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Employment Law
Wayne State University Law School
Mateikis, William J.

v Price/Theory Neoclassical Model
Ø Supply/Demand
§ Coase Article
·         Is Price what actually effects things?
·         If wage rate is lower they are going to buy more and vice-versa
·         What do buyers of labor pay people?
¨       Profit = Revenue – Cost
Ø If labor cost 75, then would want 75.01 at least
¨       Marginal Revenue Product = MC, as long as revenue is greater than the cost
·         Economic theory has suffered in the past from a failure stating clearly its assumptions
Ø Assumptions
§ There is a labor market where workers have the same skills, wage level and are basically homogeneous and can meet at the equilibrium
·         Single equilibrium wage rate
·         Labor is basically a commodity
§ There is perfect information
·         Instantaneously, the buyer of labor knows everything that they need to know and so does the seller of labor
§ Labor is perfectly mobile
·         Unemployment rates are different everywhere
§ There are no monopoly sellers of labor
·         Can’t impose wage rate higher than equilibrium
·         If union tries to raise wages, then less people will be working
§ Absence of monopoly buyers
·         Called a monopsonist
·         No effect on wage rate, if perfect market/monopoly
·         Monopsonist employers?
¨       Wal-Mart?—maybe in small towns
§ Absence of govt interference
Ø What really matter is raising Marginal Revenue Product, once occurs then wages can rise without raising prices of goods and services
§ To do this may offer
·         Bonuses
·         Casual Friday
·         Training/investment in human capital
·         Technology
Ø If market worked perfectly then no need for lawyers
Ø Fishel
§ Capital market pretty much operate efficiently
§ Laborers are human beings not commodities
§ Human beings do not exist for work
§ Because capital markets, capital owners will seek highest return on capital, trying to make labor as low as possible
§ It is extremely unlikely that workers or investors will not be systematically exploited—he was wrong
Ø Coase says it can be assumed that the distinguishing mark is the suppression of the price mechanism
§ Market does not allocate human resources, but the entrepreneurial class/firm
§ Firm emerges at all because to reduce transaction costs/marketing costs, contracting, search costs/price, cost to uncertainty, taxes and regulatory effects
§ Establish of using firm because there is a cost of using the price mechanism
§ Once firm emerges, a firm will hire people as employees of the firm, and system of relations will exist
§ Determines the size of the firm
·         Diminishing marginal returns—General Motors got too big and bureaucratic
·         Independent contracting
·         Efficient use of resources
·         Cost of lost autonomy—people can’t stand narrowly defined jobs
·         Specialization v. diversification
§ Employee relationship
·         Is master/servant relationship still determining factor? Yes, NLRA
v Internal Labor Market
Ø Stone
§ We have New psychological contract, whereas old was dependent on loyalty
·         No long-term employment anymore
§ 4 phases of employee’s life cycle to pay wage rate above MRP
·         Employee compensated = or greater than MRP
·         Employee less paid less than MRP and less than opportunity wage
·         Employee paid less than MRP but > than outside market
·         Employee paid > than MRP and outside wage
Ø Befort
§ Black hole—lack of regulations covering contingent workers
·         What causes this black hole
¨       Corporations desire for flexibility/adaptability—commitment while here but not guaranteeing them anything
¨       Worker desire for flexibility
¨       Advances in technology
¨       Legal and financial considerations
·         Black hole has created
¨       Two-tiered labor market, created second-class group of workers
·         Contingent workers
¨       Less likely to enjoy EE benefits
¨       Have less training and have more period of unemployment
¨       Disproportionately female and African American
·         Should black hole be filled, reconfigured, tolerate it?
¨       Demand for flexible work arrangements …
Ø Stone-continued
§ The Contemporary Labor market: Contingent Workers and Implications
§ Nature of the psychological contract and nature of new workplace—engender loyalty without actually giving loyalty
·         Boundary less careers—no longer vertical, but now hopping from one employer to another
¨       Lateral moves within an organization, not as many ladders
Ø Things have gotten flatter
·         General training is more advantageous to the employee, rather than firm specific training
¨       Firm specific training—justifying underpaid and overpaid compensation of employees in relation to external labor market
¨       General is always marketable in external market
·         Shift of commitment of employees to the firm
¨       Promoting the work environment, rather than their own goals
¨       Old model—continuance commitment
Ø Longevity based infrastructure
Ø Job security
Ø Firm-specific training
Ø Deskilling
Ø Promotion opportunities
Ø Command supervision
Ø Longevity-linked pay and benefits
Ø Collective bargaining and grievance arbitration
¨       New model
Ø Effective commitment
Ø Organizational citizenship behavior
Ø Extra role behavior—not specialized
Ø Competency based organization—adaptable, not company man commitment
§ Do your best despite our lack of loyalty to worker
Ø Employability security
Ø General training
Ø Upskilling
Ø Networking opportunities
Ø Microlevel job control
Ø Market-based pay
Ø Dispute resolution procedures for individual fairness claims
·         Individual subjective beliefs about his or her employment contract
¨       Should be objective assent
¨       Helps explain why most employees believe it is unfair to get fired without good cause, even though they know they are at will
·         Networking opportunities
¨       Helps EE, not the firm
¨       Once ER helps you with general training, then can use skills for ER networking activities—internally, customer-based, or externally
·         Bringing management and EE on basically equal ground
¨       Google
Ø Do dry cleaning for EEs, feed them, play games
Ø Do this for their EEs minds—want a knowledge workforce
·         Intrinsic value of job
·         Give EE forum to tell their side of the story—internal dispute resolution process
§ Implications for new workplace for labor and employment regulation
·         Who owns human capital?
¨       Covenants not to compete
¨       Trade secrets and inevitable disclosure
·         Increase in income disparity
·         Employment discrimination law needs to be reassessed in light of the changing workplace
·         New psychological contract and its attendant job structures were initially constructed in nonunion environments and have proven resistant to unionization efforts
Ø Other Stone article
§ Five classes of atypical type of employees
·         Temp agency
·         Leased
·         In-house temps
·         On-call temps
·         Homeworkers
¨       High-skilled telecommuters
¨       Industrial
§ 8 employment law protections
·         Health and safety protections–OSHA
·         Minimum wage and overtime-FLSA
·         ERISA—retirement security
·         Workers’ comp
·         Discrimination—Title VII, ADA, ADEA
·         Family and Medical Leave
·         Unemployment compensation
·         Collective bargaining—NLRA
§ Contingent worker
·         Very concepts of workplace as a place and employment involving an ER are becoming outdated
·         The distinction between EE’s and independent contractors is becoming blurred
§ Reforms Stone recommends
·         Stop the blurring—any reform has to involve dependent and independent contractors
·         Collective bargaining—whether temp people should be in bargaining unit
¨       Employment rights for all employees
¨       It is necessary to revise the test for independent contractor status so that dependent independent contractors come under the labor law protections
¨       one of the most pressing needs of workers today is to have income support for these times of transition.
¨       Individuals also need affordable and reliable health insurance, disability insurance, and old age assistance.
·         Employment place is changing and so does employment law with it
v Distinguishing EE from Independent contractor
Ø Courts use the definition of employee or servant found in the common law of agency
§ Rest. Of Agency: a master or employer is a principal who employs an agent to perform service in his a

uipment; and both exercised discretion in hiring substitute photographers when they themselves were unavailable and paid those substitutes
¨       Neither photographer was ever treated like an EE in terms of compensation, benefits, and taxes—they billed Harpo for their services and expenses
Ø They did not receive regular paychecks or salary; they received non of the EE benefits traditionally associated with EE status, such as health insurance, life insurance, and paid vacation, and Harps never withheld any payroll taxes on behalf of the photographers, as they used 1099 forms
§  The same test applied to the same circumstances could lead courts to come to different results, however in this case the court decided that the most compelling factor was that because Harpo has claimed their payments to Natkin and Green as “nonemployee compensation” for tax purposes, they could not also reap the benefits of calling them an employee for this purpose
·          Harpo could have reaped the benefits of both is they had contracted for the rights to the photos separately, but they did not
v Distinguishing Employer from Employee
Ø Clackamas Gastroenterology Associates v. Wells
§ Determining if the number of employees under the ADA is met. Control is the primary element at issue. 
§ Looked at Reid Test and Restatement: when acting as clinic doctors, the physician-shareholders appear to fit the Restatement definition
§  Court holds: because the character of the relationship between Clackamus and the doctors supplies no justification for withholding from clerical worker Wells federal protection against discrimination in the workplace
§ Court is persuaded by the EEOC’s focus on the common law touchstone of control: whether
·          (1) the organization can hire or fire the individual or set the rules and regulations of the individual’s work,
·         (2) if so, to what extent of supervision,
·         (3) individual reporting to someone higher,
·         (4) if so, to what extent can the individual influence the organization,
·         (5) parties intent that individual be an employee (see, Written agreements or contracts), and
·         (6) individual shares profits, losses, and liabilities. Non-exhaustive and non-dispositive list.
Ø Yates v. Hendon
§ Raymond Yates owned a corporation with a profit sharing/pension plan. Yates borrowed money from the plan at a set interest. After he had repaid the loan to his profit sharing/pension plan, Yates’ creditors filed an involuntary bankruptcy petition against him. They asked the bankruptcy court to set aside the repayment (interest included) and give it to the creditors. Yates argued that under the Employee Retirement Income Security Act (ERISA), the interest from the profit sharing/pension plan could not be seized (except for loans to participants). The bankruptcy court disagreed and granted Yates’ creditors’ requests. The court reasoned that as the sole owner of the business, Yates was an employer under ERISA, not a “participant.” The plan’s prohibition on interest seizure therefore did not apply. A federal district court and a Sixth Circuit Court of Appeals panel both affirmed.
§ Is the owner of a business a “participant” in a profit sharing/pension plan established under the Employee Retirement Income Security Act (ERISA)?
Yes. Justice Ruth Bader Ginsburg delivered the Court’s unanimous opinion holding that a business owner, such as Yates, qualifies as a “participant” in an ERISA pension plan. The Court