The nature of the employer-employee relationship is explored in terms of three issues: (1) what constitutes a good employer-employee relationship, (2) the consequences of good relations for the collective bargaining and grievance processes and for joint union-management cooperation, and (3) the factors that contribute to or cause variations in employer-employee relations. The state of employer--employee relationships in the municipal and police sectors in Canada is explored concerning these issues. The study involved a survey of union and mangement representatives in 26 cities with populations over 100,000. Good relations were defined as including trust, lack of hostility, acceptance of the other party, and cooperation. Factors contributing to good employer-employee relations were classified into environmental characteristics, management characteristics, union characteristics, and characteristics of union-management interaction. Study results clearly reveal that positive perceptions of the relationship by police associations and management are related to increased ease of settlement in the bargaining process, fewer grievances settled earlier in the grievance procedure, Obstacles to good employer-employee relations in the police sector are identified and suggestions to overcome them are made. Seven tables and 39 footnotes are included. An appendix defines the variables of the study and identifies data sources.