Consultation or Dicat: Different Approaches to Labour Law Reform

While mulling over a more detailed response to National's reforms, on which I will blog over the next few weeks, it has been interesting to contrast the very different approach to labour law reform taken by National and Labour. Older readers will recall the detailed and lengthy consultation process that preceded Labour's Labour Relations Act 1987 (as I recall a Green paper and submissions and then a white paper and more submissions before an Act was introduced and then the ususal Select Committee process).

In a paper that forms part of Erling Rasmussen's (ed) Employment Relationships: New Zealand's Employment Relations Act Margaret Wilson has detailed the comprehensive consultation process with all relevant groups that took place before the introduction of the Employment Relations Act 2000. This Act was notable for the limited nature of its reforms and its caution in introducing measures that might be damaging to business. In both cases Labour was open about its intentions, took care to ensure that both workers and business were consulted, that their respective interests were considered, and that the resulting legislation was genuinely pluralist in character.

By contrast National has been and remains completely unitarist. In its view of labour law there is only one side whose interests deserve consideration even if political realism may constrain that interest being pursued to too much of an extreme. National prefers to work behind closed doors and to consult only its own supporters and their lobby groups. In 1990 National had signalled the direction of its changes but the magnitude of those changes was unexpected. The policy and the legislative scheme was largely drafted in secret behind closed doors and workers and their representatives were excluded from this process. The process at the second and subsequent reading stages was particularly appalling. A significantly amended Bill was pushed through under urgency with few if any copies of the changes available either to the opposition or the public until the Bill was well through the parliamentary process. One result was that probably a third of New Zealand employees woke to find that they were covered by legislation on which they had not been consulted and had no opportunity to comment. It will be recalled that workers outside the award system only found they were to be covered by the ECA during the second reading.

National's record in 2010 is even worse. At least in 1991 National were reasonably honest about their intentions. By contrast, in 2008 its election manifesto proposed only minimal changes to employment law. This position has been repeated on several occasions. As we now know, this disinformation campaign was concealing a different game. In the dark corridors of power and in rooms that would have been previously smoke filled National was developing reforms intended to allow it to come as close as possible to pushing an agenda that appears to have changed little from the days of the ECA. It is an agenda that treats over 2 million New Zealanders as commodities and it is an agenda that makes it increasingly clear that those New Zealanders, whatever the HRM propaganda of their employers or however many statements that "our employees are our most important assets", will find that the cold legal reality is that security in their employment will diminish and that their economic well being will be increasingly subject to the arbitrary and unchallengeable decisions of their employer.

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.

My Absence

I apologise for the absence of posts over the last little while. I have been slowly moving to Scotland where I will be based for the next 6 months. The penultimate event before arriving was a conference on good faith on which I will report soon. I will also offer some thoughts on the announced reforms as well-although possibly not as libellous as my personal mutterings when I saw them.