Bargaining Power in Labour Law and the Employment Contract

There are a range of ways of thinking about the role and purpose of labour law in our society. The first way of thinking is called the protective philosophy of labour law which is that the main object of labour labor law is to be a counterveiling force in society to counteract the inequality of bargaining power between employers and employees. This sentiment is attributed to the work of Ott Kahn-Freund who was a German jurispudential philosopher. The perceived power imbalance derives from the perpetual pattern observed in economics of the power imbalance between those willing to purchase labour and those seeking to sell it. It is generally considered to be much easier for an employer to replace their employees than for an employee to find a new job.

There are presurres on workers from the need for geographical mobility and the desire to maintain their existing pesonal and familial ties which means that many workers cannot easily meet the demands of workers. It is only perhaps only when an employer is a highly skilled and sought after professional when the equality of bargaining power is swung in favour of the employee, but this only occurs in a small minority of situations. It is this inequality of bargaining power which gives the context for what is called the protective view of the purpose of labour law. Labour law theorists in this regard generally believe that the state must enact laws to prevent some of the harshness which necessarily results from the inequality of bargaining power between employers and workers.

In the United States, there is an observable system of ‘collective bargaining’ which is where the state permits workers to become organised into unions through the freedom of assembly in the Constitution. However, the percentage of the private sector workforce which is actually subject to these laws is only minor to the point of being irrelevant. Furthermore, the American system there is not yet the widespread recognition of the concept of the right to ‘decent work’ which is a concept elucidated by the International Labour organisation that means that employees have a right to work which generates a sufficient income in conjunction with adequate social protection.

Since the 1970s a different movement in the schools of thought in relation to labour law has emerged which emphasises the libertarian approach to labour law. It is based on the assumption that the best social results are achieved through the reliance on private decision making and the operation of market forces of supply and demand. Sometimes governments have introduced policies based on this political philosophy with the excuse that the living standards of the relevant workforce have become ‘unaffordable’. Whatever the view of the political philosophy of labour law that is concerned, the bargaining relationship that occurs in relation to the job market necessitates that a written contract outlining the rights and obligations of the parties is created.