Chapter 08: Industrial Relations

The Nature of the Labour Relationship

A key feature of the employment relationship is the differential in power between the employer and
the employee.
 power is particularly important when there are specific differences of interests,
 employees want higher payment, more job securities and career progression and training,
 employers want to maximise their human resources to achieve profit.
Although a general cooperation between employers and employees’ may exist, conflicts can arise.
Therefore, different mechanisms are in use to reduce the potential for conflict to escalate
 grievance procedures,
 collective bargaining,
 other forms of employee voice to address differing interests.
The complexity of labour relationships specifically appears to managers. They need to balance
their own interests and expectations towards those of their superiors, subordinates, other
stakeholders, and the general legal and structural framework.

Theoretical Perspectives
In the unitarist perspective
 employers and employees have the same interests, goals and values so conflicts should not
exist in an organisation.
 there is only one source of authority in the organisation e.g., the management.
 there is no need for trade unions because they are viewed upon as troublemakers.
 If conflicts occur, it is mainly because of reasons like personality clashes and poor
communications.
 Unitarist management uses mainly two management styles
 Paternalistic
 Authoritarian

In the pluralist perspective

 groups with different interest and goals exit in every organisation,
 conflicts are inevitable.
 Trade unions are legitimate as they act as representatives of employees.
  Organisations that negotiate with trade unions are based on a pluralist perspective of
employment relations.
 The management’s role here is
 to balance the interests of different groups in the organisation
 establishing mechanisms to address conflict such as disputes procedures and
collective bargaining.

The Labor Movement

Parties in Labour Relationships

The regulation of the employment relationship in terms of how pay and conditions are set
 varies across organisations, industries and countries
 Pay and conditions are unilaterally set by the employer and in others there is some scope for
negotiation between an employer and individual employee.
 In other organisations, employees are represented by a trade union and the employer may be
a member of an employers’ organisation and both sides negotiate and agree pay and
conditions on a collective basis. Mutual Basis (collective bargaining)

Employee Representation
Trade unions are the primary representatives of employees: trade unions
 protecting and defending the interest of their members.
 They are acting collectively: the most effective way of challenging employer power.
 Common ways to protect members’ interests are:
 collective bargaining with employers,
  lobbying the government for employee-friendly policies,
 representing members in grievance or disciplinary issues,
 providing advice to members.
An important characteristic of a union is whether it is a craft or industrial union.
o Craft unions are those that organize members of a particular skill or trade, such as
electricians or plumbers.
o Industrial unions are made up of members who work in any number of positions in a given
industry, such as the automotive or steel industry.
Commonly, trade unions use to form one or more confederations
 Deutscher Gewerkschaftsbund in Germany
 Trade Union Congress in the UK
 American Federation of labour in congress of Industrial organisations ( AFL – CIO) in US
Their tasks and objectives are
o working on policies on economic and social issues,
o organising members,
o engaging in political lobbying,
o regulating relations between individual unions.

Employers’ Associations
Employer associations work on different levels of service/coordination:
 advise members on human resources and industrial relations matters
 labour market research
 represent members in negotiations with employees and in disputes
 the interests on a national and international basis.
These levels of coordination differ between industries. In some industries companies work together
to negotiate pay and conditions with trade unions.
As a special appearance in the US, some employer groups have union avoidance as one of their
objectives.

Unionisation and Collective Bargaining

Traditionally, regulation of the employment relationships is guided by the principal of voluntarism
 Labour Law regulates minimum interventions,
 employers and employees should be free to determine pay and conditions of employment by
themselves.
  In some countries, employers and trade unions are voluntarily engaged in collective
bargaining.
 Negotiations often result in a voluntarily collective agreement
 stipulates the pay and conditions for all employees in an organisation or
industry.

Subject to collectives bargaining entail (but not limited to) wages, plant operations, job security, or
paid and unpaid leaves. Never the less, due to structural changes in the economy, an increase in
governmental regulation, and dedicated HRM practices a decline in union membership (density) is
to be recognized.
Labour Legislation
Although labour law is national law basically, it is often linked to a broader context.
 In Europe, member states of the EU follow common or versus
 civil law - both applying regulation of the European Union. Civil law is based on
legislation and judicial law,
 common law introduces policies and procedures.
EU Directives provide employees with certain rights and employers with obligations:
working time,
occupational health & safety,
parental leave,
maternity & adoptive leave,
part-time work,
fixed-term work,
agency work,
equality.
Additionally, country-specific legislation is not determined by the EU e.g., minimum wage
regulation.
Conflicts within Employment Relationships
A pattern evident across developed and developing countries since the early 1980s
 fall in the number of strikers and working days lost (WDL)
 Pattern evident across developed and developing countries.
Hypothesis: the fall in strikes is reflective of a ‘better’ employment relations environment.
Others point to globalisation and a more neo-liberalist political environment, which favours minimal
state intervention in the employment relationship and is opposed to unions.
There many forms of conflict involving groups of employees or trade unions, including
o strikes, sabotage, refusal to work overtime, sit ins, lock-outs, and work to rule where
employees work strictly to the letter of their contract and lockouts.

New Labor Management Strategies

Signs of a transformation from an adversarial approach to a less adversarial and more constructive
approach to union-management relations includes:
 increasing worker involvement and participation
 reorganizing work to increase flexibility. 
New approaches to labour relations, referred to as high performance work practices or systems:
 greater employee participation in decisions,
 employee teams,
 job rotation,
 multiskilling,
 sharing financial gains can contribute to an organization’s effectiveness as well as to
workers’ wages and job satisfaction.
Union leaders have frequently resisted such change, fearing an erosion of their influence. These new
approaches (within the boundaries of legality) to labor relations may add to an organization's
effectiveness.
The effectiveness of labour relations can be evaluated from management, labour, and societal
perspectives. Management seeks to control costs and enhance productivity and quality. Labour
unions seek to raise wages and benefits and exercise control over how employees spend their time at
work (such as through work rules). Each of the three parties typically seeks to avoid forms of
conflict (like strikes) that impose significant costs on everyone.
The union pay advantage motivates management to use more capital per worker, which is
inefficient. Union contracts may limit workload. Strikes and other job actions result in some lost
productivity. Unions, alternatively, may increase productivity: Unions provide more efficient
communication with management, which may reduce turnover. The use of seniority decreases the
competition between workers.
The presence of a union may encourage management to tighten up in terms of consistency on work
rules. Profits and stock performance may suffer under unionization if costs are raised or decrease
investment by a greater amount.  Unions also typically influence the way pay and promotions are
determined.

Individual Conflict and its Resolution

General approaches to resolve conflict differ between civil law and common law. Civil law is based
on legislation and judicial law, while common law introduces policies and procedures e.g.:
occupational health and safety.
Grievance is the formal complaint concerning pay, working conditions or violations of other factors
in a collective bargaining agreement.
Over half the countries in the OECD have special courts or tribunals to hear employment disputes. If
a company under common law does not have procedures it can refer to state-provided guidelines
from quasi-judicial administrative agencies e.g.: Advisory and Conciliation and Arbitration Service
(ACAS) in the UK or National Labour Relations Boards in US.
In most countries, the legal system provides dedicated courts for claims concerning labour and
employment matters. Court decisions are subject to review through courts of appeal. For leading
cases, the Supreme Court comes to a decision.

Employee Voice
Employee voice means that employees having influence over decisions in an organisation. It is an
important issue for employees to facilitate their expression of opinions and grievances and to enable
them to act as ‘industrial citizens’. Employers have introduced voice mechanisms for a range of
reasons e.g., wanting to improve the employment relations environment, to improve productivity
and quality and to prevent employees from joining a union. An organisations’ choice of voice
mechanism might be influenced by the country of origin of the company, the size of organisation, or
the industry.
Direct voice describes a situation in which managers enter into a dialogue with, consult with or co-
determine decisions with employees as individuals. Here, employees have a direct input to the
process.
Indirect voice refers to a situation in which employers take account of employee views through the
filter of a representative institution, e.g. a trade union, works council, working party or consultative
committee. Employee voice is heard indirectly though representatives.
The main purpose of employee voice is to make workers feel like they are active participants in
workplace decision-making.

Escalator of Participation
Information means that employees have no voice. All decisions are taken by managers and no
meaningful account is taken of what employees might think.
Communication is a limited degree of involvement, when employers and employees exchange
information. Managers may disclose defined classes of information. It is also, that employees are
aware of managerial decisions, the economic situation and their objectives, and employees have an
opportunity to respond. However, decision making remains in the management’s hands.
Consultation exists when information is exchanged through formalised channels. Employees are
asked either directly or indirectly to express views which management takes into account. Full and
proper consideration is given to the views of staff (or their representatives) before decisions are
finalised. Decision making is still the responsibility of managers. Where unions are recognised
consultation takes place through permanent consultative institutions such as a joint consultative
committee (JCC).
Co-Determination refers to joint decision making. In some countries the law requires the
agreement of a work council before significant decisions affecting employment can be taken. This is
rare in the UK, France, Italy or Spain. It is more common in northern Europe like Scandinavia
where mutually supportive small groups operate with minimal supervision. In Germany a dual
mechanisms exists: the legal empowerment of works councils or enterprise committees is
accompanied by dedicated places on executive boards for worker directors.
Control are a setting where organisations or parts of an organisation are controlled by employees
rather than by managers. Enterprises are community owned or run by staff in a partnership
arrangement. This is relatively rare in the EU.

Works Councils
A works council is a dedicated board for employee representation and employee voice in company-
and business-related matters. This is subject to national labour legislation, e.g. in Germany governed
by the Works Council Directive (Betriebsverfassungsgesetz). Here, once an enterprise is employing
more than 5 employees, the employees are entitled to elect a works council.
A works council has various entitlements, as some management decisions require agreement with
the works council (e.g. performance measurement of employees or working conditions). It is also,
that a works council has a right to reject management decisions (e.g. employee-specific treatment
like dismissal). Last, but not least, the management needs to inform the works council about major
business decisions (e.g. restructuring or closure of plant facilities) and to consult with employee
representatives about general economic affairs.
The purpose to establish works councils is the intent that employees involved in decisions affecting
their jobs and immediate work environment face increased engagement and motivation.
Furthermore, this should re-balance the factors of production labour (employees) and capital (owner
resp. management).
The EU Works Council Directive 2009 (2009/38/EC) requires a European works council for
organisations working in more than one country within the European Economic Area (EEA) and
having at least 1,000 employees within the EU and at least 150 employees in each of any two-
member states. To ensure quality of treatment across EU, the transnational information and
consultation of employees (amendment) regulations 2010 are in place.

Labour Law: Why Regulation?

Regulation plays a role in almost every area of HRM activity. The main aims are to provide some
rebalancing of the power relationship between employers and employees, reducing the scope for
exploitation and unfair treatment and to promote good practice in people management. Significant
areas of regulation are contracts of employment, unlawful discrimination, dismissal, family-friendly
rights, occupational health and safety, and the pay and benefits.
Employment rights applying to all workers are for example equal pay for equal work, basic health
and safety rights, minimum wage and data protection rights. Employment rights which apply only to
employees are for example statutory sick pay, trade union rights, minimum notice periods and unfair
dismissal rights after two years’ service.

Contract of Employment
The obligations of employers are stated in the employment contract. These are the general duty of
care, the duty to pay agreed wages, the duty to provide work, the duty not to treat employees in an
arbitrary or vindictive manner, the duty to provide support to employees, the duty to provide safe
systems of work and – most impotant – the duty to maintain a relationship of mutual trust and
confidence.
Obligations of employees are also stated in the employment contract. These are the duty to
cooperate, the duty to obey reasonable lawful instructions, the duty to exercise reasonable care and
skill, the duty to act in good faith, the duty of fidelity and – most important – the duty to maintain a
relationship of mutual trust and confidence.

Unfair Dismissal
The right to bring a claim of unfair dismissal generally applies to employees who have completed
two years of continuous service before the dismissal. The claim must be lodged with a tribunal
within three months of the dismissal. The tribunal will investigate whether the reason for dismissal
was legally legitimate and whether the employer did act reasonably in carrying out the dismissal.
Specific characteristics cause automatically unfair dismissal. It applies when their reason relates to
pregnancy or maternity, for health and safety, or because of a spent conviction. Furthermore, for
refusing to work on a Sunday (retail and betting workers only), for trade union reasons, or for taking
official industrial action (during the first 12 weeks of action). It is also, that in contravention of the
part-time workers or fixed-term employees’ regulations, for undertaking duties as an occupational
pension fund trustee, employee representative, membership of an EWC or in connection with jury
service and for asserting a statutory right would cause automatically unfair dismissal.
Reasons for potentially fair dismissal could be a lack of capability or qualifications, misconduct,
redundancy, statutory bar, or some other substantial reasons. Additionally, arising from official
industrial action after 12 weeks have passed and the occurrence on the transfer of an undertaking
where a valid economic technological or organisational reasons applies may justify fair dismissal.

Negligence and Misconduct

Gross negligence is a serious failure to exercise care in the work environment. Ordinary misconduct
is the intentional behaviour that can potentially cause great harm to another or the firm. Serious
misconduct occurs when an employee commits an offence which is sufficiently serious to justify
summary dismissal. To be judged fair, the dismissal has to have been caried out using a reasonable
procedure.

Discipline
Discipline is a corrective action designed to get employees to meet standards and the code of
conduct. At a lower level, counselling is giving employees feedback (so they realise that a problem
is affecting their job performance) and referring employees with existent problems. The major
objective of coaching, counselling and discipline is to change behaviour. Secondary objectives are to
maintain authority when challenged and let employees know action will be taken when standing
plans or performance requirements are not met.
With progressive discipline, the employer provides the employee with opportunities to correct poor
behaviour before termination. Sequential steps are informal coaching talk, oral warning, written
warning, suspension and termination.
Punitive measures should be taken in steps of increasing magnitude, and only after having been
clearly documented. This may start with an unofficial warning for the first offense, followed by a
written reprimand for additional offenses. Later offenses may lead to a temporary suspension.
Before a company suspends an employee, it may want to issue a “last chance notification,”
indicating that the next offense will result in termination. Such procedures may seem slow, but when
problem employees are discharged, the chance that they can prove they were discharged for poor
cause has been minimized.

Alternative Dispute Resolution (ADR)

Alternative dispute resolution (ADR) is a method of resolving disputes that does not rely on the
legal system and show promise in resolving disputes in a timely, constructive, cost-effective
manner.  ADR proceeds through four stages: open door policy, peer review, mediation, and
arbitration. Each stage reflects a broader involvement of different people, and the hope is that the
conflict will be resolved at earlier steps. The last step may include binding arbitration, where an
agreed upon neutral party resolves the conflict unilaterally if necessary.
Open-door policy: The two people in conflict (e.g., supervisor and subordinate) attempt to arrive at a
settlement together. If none can be reached, they proceed to
Peer review: A panel composed of representatives from the organization that are at the same level of
those people in the dispute hears the case and attempts to help the parties arrive at a settlement. If
none can be reached, they proceed to
Mediation: A neutral third party from outside the organization hears the case and, via a nonbinding
process, tries to help the disputants arrive at a settlement. If none can be reached, the parties proceed
to
Arbitration: A professional arbitrator from outside the organization hears the case and resolves it
unilaterally by rendering a specific decision or award.