Changes in the Employer-Labour Relationship - Essay Example

Legal Principles in Contingent and Nonstandard Work Job Security Katherine Stone argues that the change from an industrial-based economy to a knowledge-based economy has dramatically altered the traditional U.S. labor structure that has been in place since roughly the 1930’s. Whereas in the past, there has been an implicit psychological contract between employees and employers exchanging loyalty for job security, the new economy does not offer such a promise. The 1930’s “New Deal” labor policies of the 1930’s such as the National Labor Relations Act encouraged collective bargaining, helping to create job ladders for employees with a foreseeable opportunity for upward mobility based on tenure. In return, employers gained a loyal “internal labor market” of semi-trained workers that would save employers money required to recruit, and train. Beyond the implicit contract, unions were also successful in protecting against termination, requiring “just cause” instead of the more current employer flexibility of “at will” employment1. The ushering in of the boundaryless workplace has dismantled much of the New Deal labor structure, and has put a premium on individual skills and knowledge. Employees have become free agents in the workforce, needing such skills to compete for prevailing wages with no implicit or explicit guarantee of job security. The strongest protection workers now have is education and training. Stone also notes that those hurt the most by this instability are blue collar and untrained workers2. While the lack of security is tumultuous in itself, Stone argues that the current labor structure does not have answers for many of issues that the changing economy present. Employment Discrimination Using Stone’s method of chronicling historical changes in the employer-labor relationship, the trend towards a more flexible and boundaryless workforces has worked to improve opportunities for women and minorities. At the same time, however, she believes that, ”the new employment relationship makes discrimination hard to identify and difficult to challenge3.” Successful attempts have been made to prevent overt discrimination such as Title VII, of the landmark 1964 Civil Rights law, the Age Discrimination Act of 1967, the Equal Pay Act of 1962, and the 1990 Americans with Disabilities Act4. This legislation is effective in allowing women and minorities to gain access to the points of entry into an internal labor market, however, due to the breakup of internal labor markets, these acts do not address more modern forms of discrimination. Modern forms of discrimination have become subtler, and establishing preventative measures have become an arbitrary exercise. Stone writes, “In a workplace with fewer job ladders and flattened job hierarchies, discrimination takes new forms, such as patronage networks and cliques that exclude, ostracize, and marginalize newcomers.5” The courts have attempted to pinpoint these more modern forms of discrimination, but there is yet to be a legal consensus, as these cases are often settled pragmatically. The landmark U.S. Supreme Court case McDonnell Douglas Corp. v Green established a level of liability for proving discrimination. This case has not settled the issue though. Subsequent cases, such as Texas Department of Community Affairs v. Burdine in 1993-94, and St. Mary’s v. Hicks have made it harder to refer to settled law to determine liability6. The recent shift toward a more contingent labor force may work to improve equality, but it has created legal ambiguities that will need to be solved. Ownership of Human Capital Perhaps no issue is more salient in the changing workforce than the control of human capital. Under a structure based on long-term employment and internal labor markets, employers have had legal protections geared toward keeping company knowledge and human capital exclusive use for the company. This has come in the form of non-compete covenants, restrictive contracts, and trade secret protections. Contingent workers in a changing workplace must use their knowledge as a skill to be competitive in the market, and therefore Stone finds it unreasonable for one company to hamstring a former employee by such post-employment restraints. Like discrimination cases, there has been a wide range of recent judgments to determine the extent that employers can claim proprietary rights over knowledge. For example, The Texas Supreme Court established a “razor thin interpretation,” upholding the use of restrictive covenants when deciding Light v. Centel Cellular co7. Courts have ruled pragmatically contingent on the risk that a future employee could have on a former company. Two examples where the courts upheld the covenants are Pepsico v. Redmond and Comprehensive Technologies v. Software Artisans Inc., while the 1967 Ruhl decision claimed that the covenant was unduly harsh on the former employee8. Much of the debate centers on defining trade secrets. The 1985 update of the Uniform Trade Secrets Act and the 1987 Restatement of Unfair Competition have broadened the definition of trade secrets, but like discrimination law, judgments are still pragmatic and legal boundaries are still somewhat arbitrary9. Worker Representation The increase in contingent and nonstandard workers has correlated with a decrease in Union representation. From 1983 to 2001, the percentage of union-represented works has dropped from 16.5 to 9.0 of the entire workforce10. The 1935, National Labor Relations Act, and the 1937 Fair Labor Standards Act, created a system in which government was able to regulate the interaction between employers and organized labor. Under the industrial-era employment model, these acts reinforced the implicit contract of job security for the laborer, and the establishment of the internal labor market for the employer. Contingent labor and the knowledge-based economy are eroding both the implicit contract and the internal labor market. According to Stone’s findings, 87 percent of workers continue to seek representation, but the decline of the union has created controversial measures to deal with this issue11. The current trend to settle labor disputes has become arbitration and Alternative Dispute Resolution (ADR). U.S. Supreme Court cases such as the 1991 Gilmer v. Interstate/Johnson Lane, and the controversial 2001 decision of Circuit City Stores v. Adams established the use of arbitration as a legitimate form of dispute resolution12. These cases established the arbitrator’s ruling to be binding, even though the system appears weighted toward the employer. Many regulations regarding arbitration have made it difficult for individuals to fight against a company, and given the binding nature of the arbitration rulings, they are unable to seek further legal recourse. Employee Benefits The establishment of the traditional employee benefit structure was forged out of collective bargaining by unions and the desire to attract long-term employment for the benefit of creating an internal labor market for the employer. The erosion of union and long-term employment has nullified many of the health-care and retirement packages of the average worker. The percentage of full-time employees with health coverage dropped from 97 percent in 1983, to 76 percent in 1997 while the individual cost per month has nearly quadrupled13. As workers become more temporary, the likelihood that a worker is without health coverage increases, and in many cases, workers lose their pensions. Stone advocates measures that will make benefits more portable and more secure. Since the mid 1980’s, the U.S. government has successfully legislated measures to increase portability, although the burden of responsibility has been moving toward the individual. The 1986 Consolidated Omnibus Budget Reconciliation Act allowed departing beneficiaries to continue coverage for 18 months post-employment while the 1996 HIPAA Act, which worked to increase portability of medical coverage have helped some people adapt to the change in the implicit labor contract14. Congress has also amended the Employee Retirement Security Act of 1974 in both 1984 and 2001, but the most used alternative to a traditional pension continues to be the Individual Retirement Account (IRA), a fully portable individual plan. Other hybrid plans such as the Cash Balance Plan offer an alternative, lump sum distribution of benefits as opposed to the worker having to wait for retirement. There has also been a dramatic recent increase in private insurers that specialize in self-employed and temporary workers. Stone believes, however, that current choices are not sufficient15. Read More