New bottle-same tired old message

While there will always be differences between National and Labour on employment law those differences have narrowed over the last half decade as National and its employer backers came to realise that not too much had changed since the Employment Contracts Act reshaped industrial relations in the early 1990s. Union membership density dropped to around 20% and has remained there, industrial stoppages rarely exceed 50 a year and collective bargaining now covers only about 10 percent or less of private sector workers. The coverage of collective bargaining dropped further under Labour in spite of the introduction of good faith bargining. The fairly restrained stance taken by National to labour relations since the elections reflects, as much as anything, that there are not many unions around worth bashing anymore. It might also have been thought to recognise that there is now a reasonable balance in the law between the need flexibility and protecting an employee's investment in their job - on which see my post "Serfdom and Employment".

Nevertheless there will always remain an element in National, especially in its small business and ACT end, that regards workers as something less than full citizens - as Roger Kerr once put it “While people are not commodities ..the labour services they provide … most certainly are”, a theoretical separation likely to appeal only to Chicago economists and Cartesian dualists. The categorisation of employees as commodities does however help to depersonalise employees - they cease to be citizens in the fullest sense and can be treated as ideally cheap and disposable: certainly they should not have legal rights to protect their employment status or to recognise their investment in it. One might have hoped that this attitude to workers, while unlikely to have fully vanished, might at least have given way to a more balanced approach. Productive economies in developed countries require a more stakeholder approach to employees, one which recognises the significant educational and training investment built up by employees and which protects both that investment and the economic security of employees from arbitrary employer actions - indeed that attitude seemed to have been ocurring over the last decade or so:-

And then along comes Dr Brash peddling the old snake-oil made from the corpse of new-right deregulation and the neoliberal economics that brought us the current financial crisis. All we need to do to bring our standard of living up to Australia's is to bash the workers-again. Dr Brash marvelous medicine is essentially the new right's unfinished business of the 1990s: get rid of the floor of employment rights, introduce employment-at-will (or as close to it as you can get away with) and slash the welfare state.

John Key has rightly rejected this prescription and in an MMP environment it is almost certainly not politically viable. The last time reforms of this type ocurred, under both Labour and National, they were driven through Parliament under the FPP system:- which we will have a chance to return to in a few years. While the Prime Minister may have reburied the new-right corpse for the present it should be kept in mind that zombies usually reappear and that their defeat is always messy.

In case you didn't read the whole report and get that sense of deja vu:
“Labour market:
a. Labour law should be amended to strengthen the freedom of negotiation between workers and their employers, including, for example, streamlining provisions governing dismissal of workers, and putting less emphasis on procedural matters.
b. Statutory provisions allowing enforceable mutually-agreed probationary periods for new employees should be extended, from the current maximum of 90 days for those working for small firms to a maximum of 12 months for employees of firms of any size.
c. For employees earning in excess of $100,000 per annum, employment relations should be governed by the standard provisions of contract law rather than by the Employment Relations Act.
d. The youth minimum wage should be reinstated as a matter of urgency, and minimum wage rates should be reduced to the same ratio to average wages that prevailed in 1999.”

Contractors across the ditch

Occasionally it is interesting to glance across the Tasman. In Australia independent contracting has a considerably higher political profile than in New Zealand. Indeed in Dr Craig Emerson Australia has a Minister for, among other things, independent contractors. The reason for this profile appears in part to be due to the lobbying activities of groups that either use or claim to represent independent contractors such as the Housing Industry Association and the Independent Contractors Association. The latter is a small but very vocal body which purports to represent the many hundreds of thousands of contractors in Australia: apparently it is committed to promoting a free choice between the “powerlessness and bondage of employment” and the “equality and liberation of shared power under independent contracting.” While the description of employment may ring some bells the description of independent contracting seems a tad overoptimistic particularly for that group of contractors who are better described as “disguised employees” or “dependent contractors. Nevertheless it seems that both the Labor and Coalition parties have become committed to supporting ‘the choice of Australians to pursue a career as independent contractors’.

Shae McCrystal of Sydney Law School, suggests that in Australia independent contractors are increasingly seen as a distinct class of small business actors deserving their own regulatory attention. The Howard government for example passed an Independent Contractors Act, mainly to limit the ability of the states to apply employment-like protection to contractors, but the Act which is still in force does allow contractors covered by it (don’t even ask about Australian constitutional complications) to challenge unfair contracts – in a recent case contracts with owner-drivers were held to be unfair when they allowed the principal to require upgrades to trucks (from singletrailers to B-doubles) where there was no provision for reasonable compensation for the extra expense. The new Fair Work Act 2009 provides some limited protection by prohibiting misrepresenting employment as an independent contracting arrangement and dismissing an employee in order to re-engage them as a contractor.

Nevertheless, as in New Zealand, dependent contractors are caught between a rock and a hard place. They are excluded from the protective coverage of labour legislation, including the right to form unions and to bargain collectively, while trade practices legislation generally regards any efforts to collectively improve conditions of work as unlawful. In a recent article, “Is there a 'Public Benefit' in Improving Working Conditions for Independent Contractors? Collective Bargaining and the Trade Practices Act 1974 (Cth)”, McCrystal looks in some detail at the position of contractors under Australia’s trade practices legislation. Groups of contractors may apply for permission to engage in conduct that might otherwise breach Act but for an application to be successful the Commission needs to be satisfied that any public benefit from the conduct is outweighed by the likely public detriment. Such applications have almost always failed.

McCrystal summarises the position as follows: “The public benefit test does not accommodate the argument that improved control over working conditions can be a public benefit in and of itself, especially where it ultimately increases the cost of service provision. Additionally, the competition regulators appear unable to conceive of countervailing bargaining power as a public good of itself. Potentially coercive collective action operating in opposition to strong market power is considered too great an anti-competitive risk to be allowed. Parties with no market power may, if a notification is allowed, collectively try to pursue efficiency gains provided that the collective does not seek to exercise any muscle. Groups with existing market power, however theoretical, cannot combine.”
McCrystal's article can be downloaded without charge from the Social Science Research Network Electronic Library at: http://ssrn.com/abstract=1491855.]

Serfdom and employment

A correspondent in the most recent edition of The Economist suggests that corporations are, for workers, the successor to their feudal lord: “The lord provides protection and defence so the workers can produce without fear of raiders taking their life’s bread. In exchange, the lord gets a percentage of the production. Today’s companies provide that same trade-off, giving their workers job security in exchange for the profit from their productivity.”

The spectre of feudalism and its successor, the law of master and servant, does indeed remain strong and especially within the common law. The modern contract of employment is a contract in form only; in reality the courts developed it as a device to protect the proprietary interests of employers and to subordinate employees to that interest. As Deakin and Wilkinson point out in The Law of the Labour Market, the contract of employment is the product of “the assimilation by the common law of a hierarchical, disciplinary model of service.” This obligation of service in true feudal fashion includes not only the workplace but extends to the personal sphere: the spirit of the nineteenth century decision upholding the dismissal of a young woman for visiting, in her own time, her dying mother without permission lives on in decisions that support dismissals for non-work conduct disliked by employers which has little more than an imaginary or fleeting connection with employment.

What the common law has signally failed to do is to recognise that employees also have an equally valid economic and proprietary interest in employment: the economic security of themselves and their dependents, the economic and psychological investment in a job, and increasingly the value of the employee’s educational, reputational and intellectual capital, often developed at considerable personal financial cost. In a speech given to the Institute of Directors in 2006 Andrew Little of the EPMU commented that “Unless employees are to be regarded as subjects – and employers to take on the role of feudal lords – then the law must afford … employees rights against irrational and arbitrary decision-making.” The reason is of course is that employees are entitled to expect that their tangible and intangible investment in employment be protected against such decision-making.

Modern personal grievance law provides some protection but it does so from the common law’s perspective that an employee has no legitimate protectable interest, at most a right, imposed by statute and reluctantly conceded by the common law, to be afforded a degree of natural justice. The courts insist that employees owe a very high duty of fidelity (a term redolent of feudalism) to their employer, they have yet to concede that this should be reciprocated. Power in both feudalism and labour law traditionally flows one way only – to the extent this flow is impeded it is the result of rights hard won, both politically and industrially, by those subject to that power.

Clayton's Law? Codes of Employment Practice

The Explanatory Note to the Rest and Meals Breaks Bill discussed in the last post indicates that the Minister intends to develop an approved code of practice to provide “non-prescriptive guidelines highlighting the recommended duration and frequency of rest breaks and meal breaks.” Section 100A of the ERA allows the Minister to approve codes of employment practice either generally or in relation to particular situations or particular parts or areas of the employment environment. Once a code is approved the Authority and the Court are required to have regard to the code in determining any matter within its jurisdiction.

To date codes of practice have not been widely used in New Zealand employment law other than in relation to safety and health. The two significant codes issued under the ERA, the Code of Good Faith in Collective Bargaining and the Code of Good Faith for the Public Health Sector have both been issued under specific provisions of the Act, sections 35 and 100D. In AUS v VC of Auckland University(2005) the full Employment Court stated that the Code of Good Faith “is, or ought to be, well known to unions and human resource managers engaged in bargaining”, a fairly clear hint that observance of its general principles might be expected. The use of codes is more widespread in the UK and codes have been issued in relating disciplinary and grievance procedures, picketing, disclosure of information to unions for bargaining purposes and a range of matters around union recognition that have no direct relevance here. A leading UK text, Deakin and Morris’s Labour Law, comment that there is evidence that codes are capable of having a significant impact in the workplace and refer specifically to the code on disciplinary and grievance procedures.

Codes of practice come within the category of “soft law” or possibly what older readers might describe as “Clayton’s law”, ie a form of law that either lacks binding force or which has only indirect force or "the law you're having when you're not having a law". Employment codes of practice both in New Zealand and the UK only have force to the extent that courts or tribunals can be persuaded to have regard to the code. Generally it might be expected that the more a code resembles traditional legislation the more it will be taken into account. A code that has clear and relatively unambiguous provisions is more likely to be seriously regarded by the courts than one with flexible aspirational provisions. Thus a code on rest and meal breaks that reflects the current law, providing for fixed breaks at regular intervals, is more likely to have a positive impact than one phrased in the vague and imprecise language of the Bill. If there is nothing to grasp onto it is difficult to have regard to.

Codes of practice can provide expectations for workplace behaviour and can provide useful guidelines for employers, employees and unions. They can provide greater flexibility than might be desirable in legislation and need not be written in an overly prescriptive form. However if they are to be other than meaningless window dressing they need to be fulfill at least two criteria. First they need to be carefully developed following full consultation. A code that has broad stakeholder acceptance and which reflects workplace realities as well as good practice is clearly more likely to be accepted by the courts. This is particularly so if they also meet the second criteria of stating clear and well defined standards or expectations. The Minister's proposed code on rest and meal breaks may provide a useful indicator for the future.