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THE FUTURE OF FIXED TERM CONTRACTS AND OUTSOURCED LABOUR

THE FUTURE OF FIXED TERM CONTRACTS AND OUTSOURCED LABOUR. Presented to the 25 th annual labour law conference 3 August 2012. THE RIGHT TO FAIR LABOUR PRACTICES. Constitutional authority for statutory regulation of employment:

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THE FUTURE OF FIXED TERM CONTRACTS AND OUTSOURCED LABOUR

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  1. THE FUTURE OF FIXED TERM CONTRACTS AND OUTSOURCED LABOUR Presented to the 25th annual labour law conference 3 August 2012

  2. THE RIGHT TO FAIR LABOUR PRACTICES • Constitutional authority for statutory regulation of employment: • “The focus of section 23(1) is, broadly speaking, the relationship between the workers and the employer and the continuation of that relationship on terms that are fair to both. In giving content to that right, it is important to bear in mind the tension between the interests of the workers and the interests of the employers which is inherent in labour relations. Care must therefore be taken to accommodate, where possible, these interests so as to arrive at the balance required by the concept of fair labour practices.” (UCT v Nehawu 40)

  3. THE RIGHT TO FAIR LABOUR PRACTICES (2) • The constitutional authority for statutory regulation of employment: “The declared purpose of the LRA ‘is to advance economic development, social justice, labour peace and the democratization of the workplace.’ This is to be achieved by fulfilling its primary objects which includes giving effect to section 23 of the Constitution.”

  4. THE STATE LEAVES THE COMMERCIAL TERMS OF EMPLOYMENT CONTRACTS TO THE PARTIES • There are some exceptions to this general proposition, including: • Collective bargaining rights • Minimum standards • Protection against dismissal

  5. CASE STUDY: CHRIS THE CAPITALIST AND PAUL THE POET • Chris and Paul • Used to work together on the shop floor at a clothing factory owned by a big retailer, until the factory closed down • Have managed to borrow some seed capital under a state scheme to encourage economic activity and employment • Each decides to start his own clothing factory in adjacent buildings in the area where they used to work

  6. CASE STUDY: CHRIS THE CAPITALIST AND PAUL THE POET • Chris • Remembers his studies on Marx • Knows that his own earnings (profit) will come from the difference between what the finished products will sell for and the cost of production – a large chunk of which is workers’ wages

  7. CASE STUDY: CHRIS THE CAPITALIST AND PAUL THE POET • Chris • Wants to make as much money as quickly as possible • Decides to try out two regimes: • He hires five employees on one line in the factory; and • Contracts five “home workers” who will be self-employed, will be given material and must deliver product at an agreed price to the factory.

  8. CASE STUDY: CHRIS THE CAPITALIST AND PAUL THE POET • Chris • Pays the employees the minimum rates permissible; • Offers them one year fixed term contracts, saying he does not know whether the venture will succeed; • Hires a tough “manager” on a one year contract to manage productivity on the line; • Extracts a very high profit margin from the business, which he keeps all to himself.

  9. CASE STUDY: CHRIS THE CAPITALIST AND PAUL THE POET • Paul • Remembers his studies on Marx • Knows that his own earnings (profit) will come from the difference between what the finished products will sell for and the cost of production – a large chunk of which is workers’ wages • Wants to achieve a fair balance between the interests in the enterprise, and to develop a sustainable business • Cares about the workers’ job satisfaction, work life balance, and would be happy to make only a modest income from the venture

  10. CASE STUDY: CHRIS THE CAPITALIST AND PAUL THE POET • Paul • Decides to hire 10 employees in his factory on two lines • Has a full discussion with them about their pay and the financial position of the factory • Agrees to pay a little more than the minimum wage for the industry, and also to share a proportion of surplus profit once the venture gets under way

  11. CASE STUDY: CHRIS THE CAPITALIST AND PAUL THE POET • Paul • Tells employees what he expects to earn from the enterprise himself • Commits to full disclosure of the financial position from time to time • Pursues a profit margin of less than half the margin insisted on by Chris

  12. CASE STUDY: CHRIS THE CAPITALIST AND PAUL THE POET (6) • By the end of the first year: • Chris: • Makes more money out of the home workers, who he doesn’t pay by the hour • Decides to “let go” his five employees and the manager • Turns the factory into a distribution centre for the products made by the homeworkers, which he sells to local retail chains for a premium price under a “locally made” label • Makes a “killing” out of the venture.

  13. CASE STUDY: CHRIS THE CAPITALIST AND PAUL THE POET (7) • By the end of the first year: • Paul: • Makes very little money; • Decides to try to increase his own earnings by doubling the size of the factory; • Employs 10 more people; • All of his employees are very happy. (They read poetry to each other at the end of each shift.)

  14. CASE STUDY 2: MAXINE’S MODUS • Maxine started a factory at the same time as Chris and Paul • Her factory was very successful, and grew to employ 50 people • Although she started out paying minimum rates, a trade union began to organise workers (Maxine had no problem with this) • Over time, through collective bargaining, wages increased to levels substantially above the minimum

  15. CASE STUDY 2: MAXINE’S MODUS • An industry strike over increases to the industry minimum wages affected the factory very badly. • Maxine became disillusioned and started to think about developing her own brand, Modus, and opening a retail store.

  16. CASE STUDY 2: MAXINE’S MODUS • Maxine was persuaded to “outsource labour”, and contracted a reputable labour broker to “take over” the workforce; • Later, she sold the factory for very little to the factory manager, in return for an undertaking to buy all of its production for a year; • She opened a high street store, with one employee; • The brand was successful, and she started to buy from two other sources – one in Poland and one in China; • A couple of years later, the factory she had sold closed down.

  17. STATUTORY INTERVENTION: WHAT DOES THE RIGHT TO FAIR LABOUR PRACTICES DICTATE? • The vertical and horizontal disintegration of businesses cannot be reversed or controlled • We can ensure that employees enjoy genuine and enforceable protection against arbitrary or unfair dismissal • That is something, but little real comfort in an environment in which livelihoods depend ultimately on the economic success of the enterprise • There are no objective or enforceable measurements of economic success

  18. STATUTORY INTERVENTION: WHAT DOES THE RIGHT TO FAIR LABOUR PRACTICES DICTATE? (2) • The focus of State initiatives, whether through law or incentive, should be: • To strengthen collective bargaining, and the ability of trade unions to organise throughout the broader enterprise; • To promote workplace partnerships; • To promote training and development at every level, including in workplaces; • To provide access (for all workers) to opportunities for longer term placements

  19. Thank you

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