Labor Market Regulations And Bankruptcy Laws: An Implicit Contracts Approach

Abstract

The bankruptcy law in existence today was developed within an economic framework characterized by the prevalence of private law contracts freely undertaken by parties, and by a low level of government control of economic activity. This is how this institution is still designed in the majority of countries. However, important changes have taken place in the framework within which bankruptcy law should be developed today. Not only have government control and intervention modified the original concept of many commercial relationships, but the relationships between companies and workers have also taken on new and special shapes, and are very different from those existing between companies carrying out sales or leasing transactions. Labor law scholars often consider labor regulation to be expansive, in the sense that one of the effects of the increasing relevance of public law would be a bigger role for labor law; and one of the main characteristics of labor law is subordination of the principle of freedom of contract to specific regulations in which workers are considered the weaker part in the contractual relationship. From this perspective, bankruptcy law would only be another case of this lesser relevance of private law in modern societies.