Regulation and Inequality at Work

Isolation and Inequality Beyond the Regulation of Labour

Vanisha Sukdeo

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9781138323421
• eBook ISBN: 9780429836626
• Edition: 1
• Topic: Diritto
• Subtopic: Diritto societario

This book examines how the law has limitations to the extent that it can combat repression, isolation, and inequality. The main point the book explores is that isolation and inequality cannot be solved by driving up wages and having better working conditions. The true divide between management and workers is the inability of management to see the workers as people, and not just numbers. "The Swiss novelist Max Frisch remarked at the time, 'We imported workers and got men instead.'" This encapsulates the dilemma of management – how to distance one's self enough from workers to command respect yet not too distant as to be seen as inhumane. How can isolation and inequality within the workplace be overcome?

Regulation and Inequality at Work shows how workers can have an increased voice by using tools outside of the typical legal ones. Without state protection, the rights can be viewed as less stringent. Working outside the system allows for greater malleability and flexibility to be able to cater to individual workers in individual workplaces. Workers' rights are about better working conditions, hourly wages, and benefits, but are also about being treated in a more civilized manner where one's humanity is recognized. Only through all of these parts working together will a true version of workers' rights emerge—one where workers are not viewed as mere tools but within and of the system itself. It shows the latest state of knowledge on the topic and will be of interest both to students at an advanced level, academics and reflective practitioners in the fields of business and company law, labour law, and employment law.

1 Historical Background

North America

Current North American labour and employment law originated from the Master and Servant Act in Britain in the 1800s. This was a compilation of laws that governed the relationship between employers and employees. As the name alludes, the employee or servant was to be loyal and obedient to their employer with severe consequences for not doing so, such as jail sentences of hard labour. It was used to stifle unionization until 1871, when the Trade Union Act was implemented in Great Britain and recognized the legal status of unions. In Canada, the “Trade Unions Acts of 1872 widely celebrated by contemporaries and later historians as marking the decriminalisation of labour unions.”¹

The Divergent Paths of Corporate Law and Labour Law

The underlying theories behind Corporate Law and workers’ rights are divergent. The competing theories about Corporate Law explore whether the corporation is ‘a nexus of contracts,’ whether the corporation serves the public or its shareholders, the role of agency and whether directors and officers are merely agents of the shareholders.² The competing theories about workers’ rights are as extreme as those promulgated by Professors Bakan and McNally to the less radical theories put forward by Professors Fung, O’Rourke, and Sabel. These scholars explore the extent to which workers are the main vehicle in society and how much protection they deserve due to the corresponding role—if they are major vehicles then perhaps they are more worthy of protection and may be worthy of a greater level of protection than other groups.

The Salomon Principle is derived from the UK case Salomon v Salomon & Co Ltd.,³ which states that the corporation is a separate legal entity from its shareholders, directors, and officers. This gave rise to the term ‘the corporate veil’ that allows for shareholders, directors, and officers to gain protection from liability by being separate from the corporation itself. The legal distinction between the corporation and its directors and officers is important because without that separation, the directors and officers could be personally liable for the debts and expenses of the corporation. There is a provision in the Canada Business Corporations Act (CBCA) that directors may be held liable for unpaid employee wages up to a certain amount.⁴ While it may be said that in Canada directors and officers have fiduciary duties to the corporation, the duties to other stakeholders may be duties, but not fiduciary duties. To elevate all duties to the level of fiduciary duty will be to dilute all duties. Rather than elevate the corporate obligations towards workers to that of fiduciary, it is better to implement standards through other mechanisms available including legislation, caselaw that sets a higher standard, as well as soft law mechanisms that can be enforced by a third party. These are possible ways forward to allow for workers to have greater autonomy and influence over their place of work.

As noted by Ewan McGaughey, “[Marx] invented the language of the separation of ownership and control, which was later adopted by Berle and Means.”⁵ So perhaps there is not just a wide gap between corporate law and labour and employment law. The same separation that upset workers being alienated from their work product also lays the foundation for corporate governance theory about the separation of ownership by the shareholders and management by directors and officers.

Brief Historical Background of the Corporation

As noted by Professor Fenner Stewart at the University of Calgary Faculty of Law, the earliest Canadian corporations such as the Hudson’s Bay Company were not corporations in the modern sense but instead can be thought of as British Royal Charters.⁶ They did not contain the same distance between modern corporations and the government as these former ‘corporations’ were very much intertwined with the government that they worked for. This allowed the government to control the corporation’s operations and determine where and how a corporation would be run. “A Royal Charter was an exercise of the Royal prerogative, delegating the Crown’s power to those in the Sovereign’s favor.”⁷ These British Royal Charters were essentially branches of the British Empire or the King or Queen themselves. Because these corporations could be made at the Crown’s pleasure, the Crown had both the ability to grant a corporation a Charter to operate and rescind a Charter for whatever reason.

In the late 1800s, there were no standardized statutes on how to incorporate a business in Canada.⁸ This means that there was no uniformity or predictability in how to start a corporation. The system lacked consistency, which may have been the intention: to make sure that the conditions surrounding incorporation are vague so that they can be implemented in a haphazard way and that those who were most loyal to the Crown would be able to have corporations. Also, the corporations were to remit profits and benefits back to the government, so there was no detachment between the corporation and the government of the day.

The corporation in the 1800s evolved to a creation that was more akin to the modern-day partnership. As noted by Professor Flannigan, at the College of Law, University of Saskatchewan, “[j]oint stock companies, unless they were formally incorporate, were general partnerships.”⁹ He harkens back to the notion that there is a division in the corporation between the owners (the shareholders) and the governance of the corporation (through the board of directors).¹⁰ This remains true today. This separation of ownership and governance is essential in corporate governance as that it gives way to agency theory, which is the theory that the board is merely acting as agent for the shareholders as owners. Agency theory is contrasted with the ‘nexus of contracts’ theory, which ascribes to the model that the corporation is simply made up of various contracts flowing from one party within the corporation to another, which all meet through the corporation as an entity—that employees have an employment contract at common law and statutorily, bondholders have a legally binding contract, etc.

Canadian law is very much influenced by UK law, and Flannigan asserts that the UK Act in 1844 changed the very structure of corporate governance. “In the years following the 1844 introduction of the Joint Stock Companies Act there was a failure on the part of some judges to comprehend the transformation in fiduciary accountability that occurred when a partnership converted itself into a corporation.”¹¹ The distinction between a partnership and corporation is quite considerable. In a general partnership, liability is spread across all partners with the limited liability partnership sheltering some blame from the partners directly. The corporation acts as a shield or veil for all members of the corporation—be it executives, employees, etc. The decision to move from partnership to corporation is a significant move, and the responsibilities and duties that flow from such a decision are vast.

Patrick Lupa, of Osler Hoskin & Harcourt, notes that “In Dodge, shareholders’ [sic] complained directors had breached their fiduciary duty when they decided to allocate corporate profits to lowering the costs of cars and increasing employment opportunities within the community rather than paying out dividends.”¹² Dodge is an American case that stands for the proposition that the Board of a corporation will run afoul of its duty to maximize wealth for shareholders if they choose to give money to the community for betterment projects. This was the beginning of the discussion about whether corporate philanthropy (a corporation giving money to charities and the community) is against agency theory and against the duty to maximize shareholder wealth. If directors are merely agents for shareholders and if shareholders only care about profits and dividends, then the decision to give money to charity or the community would not be in the best interests of shareholders as it would result in an instant loss for shareholders. This discounts the difference between short-term and long-term gains as although shareholders may lose that money at the time, it may result in increased goodwill and better branding, which may result in more consumers, higher profits in the long term.

The premise that spending money on causes that benefit society rather than constantly worrying about how to make shareholders richer was thought to be too progressive in the late 1900s, but in 2018, these values have shifted within society and the role that the corporation once played has grown to such an enormous size that the reach and strength of the corporation must be critiqued and examined. If corporations are to continue growing in size and power, then that same power must be checked. To allow corporations to grow to sizes that rival nation-states is not a service to all of humanity. The reason to study where the corporation began to how it currently exists to how it should exist is to examine where corporate law currently stands and how it should evolve to keep pace with modern society. The law should reflect the changing values and beliefs of a society, and the law should not be stagnant and unchanging. Cases like BCE has allowed courts to keep progressing and making corporate law more about equality among stakeholders and moving away from privileging shareholders. This movement will result in a more democratic corporation.

The link between corporate law and labour and employment law is not well explored as these connections are often left untouched. There seems to be a mistaken belief that these two areas of law are separate and distinct. Workers are a fundamental component of any corporation, and to leave these two areas divided and distanced is not wise. The congruence between the two is greater than the divergent. A happy worker is a productive worker and a productive worker helps create greater wealth for the corporation. These two divided areas should not remain divided. Hopefully future researchers keep studying the many linkages between corporate and labour and employment law.

Corporate law begins with the assumption that the corporation is a legal person and that it is able to enjoy similar rights and privileges as a natural person—perhaps including the right to life, liberty, and freedom of expression. Shareholders are thought to be the true owners of the corporation as their investment in the corporation allows for the corporation to function. Without that investment the corporation would standstill. The role of other stakeholder groups such as other investors like creditors and bondholders became more important in the early 2000s in Canadian law with the Peoples and BCE decisions from the Supreme Court of Canada.¹³ These decisions, along with the increasing fight for greater corporate social responsibility (CSR), have changed corporate governance and the corporation itsel...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• Acknowledgements
• Overview of the book
• 1 Historical Background
• 2 Current Structure of Labour and Employment Law
• 3 How Can the Law Be Changed
• 4 Transnational Labour Regulation
• 5 Conclusion
• Index