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Employment security is a concept that generates legal and economic controversy. This is due to the conflict between the rights of capital to run a business to its maximum profitability and the argument that employees have a right to employment security.

For people living and working in an advanced economy, viz. an economy where there is specilisation within the process of production in goods or services, then employment security ought to depend on access to a market that demands their goods or services.

The law however adds some further stipulations: that employment security can also be taken to include all factors that affect a person’s employment opportunities. These would include factors such as additional protection for limited periods if they choose to leave paid employment to raise children.

The need for employment security was summarised by Judge Perkins, who, was the Judge in my recent case.

“A heavy onus rests upon an employer before a dismissal can be validly effected. The reasons for this are obvious. The right to be in employment and earn the means to support oneself and one’s dependants is a substantial right requiring protection. There is a strong societal imperative behind this, supported by economic need for full employment as founding a strong overall economy. A position of employment is a valuable asset. Employees are the most valuable asset of any business hoping to thrive. If the employment is to be terminated it is essential that it be justifiably fair.”

Clearly the Judge is not an economist.

Employment in production, when analysed as an economic proposition, can be analysed as a series of property rights, which, lends itself to a concurrent legal analysis.

The first right enumerated is ‘the right to be in employment’. This is another way of saying that as an entrepreneur, who supplies the capital, must provide employment.

Clearly this is incorrect. I have a legal right to my property, in this case capital. There is no requirement that I subjugate that right to another who has no legal claim to my property. There can be no ‘right to employment.’

Employees are a valuable asset, but they are no more valuable than other economic inputs, such as raw materials etc. The most valuable asset is capital, without which, there is no business and no employment. Capital pays the wages of the employee.

This is clearly true, as, production takes place over time. Employees are paid before the production results in consumer goods and the capitalist can earn the market return on those consumer goods.

What the law is actually talking about is the right of the employer to discard under-performing employees. Employees who earn less than their ‘discounted marginal value product’. These employees can create losses to capital and quite rationally, the employer wants to discard this underperforming factor of production.

The law does allow this, but requires that the employer evidence this and thereby justify their dismissal. This prevents the employer dismissing employees, not because they are underperforming, but because there is a personality clash and the employer wants to dismiss on this basis.

 

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