part II establishes the sources of relational contract at work. Part III presents two case studies that show maintenance of relational contract is critical for the successful organization. Part IV devises an opportunism-based enforceable theory of relational contract in the employment context.
Keywords: Employment law, relational contract, wrongful discharge, norms, workplace
JEL Classification: K12, K31, J41, J53, M50
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