Rethinking Workplace Regulation: Beyond the Standard Contract of Employment

4. The Decline of the Standard Contract of Employment in the United States: A Socio-Regulatory Perspective

58 Chapter 4 The Decline of the Standard Contract of Employment in the United States: A Socio-Regulatory Perspective katherine v.w. stone A potent mix of globalization, technological change, and neoliberal public policies is undermining established employment practices as well as employment regulatory regimes around the world. The employment relationship is being transformed from a longterm stable relationship between an employee and a firm to one in which the employee is a free agent operating in a boundaryless workplace. Along with the transformation in the individual employment relationship , there has been a deterioration of the labor market institutions in which the individual contract of employment is embedded. Earlier in this volume, Robert Kuttner described the demise of established labor market institutions from a political economy perspective. Morley Gunderson also discussed the same phenomenon from a macroeconomic perspective. In this chapter, I describe the decline of standard contract of employment from a regulatory perspective, using the United States experience as a case study. At first glance, one might find the United States an odd choice because it is practically unique among industrialized countries for having no statutory or constitutional protection for job security. In the United States, the overwhelming majority of employment relationships take the form of at-will contracts. In an at-will contract, either side may terminate the relationship at any time for any reason (for a detailed exposition of the nature of the at-will employment contract under U.S law, see Stone 2007b). Because most U.S. employees have no claim to ongoing employment , they do not seem to fit the template of the standard contract of employment. Nonetheless, my thesis is that the United States developed Decline of the Standard Contract of Employment in the United States 59 a standard employment contract, not as a set of legally imposed obligations , but as a widespread social practice. Moreover, the U.S. story illustrates how deeply current regulatory regimes are based on a particular understanding of the nature of work, and how changes in the nature of work have therefore made these regulatory regimes dysfunctional. pre-history of the Standard employment contract In the United States, the standard contract of employment is not a legal construct but a social practice, one that grew out of early twentieth-century approaches to human resource management. It first developed in response to changes in the technology of production in the late nineteenth century, and later matured with the advent of industrial unionism in the mid-twentieth century. The essential features of the standard contract of employment in the United States are an implicit promise of job security and employer-provided health and pension benefits. It often includes other benefits such as paid vacations, sick days, or a grievance procedure for resolving disputes arising in the workplace. The standard employment contract in the United States developed in tandem with shifts in the location of worker knowledge. In the nineteenth century, craft workers were the exclusive repositories of production knowledge. Although there were many distinct crafts, workers in each craft collectively possessed all of the knowledge necessary to produce the various items they manufactured, such as steel, barrels, glass, paper, and shoes. Craft workers created institutions to protect their human capital and control its dissemination, including apprenticeship systems , craft unions, and inside-contracting. They used their monopoly of knowledge to obtain fair compensation, insulate themselves from product market fluctuation risks, control the pace of production, veto the introduction of labor-saving technologies, and control the hiring and training of new employees. With these institutions, craft workers guarded what they termed the “mysteries of the craft” in order to protect their jobs, status, and way of life (Stone 1974; 2004, 13–26). In the late nineteenth and early twentieth century, technological change and the opening of new markets destabilized the artisanal system of production (Stone 1974). Employers came to see skilled workers as an impediment in their quest to exploit new profitable opportunities. Thus manufacturers teamed up with industrial engineers to remove production bottlenecks, devise new methods of work organization, and maximize the advantages of the technological breakthroughs of the era. The most important figure in the movement to rationalize work was an industrial engineer named Frederick Winslow Taylor. Working in the steel industry in the late nineteenth and early twentieth century, Taylor 60 Rethinking Workplace Regulation devised what he termed a “scientific” method for organizing work. Like other industrial engineers...