Labour LAW Class Notes updated PDF

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GPR 318: LABOUR LAW CLASS NOTESCourse Instructor: Ms Naomi N. NjugunaIntroductionLabour as a Factor of ProductionThe term factor of production describes the inputs that are used in the production of goods or services in the attempt to make an economic profit.The main factors of production are land, ...

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GPR 318: LABOUR LAW CLASS NOTES Course Instructor: Ms Naomi N. Njuguna Introduction Labour as a Factor of Production The term factor of production describes the inputs that are used in the production of goods or services in the attempt to make an economic profit. The main factors of production are land, labour, capital, entrepreneurship and ICT. Labour as a factor of production may thus be described as the exertion of physical and mental effort for monetary benefit. It does not include leisure activities (for purposes of labour law). Some Characteristics of Labour 1. It is inseparable from the labourer – it is present and joined to the human being exerting it and using it. But when people get paid when they work, they are paid for their services and not for selling themselves 2. No production is possible without labour – it is a necessary activation of the production process. The activeness of it is based on the fact that unlike machines, human beings have feelings, the ability to think and also have preferences 3. Labour has imperfect mobility – it is not always easy for workers to move from one occupation to another due to various limiting factors e.g. culture, language barriers, education and technical skills needed, values, etc

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4. It is inherently perishable – it diminishes over time and cannot be stored – unemployed workers cannot store their labour for future employment 5. It is both a means to an end and an end in itself 6. It is an immeasurable factor of production – it cannot be calculated based on units of labour – one cannot determine the production cost of labour. It includes other expenses incurred by and on the labourer since birth. These expenses cannot be accurately determined. 7. It is heterogeneous – no two workers can have the same quality of labour 8. Labour supply is generally inelastic – the supply of labour is dependent and determined by many factors e.g. the population size of the society, sex composition, age, the desire to work, quality of education, etc. Supply of labour is therefore not as changeable as the changes in demand.

Foundations and function/role of Labor Law The importance of considering the foundations of Labor Law 1. To guide modernization efforts and reform agendas of labor law – considering the foundations of labor law helps scholars to understand the REASONS for the existence of Labor Law in the first place and helps them to identify the points of departure of modern day labor issues.

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2. It contributes to an understanding of the interrelationship between labor law and other social and economic disciplines. Labor law must be understood in its context. 3. Foundations lead to the explanation for the PURPOSES of labor law. It explores the norms and values of a Labor Law. What is it intended to achieve? Has it achieved it? What are the hindrances and challenges to its achieving its purpose? Labor Law was birthed as a result of the dissatisfaction of the working class (the proletariat). It began from revolts in 17th century Europe but became organized in the 19th century. Socialism was the ideal behind the rise of labor law. Causes of the revolts: 

Increasing gap between the wealthy and the poor

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Declining incomes of the poor

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Rising inflation and taxation

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Famine, plagues and war

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Religious backlashes.

Foundations of Labor Law a) Human Dignity The term “dignity” comes from the Latin word “dignitas” meaning “worthiness”, inherent worth or inherent respect. From this notion comes the maxim that “Labor is not a commodity but is also a commodity.” What does this mean?

Commodification should be broadly interpreted as the “practice of thinking about interactions as if they were sale transactions” and applying

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market methodology to it. Commodification involves the owning, pricing, and evaluating transactions in terms of monetary benefit. Proponents of universal commodification e.g. Richard Posner, argue that anything some people are willing to sell and others are willing to buy in principle should be subject to laissez faire – the free market

Proponents of universal non – commodification – argue that commodification gives the worker an inferior kind of life due to the alienating of oneself as a piece of property.  Labor is not a commodity – at the end of the First World War, the Treaty of Versailles was signed. This Treaty set up the International Labor Organization. Article 427 of this Treaty – “Labor should not be regarded merely as a commodity or article of commerce.” (note the use of the term ‘merely’ – seems to give the impression that labor can in some respects be seen as a commodity, but it is not solely a commodity). See the Clayton Act 1914 – “The Labour of a human being is not a commodity or article of commerce.”

One major reason that can be advanced as to why labour is not a commodity is because it gives persons a sense of identity and meaning thus allowing them to secure their self esteem/self respect – this is part of the dignity of a human being (David Beatty, 1980) – this may provide a justification as to why employment contracts should not be terminated by the employer without just cause – there should be no unilateral termination by the employer even upon giving of notice ( this prevents the contractual commodification of labour)

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 This expression that labor is not a commodity is attributable to Kell Ingram who was an Irish economist in the 19 th Century. During the Workmen’s Address to the Trades Union Congress in 1880, he made the following statements: “Our views of the office of the workman must also be transformed and elevated. The way in which his position is habitually contemplated by the economists, and indeed by the public is very narrow, and therefore a false one. Labor is spoken of as if it were an independent entity, separable from the personality of the workman. It is treated a commodity like corn or cotton – the human agent, his needs, human nature and human feelings, being kept almost completely out of view. Now there are, no doubt, if we carry our abstractions far enough, certain resemblances between the contract of employer and employed, and the sale of a commodity. But by fixing exclusive or even predominant attention on these, we miss the deepest and truly characteristic features of the relation of master and workman – a relation with which moral conditions are inseparably associated. ….by viewing labor as a commodity, we at once get rid of the moral basis on which the relation of employer and employed should stand, and make the so – called law of the market the sole regulator of that relation.”

 Labor is a commodity – labor is a function of the market. It is an activity with a productive character. This production can be priced (a price can be attached on it). It has economic value. In as much as one attaches various moral values on labor, one cannot escape from the fact that it also has an economic value. However, this commodification of labor cannot be done without considering the very personhood of the person providing the labor, hence the barrier in seeing labor as merely a commodity.

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See the theory of Margaret Jane Radin (1987) that “by making something non saleable we proclaim that it should not be conceived of or treated as a commodity.” – Radin argues for incomplete commodification. She did not believe in complete incommodification. She argued that there are some things that are to some extent within the market and to some extent outside the market. she stated that: “Work and housing are possible examples of incomplete commodification. With respect to the particular aspect, consider that for many of us, work is not only the way we make our living, but also part of ourselves. What we hope to derive from our work and the personal importance we attach to it, are not understandable entirely in money terms, even though we demand and accept money. These ideals about work seem to be part of our conception of human flourishing, and thus the loss of this personal aspect of work would be considered inhumane” The provision of your labor is the provision of your very self, your very essence…that is why it is difficult to commodify labor. How much are YOU worth in terms of money?? Note the argument that not everything can be said to belong to one or the other of categories (either a commodity or a non – commodity). The division is not always so clear and hence the expression in the Treaty that labor is not MERELY a commodity. Labor is in this “in – between” bracket. (Are there other things that can be classified to be in between? SEX, HOUSING

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 Due to this view, it can be argued that that part of labor that one cannot put a money cost to is to be paid in terms of HUMAN DIGNITY. The expression that labor is not a commodity is linked to the concept of human dignity. See the words of Immanuel Kant that:

“Everything in the realm of ends has either a “price” or a “dignity”. That has a PRICE in the room of which something as an equivalent may be put; but that which is above all price, and admits not substitution by an equivalent, has a DIGNITY. What is subservient to human wants and wishes has a market – price; and what, when there is no want, serves only to gratify a taste, has a fancy price. But that which constitutes the condition, under which alone any what can be an end in itself, has not merely a relative value, i.e. dignity.”

b) Social Justice  What is social justice? Can be seen as a dynamic exploration of equity and equality. It implies fairness and mutual obligation in a society. There should be equal opportunities in life and where life chances are not distributed equally, then it means that there should be a distribution of those opportunities in a fair and just manner (distributive justice).  Social justice seeks to achieve fair distribution of wealth, power and benefits in a society.  Examples of social justice in Labour Law – e.g. collective bargaining procedures, basis labour standards e.g. minimum wage – these interventions are aimed at improving the position of the weaker members of the labour market  The traditional view of social justice is that it is for welfare maximization. However, the explanation of social justice as a 7

justification for some of the mandatory and protective aspects of labour law can also be based on two other aspects. 1) market failures in the labour market and 2) behavioural economics where individuals do not make rational assessments of risks in entering into contracts  Proponent of social justice – John Rawls (1971)  Human dignity is not sufficient as a foundation without social justice.  According to Georg Wilhelm Friedrich Hegel’s philosophy, labor is not just an individual activity but is also a social one. A man produces not merely to satisfy his own needs but also on a reciprocal basis for others.  However with this view, one cannot fail to see the tension between the concepts of human dignity and social justice. Social justice has a component of egalitarianism/equality. Is it not more important to focus on the real needs of individuals rather than constantly engaging in a comparison of people’s lives with others??? A strict view of Egalitarianism/equality will necessitate a comparison.  A different theory of egalitarianism – constitutive or relational egalitarianism – equality is pursued on the basis of moral grounds. Equality has a value which is extrinsic because it follows from a higher moral value of equal dignity and respect. This is different from instrumental egalitarianism which sees the value of equality as an instrument to reach other value.  How does this relate to labor law? Can be seen very well in the area of wages. Employees need sufficiently high wages to live a decent life (DIGNITY) But also need wages that stand in relation to the earnings of other employees or even in relation to their additional value to the enterprise/institution (RELATIONAL EGALITARIANISM) 8

4. The Market Economy – the free market as a (functional) foundation of labor law  The common view is that labor law is actually a reaction to the principles of the free market. So how can the free market be a foundation for labor law?  The answer may lie in the view that if Labor Law is a corrigendum (correction) to the free market, it cannot otherwise be, than that labor law is presupposing and built on the existence of this free market.  Labor law is thus seen as a law that responds to the changing demands of a socially dynamic aspect of modern capitalism.  The free market principles give labor law its REASON FOR EXISTENCE.  However, under the neo – classical economics theory, labour law operates as an exogenous intervention in the operation of market forces. Wages and employment are influenced by the forces of supply and demand for labour. The market forces are an implicit regulator of decisions to be employed. Firms/employers who underpay are at risk of losing their workforce or potential employees to employers who pay well. In the same breath, workers who overdemand for wages risk exclusion from employment as firms will substitute capital or ICT for labour or simply cease to employ. Market forces are considered favourable because they promote equality. This means that there is equal pay for an equal value of work. This also means that there will be a standard wage for labour of comparable productivity regardless of the employer. Labour law is thus seen as an interference. It is the source of imperfections in the market equilibrium created by the market. Wage 9

regulation actually lowers the demand for labour and “results in the exclusion from the market of those it is designed to help, that is, the low paid.”

5. Freedom/Liberty as a Foundation for Labour Law

Conceptions of freedom

Negative Freedom or liberty

This was favoured by utilitatarians such as Jeremy Bentham. Liberty clearly meant the absence of external interference. “All coercive laws, therefore…… and in particular all laws creative of liberty are as far as they go, abrogative of liberty.”

Positive Freedom or Liberty

 This is a conception of freedom as self – realization and self – fulfillment.  The main proponent of this was Thomas Hill Green (1891)  He stated about freedom “But when we thus speak of freedom,

we should consider carefully what we mean by it. We do not mean merely freeom to do as we like irrespectively of what it is that we like. We do not mean a freedom that can be enjoyed by one man or one set of men at the cost of a loss of freedom to others. When we speak of freedom as something to be so highly prized, we mean a positive power or capacity or doing or enjoying something worth doing or enjoying, and that too, something that we do or in enjoy in common with others. We by it a power which each man exercise through the help or 10

security given by him by his fellow men and which he in turn helps to secure for them.”  Green emphasizes freedom in the positive sense as the liberation of the powers of all men equally for contributions to a common good.  With respect to labour, in as much as it is an exchangeable commodity, because it is so closely connected to the person of the worker, restrictions are necessary to ensure that workers will be contributers to the COMMON GOOD.  For example – laws that ensure safe and healthy working conditions.

The argument is that any injury to a person is an injury to the whole society.

Freedom as Capability

 The main proponent of this conception of freedom is Amartya Sen and Martha Nussbaum  Freedom is the possession of opportunities, options and powers and the actual exercise of those powers  According to Sen – freedom is to be understood as capabilities – the opportunities that one has to be what he or she desires to be  Labour law should therefore enhance workers capabilities Real Freedom

 This is freedom that is based on consent – there is no duress and no undue influence  The argument is that labour contracts are voluntary in nature and no one is forced into them 11

 However, what about economic duress? When an employee has no reasonable or acceptable alternative to taking a hazardous job, he may be forced or coerced economically into taking that job (According to Gerald Cohen)  Cohen argues that all job offers in a capitalistic society are actually coercive because proletarians are not free to leave the working class and become private owners of capital. Proletariate are forced to sell their labour to capitalists.  However, Robert Nozick denies the concept of economic duress and

insists that when a worker accepts to work under less attractive conditions, he or she still has a choice. There is still freedom.  Take his example of the 26 men and 26 women each wanting to be married.  He argues that labour contracts are still voluntary even if workers have no other palatable alternatives.

6. Paternalism  This is usually seen as an attack on individual autonomy and free choice. It is seen as an attack on Liberalism. According to John Stuart Mill – people should be left legally free to lead their lives as they see fit as long as they do not harm others.  However Stuart Mill also recognized that there are some forms of paternalism that can be reconciled to the concept of liberalism. He acknowledged that some forms of government intervention or interference are done for the good of individuals without necessarily being a detriment to the liberty of the individual. For example placing legislation regulating maximum hours of working.  Gerald Dworkin suggested that paternalism is necessary due to the limitations of our cognitive and emotional capacities. See what he says: 12

“I suggest that since we are all aware of our irrational propensities – deficiencies in cognitive and emotional capacities and avoidable and unavoidable ignorance – it is rational and prudent for us to take out ‘social insurance policies’. We may argue for and against proposed paternalistic measures in terms of what fully rational individuals would accept as forms of protection.” Simon Deakin argues that paternalism can still be justified in the light of freedom of contract doctrine. He argues that contractual freedom can be seen from a functional perspective i.e. what is the function of contract? The function of contract is to facilitate market based exchanges. Market based exchanges are exchanges that are dependant on the forces of supply, demand and price In performing this function, the law of contract DISCRIMINATES in terms of which contracts it is to enforce. It is within this discriminative aspect that paternalism can be justified. The exceptions or limitations to the laissez faire doctrine are all part of the paternalism argument. E.g. Incapacity and public policy considerations. Therefore paternalism can be justified where parties need to be protected from the negative welfare implications of their decisions (the rare cases where parties do not display rationality in their choices). This is the TRADITIONAL argument for paternalism. However, in some forms of regulation which demonstrate paternalism e.g. labour law and consumer protection law, the contractual regulation cannot simply be explained in terms of traditional paternalism. When people enter into employment contracts or consumer based contracts which have welfare – reducing effects, they are not “irrational” per se. They may have limited information or unequal bargaining power BUT NOT IRRATIONALITY.

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The basis of intervention based on paternalism therefore is not to protect the parties from themselves but to overcome externalities and to address information asymmetries (inequalities). In so doing, the scope of the market is expanded and the general societal well being is promoted. NB – An externality is a consequence of an economic activity that is experie...