Monday, July 26, 2010

Behind National's Reforms

In the nineteenth century Sir Walter summed up the fears of British Tories and the propertied classes when he feared the day that “unwashed artificers” might get the vote, a sentiment that caused Borderers to jeer at him and stone his carriage. Universal suffrage, in Britain as in New Zealand, posed a major threat to the ability of the propertied class and expanding corporate capitalism to treat the great bulk of the population as exploitable commodities. In their view capital was endowed by god, or the “laws” of economics to exploit whatever resources were available, including human resources, and to accumulate the benefits of that exploitation for its private benefit.

Before universal suffrage the subordination of workers could be guaranteed through penal sanctions and imprisonment as well as the threat of unemployment, destitution and the workhouse for the worker and their family. Universal suffrage, the growth of effective trade unions, collective agreements, legislated minimum employment standards and welfare systems undermined these controls but the employment relationship, however, remained one of subordination. The courts invented new torts to crush worker organisation and developed a new form of contract embodying mechanisms to ensure effective control of employees. Employees were held to owe onerous duties of fidelity to their employer but such obligations were strictly one way – employers were obliged to pay wages but owed nothing more to their employees. The ASLEF case in the UK and decisions of the New Zealand Court of Appeal in the 1990s made it clear that in the view of the law an employment contract is a contract intended to benefit the employer – its function is to allow the owners of property to maximise the gain from their property. Employees are there to promote that function.

Employees however have no interest worthy of legal recognition in their employment. While the common law courts have long shown incredible flexibility in creating abstruse property and proprietary rights to protect employers, increasingly including quasi-property rights in their workforce in part or as a whole, they have never recognised any such rights for employees.

Subordination depends on fear. Historically fear was generated by the threat of flogging, transportation and the workhouse. Universal suffrage and effective political power ended the more draconian of these threats but the common law courts, always one of the strongest supporters of the interest of property, ensured that one threat remained clear and untrammelled – the right to dismiss without reason and without consequences. The common law has always taken, and continues to take the position, that any employee, be they employed part-time for a day or have worked productively and faithfully for 30 years, can be dismissed on a whim and without reason or even for reasons which any reasonable person would regard as totally unacceptable. An employee who has spent half a decade or more accumulating professional or technical expertise, increasing at their own expense, may have their reputation and their investment compromised or destroyed in a second by an arbitrary or vindictive employer and the common law gives not a jot.

Since the Second World War, however, most democratic developed countries, with the notable exception of the United States, have moved to limit such arbitrary power by requiring employers to justify a dismissal on some rational grounds-economic or commercial or employee misconduct or incapacity. New Zealand introduced this protection in 1973 and while personal grievance protection was never perfect, and rarely provided adequate remedies against unjustified employer actions, it did act as a significant deterrent to at least the more obvious abuses of employer power. Protection from unjustified dismissal, as with union organisation, thus qualifies employee subordination and hence the power of an employer to unilaterally and arbitrarily control its labour force. An employee who can insist on their contractual rights, or on some control in how their labour is utilised, constrains the so-called right of capital to have an untrammelled ability to exploit that capital. On the other hand an employee who knows that they can be dismissed without reason, and see their own and their dependents future jeopardised, is an employee who for all practical purposes has few if any legal rights and will have no power or ability to control or protect their own economic security. Understand that and the logic behind National’s reforms becomes clear.

Political constrains may mean that John Key's government is not be able to introduce the United States employment-at-will rule which reduces employees to totally disposable assets, as many National supporters would have liked to do in 1991. Gutting the balanced test of justification and replacing it with one that comes close to equating lack of justification with employer irrationality is however a large step in that direction.

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