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Fragmenting WorkBlurring Organizational Boundaries and Disordering Hierarchies$

Mick Marchington, Damien Grimshaw, Jill Rubery, and Hugh Wilmott

Print publication date: 2004

Print ISBN-13: 9780199262236

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780199262236.001.0001

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Blurring the Boundaries to the Employment Relationship: From Single to Multi-Employer Relationships

Blurring the Boundaries to the Employment Relationship: From Single to Multi-Employer Relationships

(p.63) 3 Blurring the Boundaries to the Employment Relationship: From Single to Multi-Employer Relationships
Fragmenting Work

Jill Rubery

Jill Earnshaw

Mick Marchington

Oxford University Press

Abstract and Keywords

Debates about the changing nature of work and the prospects for the retention of the so-called standard employment relationship have become more widespread recently. This literature has focused to large extent on the fragmentation of work and increasing insecurity, often associated with the proliferation of ‘non-standard’ forms of employment. Growing numbers of pseudo self-employed workers, agency temps, zero hours contractors, and home-based teleworkers have all attracted attention to the issue of whether these forms of work fall within our understanding of the standard employment relationship; a bounded and long-term relationship between a single employer and an employee. These concerns within the literature are mirrored in the practice of employment law where increasing numbers of cases apply to situations where the definition of employee status is in some sense ambiguous, and employment regulations have increasingly been extended to include within their scope workers who fail the full test of employee status. So far, however, attention in both social science and employment law has focused mostly on the appropriateness of a narrow definition for the employee side of the employment relationship. This chapter argues there is a parallel need to question the employer side of this conceptual box. Employment change needs to be understood through the changing nature of organizations and inter-organizational relations.

Keywords:   employment relations, employment law, employment change, employee status

3.1 Introduction

Debates about the changing nature of work and the prospects for the retention of the so-called standard employment relationship have become more widespread recently (Handy 1985; Rifkin 1995; Cappelli et al. 1997; Supiot 2001). This literature has focused to large extent on the fragmentation of work and increasing insecurity, often associated with the proliferation of ‘non standard’ forms of employment (Atkinson 1984; Felstead and Jewson 1999). Growing numbers of pseudo self-employed workers, agency temps, zero hours contractors, and home-based teleworkers have all attracted attention to the issue of whether these forms of work fall within our understanding of the standard employment relationship; a bounded and long-term relationship between a single employer and an employee. These concerns within the literature are mirrored in the practice of employment law where increasing numbers of cases apply to situations where the definition of employee status is in some sense ambiguous, and employment regulations have increasingly been extended to include within their scope workers who fail the full test of employee status (Earnshaw et al. 2002).

So far, however, attention in both social science and employment law has focused mostly on the appropriateness of a narrow definition for the employee side of the employment relationship. This chapter argues there is a parallel need to question the employer side of this conceptual box. Employment change needs to be understood through the changing nature of organizations and inter-organizational relations. The need to focus more on the employer side of the employment relationship applies not only in relation to its legal regulation, but also to the management of human resources, the analysis of changing employment opportunities, and the collective regulation of employment/industrial relations. The legal framework can be considered to (p.64) be both a force that shapes the formation of organizational and employment relationships and a phenomenon that is shaped by such developments. This two-way relationship is evident in the increasing numbers of cases, as we document below, that call into question the uniqueness of the definition of the employer that is central to the current legal framework governing the employment contract. These have implications for how an employing organization interprets its responsibilities, both towards its own employees when working under the influence or control of clients and towards employees of other organizations when they are working on its premises or under its direct or indirect control. The legal framework in this area is thus evolving through case law, even though no systematic review has yet been undertaken of how the law needs to be reformed to guarantee employee rights in the context of permeable organizations. Regulation does, however, impact on the formation of inter-organizational relations. For example, the TUPE regulations provide for the terms and conditions of employment set by one employer to be carried over to another employer following merger or some forms of contracting out. Such regulations, as we discuss further below, affect not only the impact of contracting on employment conditions but also the incentives to engage in contracting. Other employment regulations, such as minimum legal standards to be observed by all employers, may also reduce incentives to use contracting in order to reduce employment costs.

The development of inter-organizational relationships also has significance for the management of human resources. Where employees of one organization work in environments open to pressure and influence from other employers, the relevance of key notions of HRM such as corporate culture, organizational commitment, loyalty, and identity are called into question. The presence of multi-agencies raises doubts about where the locus of control and authority lies and where an employee's duties of loyalty and commitment should be directed. The possibility of designing or maintaining a coherent and consistent set of human resource policies and practices across inter-organizational relationships is complicated because of potentially competing employer goals.

The reshaping of organizations and the move away from the integrated and bureaucratic organizational form also has implications for both employment opportunities and employment relations. Some accounts see these developments as increasing worker autonomy, discretion and skill, while others are concerned that responsibilities for training and skill development may become more diffuse, reinforcing a tendency towards a low skill economy. For some commentators (Kanter 1977), fragmentation of organizations may open up opportunities to change, for example, the gender division of labour within the organization, by challenging the restrictive norms and principles embedded in the bureaucratic form and by removing unnecessary and artificial layers of hierarchy and control. However, it also exposes groups and individuals to more intense and more complex forms of competition, requiring constant attention to both internal and external rules. Fragmentation poses particular challenges (p.65) for the collective regulation of employment. Where organizations are embedded in a set of inter-organizational relations, the power in a particular employment relationship may not lie with the legal employer but with the employer's clients. The growth of inter-organizational relations increases the need to consider the employment relationship beyond the specific workplace or enterprise. However, just as HR practitioners and analysts have stressed employee commitment to a single organization as the means to achieve employee cooperation and productivity, so their industrial relations counterparts have focused attention on the single employer through the medium of partnership agreements.

The development of inter-organizational relations, therefore, has implications for how the employment relationship is conceptualized, regulated, and managed within the fields of employment law, human resource management, labour market analysis, and employment relations. We now turn to a more detailed consideration of these issues.

3.2 Broadening the legal definition of the employer–employee relationship: from single employer to multi-employer?

The legal framework surrounding the employment relationship has traditionally been conceived as involving a single employer and a single employee, and it has been tacitly assumed that legal rights and duties could be delineated primarily within the boundaries of a single organization. Common law rights and duties—such as the duty of confidentiality and good faith—arise by virtue of the contract of employment and of necessity, therefore, concern only the parties to that contract. Similarly, the statutory employment protection rights which have increasingly overlaid this common law foundation since the 1960s, are largely predicated upon the notion of an ‘employee’, as legally defined, working for a single employer. The focus on a single employer has, in fact, contributed to the determination of employment status itself. This is because in deciding whether an individual should be regarded as an employee or self-employed under a contract for services, a number of factors are considered, some of which relate to the exercise of ‘employer’ functions such as the right of control and the power to discipline and dismiss. The fact that in more complex organizational forms these ‘employer’ functions might be exercised by a non-legal employer would not be considered by employment tribunals when adjudicating on employment status (Table 3.1).

The point is most clearly demonstrated by considering the lack of clarity surrounding the position of agency workers in law. Regardless of how such workers are managed on a day-to-day basis by the client organization, the agency rather than the client has traditionally been regarded as their legal employer. However, the agency is not in a position to undertake some of the key tasks associated with an employer's role in relation to a directly employed (p.66)

Table 3.1. Employer–employee rights and duties in a multi-employer/agency environment

Non-employer influences on the employment relationship

Current position with respect to legal responsibilities

Control of work

Client has effective responsibility for control of agency work, seconded workers etc.

Control of work one of the legal tests for employer status—cases that have deemed there to be and employment contract with client have been overturned at appeal

Supply of work

Agency workers, freelance worker may work exclusively for one client

Long-term relationship between parties maybe ‘capable of generating an implied contractual relationship’ but case by case decision

Equal pay

Differences in pay for same or equal work may be found at same workplace among workers with different employers

Comparison only permitted in same employment or between associated employers

Transferred workers

Transferred staff retain terms and conditions of previous employer

Transferred staff not able to make comparison with ex-colleagues even if in same workplace if their terms remain frozen/rise less quickly after transfer

Sex and race discrimination

  1. (a) Client may offer bonuses to supplier employees

  2. (b) Sex and racial harassment may occur when employees working in multi-employer environment

  3. (c) The principal or client may discriminate by sex or race with respect to supply of agency workers

  1. (a) No remedy under sex discrimination if bonuses vary by gender as employer not liable for action of client

  2. (b) Decision that an employer had the responsibility to protect their workforce from unlawful behaviour of non-employees overturned as had not addressed question of whether employer had discriminated against the particular employees.

  3. (c) Sex and Race Discrimination Acts outlaw discrimination by a principal but comparison only allowed with other agency staff not principal's own staff

Discipline and grievance

Business to business contracts may give clients a right of veto over staff. May be dismissed at behest of a third party including a client

Client request to dismiss (or not to deploy) can be considered an ‘other substantial reason’ for dismissal and thereby to be a fair dismissal. If sex or race discrimination at base, cases can only be brought by respective enforcement agencies not by individuals

Health and safety

Health and safety of workforce on a multi-site is dependent on actions of non-employers or employees of other employers

Law provides for legal responsibility by main contractor for health and safety but applies to criminal law; individual employee can only make civil claim against own employer

Duty of good faith

Duty to work honestly/faithfully for own employer and not to reveal confidential information—difficult to apply when working cooperatively with non-employees or under direction of non-employer

Implied term in employment contract but difficult to interpret in multi-employer settings

(p.67) (p.68) workforce—such as controlling the work process or being in a position to establish and verify the circumstances which may lead to disciplinary sanctions. The inability of agencies to exercise such ‘employer’ functions, as well as the fact that there is no obligation on agencies to provide individuals with work on a continuing basis and nor for individuals obliged to accept assignments offered (‘mutuality of obligation’), has typically resulted in courts and tribunals concluding that the relationship between the agency and the worker cannot be regarded as a contract of employment; hence, the individual is deemed to be self-employed rather than an employee. For example, in the case of Montgomery v. Johnson Underwood Ltd [2001] IRLR 269, the applicant had been placed within a client company for over two years before her assignment was terminated by the agency at the behest of the client. An employment tribunal hearing her claim of unfair dismissal against both the agency and the client concluded that, on balance, the factors pointing to the existence of an employment contract with the agency outweighed those against. However, included in the list of factors against a contract of employment was a finding that there was ‘little or no control, direction or supervision’. On appeal, the Court of Appeal held that the tribunal's finding of a lack of control was fatal to its decision that the applicant was an employee of the agency: ‘A contractual relationship concerning work to be carried out in which the one party has no control over the other could not sensibly be called a contract of employment (ibid. 2001: 271).’

Accordingly, the applicant could not claim unfair dismissal against the client—because the agency was regarded as the employer—or against the agency—because she was found not to be its employee. The Court of Appeal's ruling thereby ignores the whole rationale behind the weighing of various factors, which is to differentiate the autonomous self-employed from those in a position of economic dependency. However, at around the same time the Employment Appeal Tribunal in the case of Motorola v. (1) Davidson and (2) Melville Craig Group Ltd [2001] IRLR 4 took an arguably more enlightened approach by deciding that the applicant, who had been placed with Motorola for over two years, should be regarded as an employee of Motorola (see Box 1.1). Although recognizing that the legal power of control was vested in the agency, they refused to ignore the day-to-day practical control exercised by Motorola over the applicant. Unfortunately, in the subsequent case of Hewlett Packard Ltd v. O'Murphy [2002] IRLR 4, the Employment Appeal Tribunal reverted to a strict contractual approach. In essence, it concluded that despite working for a client firm for six years, an agency worker could not be its employee since there was simply no contract of any kind between them. However, a more recent decision by the Court of Appeal (in the case of Franks v. Reuters Ltd and anor [2003] EWCA Civ 417) highlights an interesting development in the law. While accepting there was no express contract between Franks (an agency worker) and Reuters Ltd, for whom he had worked for five years, it considered that a contract between them could be implied from the circumstances of his work and from what was said and done both at the time he started work and subsequently. (p.69) The Court stated that ‘dealings between parties over a period of years, as distinct from the weeks or months typical of temporary or casual work, are capable of generating an implied contractual relationship’. This case frees tribunals from some of the previous inflexibility in adjudicating on employment status, but does not produce any certainty of outcome because each case is determined on its own merits.

The inability of the legal tests to recognize the economic dependency of many individuals who fail to qualify for employee status has been recognized partially in that some employment protection rights have been extended to ‘workers’. By virtue of section 230 of the Employment Rights Act 1996, workers are defined as ‘those who undertake to do or perform any work or services for another party to the contract whose status is not, by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual’.

This brings within the ambit of statutory employment protection those who work under a contract for services but who are not in reality running their own self-employed business, such as agency workers, some casual workers, and labour-only subcontractors. However, no such recognition of the mismatch between the legal framework and the reality of modern day working appears to have occurred in relation to the issue of multiple employers. As Becker (1996: 1527) has put it:

Contemporary labour law is marked by a disjunction between theories of rights and duties based on privity of contract between employer and employee and new forms of work relations that disrupt this model of employment by increasingly interposing intermediate employers between the entities of labour and capital.

Similarly, UK equal pay laws were also formulated with a single employer in mind. The Equal Pay Act 1970 specifically requires that comparators must be ‘in the same employment’ (section 1(6)) and this normally limits claims to the same employer. Exceptionally, employees are regarded as being in the same employment where they are employed by ‘associated’ employers—meaning that one is a company controlled (i.e. voting control) by the other or that both are controlled by a third company. Even within the same organization the legal provisions are limited in their ability to rectify inequalities in pay because a comparator must be of the opposite sex. Once distinct legal employers are involved, the Act becomes powerless to intervene, even if employees of different organizations work together on a daily basis.

This limitation is particularly apparent where contracting-out has taken place under the provisions of the TUPE Regulations. These state that employees who are assigned to the section of the undertaking transferred are, in effect, part of that undertaking, and hence at the point of transfer they cease to be employed by the transferor and become employees of the transferee. However, their pre-transfer terms and conditions are preserved and, especially where the transfer involves the contracting out of public services to the private (p.70) sector or arises out of a private finance initiative, the staff transferred may be working alongside their old colleagues who did not transfer. They may even have their work checked by those members of staff. Nevertheless, despite this, the two groups of employees are no longer ‘in the same employment’, so transferred staff would not be able to use their former colleagues in the public sector as comparators in an equal pay claim if, for example, their own terms and conditions remained frozen after the transfer whereas the public sector staff continued to receive pay rises. In a similar way, inequalities in pay between agency workers and those they work alongside cannot be rectified by the Equal Pay Act.

These strict constraints are not apparent to the same extent in EU law. Article 141 of the Treaty of Rome extends the permitted comparison to those employed ‘in the same establishment or service’ and this has enabled successful claims to be made across Regional Councils (see Scullard v. Knowles and Southern Regional Council for Education and Training [1996] IRLR 344) and local education authorities (see South Ayrshire Council v. Morton [2002] IRLR 257). However, the European Court of Justice in the case of Lawrence v. Regent Office Care ([2000] IRLR 608) ruled that a local authority and the private contractor to whom the cleaning service was contracted out could not be regarded as being ‘in the same establishment or service’. Their reasoning was that the discrepancy in pay could not be traced to a single source, such as a national pay scale or a common collective agreement. A further case awaiting consideration by the European Court of Justice on the same issue (Allonhy v. Accrington & Rossendale College [2001] IRLR 364) concerns an FE college which dismissed all its part-timers in anticipation of legislation which would outlaw their being discriminated against vis-à-vis their full-time colleagues, and re-employed them through an agency. Had the EU Draft Directive on Temporary (Agency) Workers been enacted, this would have provided for pay equality between agency staff and employees of the client on similar work after a specified period, but at the time of writing, it has yet to reach final agreement.

A further limitation of the Equal Pay Act is that it targets only contractual disparities in remuneration packages and not, for example, discretionary bonuses, which would necessitate claims under the Sex Discrimination Act 1975. Here again, however, the legislation contemplates claims only against the legal employer; moreover that employer is vicariously liable for the unlawful actions of its own employees (by virtue of section 41 of the Act) but not for those of another employer even if the two employers are involved in a joint enterprise or activity. Thus, for example, if a male employee was offered a bonus by the manager of one of his employer's clients and such a bonus was not offered to a female employee, even though she was engaged in the same or similar work, the female employee would be without a remedy under the Act. She could not claim unlawful discrimination against her own employer because it would not be liable for the manager's actions and although the client firm would be liable, it would not be her employer.

(p.71) Only in cases of sexual or racial harassment has there been any attempt to overcome this limitation—not by making the legal employer vicariously liable for the actions of non-employees, but by holding that an employer subjects its employees to the detriment of such harassment if it is in a position to control whether it happens (see Burton & Rhule v. De Vere Hotels [1996] IRLR 596). However, this ruling has now been disapproved by the House of Lords in the joined cases of Macdonald v. Advocate General for Scotland and Pearce v. Governing Body of Mayfield Secondary School [2003] IRLR 512 on the basis that the fundamental question of whether the employer had discriminated against the particular employees by treating them less favourably on grounds of sex or race had not been addressed. Interestingly, agency workers have a right of action against the client firm in which they are placed because both the Sex Discrimination Act (in section 9) and the Race Relations Act 1976 (in section 7) specifically outlaw discrimination by a ‘principal’—defined as a person who makes work available to be carried out by individuals employed by another person and supplied to the principal to do the work. In the case of Harrods Ltd v. Remick [1997] IRLR 583 a woman employed at an outlet within Harrods was able to bring a claim of race discrimination against Harrods even though it was not her employer. However, the statutory provisions do not appear to allow contract workers to compare their treatment with that of the principal's own staff but only with other contract workers of the opposite sex or of a different racial group.

The behaviour of non-employees raises the matter of discipline and grievance more generally. Grievance procedures envisage complaints by an employee about the actions of an individual employed by the same employer, yet in a multi-employer setting this may obviously not be the case. In a similar vein, employers have, in theory, no right to discipline agency staff working ‘for’ them or on their premises but who are not directly employed by them. In reality, however, agency staff may well be dealt with by the client firm, rather than asking the agency to remove them, especially where misconduct has involved both agency staff and the client's own employees. More generally, it is not uncommon for a client to have the right of veto over its contractor's staff, and this can lead to the dismissal of an employee at the behest of a third party. The dismissed employee is permitted to claim unfair dismissal only against the legal employer, who can justify such a dismissal for ‘some other substantial reason’ (see Section 98 of the Employment Rights Act 1996) even where the employer has no particular wish to lose the services of the individual concerned but is constrained by a provision in the contract between the two organizations (see, for example, Dobie v. Burns International Security Services [1983] IRLR 278). Of course, if the non-legal employer had expressly required a dismissal due to discriminatory motives, then that employer could be guilty of unlawfully ‘instructing’ the legal employer to discriminate. However, only the Equal Opportunities Commission (EOC) or the Commission for Racial Equality (CRE) can bring proceedings in respect of such matters. The influence exercised (p.72) by a non-legal employer may also be apparent when considering a franchised outlet. In law, staff working at a franchised outlet are employed by the franchisee rather than the franchisor but the franchisor may still exert considerable control over the franchisee's operations, including specifying through the contract a detailed work process or providing a framework for discipline and grievance for the franchisee to use for its employees (Felstead 1991, 1993).

Health and safety is one area where an employer is able to exert influence beyond its own organizational boundaries. For example, under the Health and Safety at Work Act 1974 the main contractor has responsibility for health and safety not only of its own workers, but also to employees of subcontractors and to non-employees who may be affected by its operation (including the public). This would encompass not only duties to subcontractors, but also the reverse—in other words a subcontractor could be prosecuted for failing to ensure the health and safety of employees of the contractor—see, for example, R versus Mara ([1987] IRLR 154). Equally the duty to non-employees would apply even when there was no contractual relationship between the employers, as would be the case, for instance, on a multi-employer site. Nevertheless, even though the Health and Safety at Work Act reaches beyond the boundaries of a single organization, it leads only to criminal sanctions against the wrongdoer and cannot be used by an injured employee to obtain compensation via a civil claim. In this respect, the legal framework is more limited because an employer's civil duty of care arises by virtue of the employment relationship and therefore applies only to its own employees. Legally this is unproblematic where employees are working for their own employer on the employer's premises alongside other employees of the same employer. However, matters become more complex where employees are working in cross-organizational teams, or are injured whilst carrying out work for another employer or working on that employer's premises.

Since a personal injury claim in the United Kingdom proceeds by way of an allegation of negligence, an injured employee would have to show that his or her employer had failed in the duty of care. While it is clear that an employer's duty does not cease merely because the employee concerned is working on the premises of another employer (see, for example, General Cleaning Contractors Ltd v. Christmas (1953) AC 1880), it is less easy to prove breach of the duty. Moreover, the injured employee's employer cannot normally be held vicariously liable for an accident that has been caused by the negligence of someone employed by another employer. Such difficulties in attributing liability are also apparent in deciding who bears ultimate responsibility when public service delivery is fragmented through chains of subcontractors.

The duty of good faith arises because it is an implied term in the contract of employment; this requires employees to work honestly and faithfully for their employer's interests, as well as not reveal their employer's trade secrets and other confidential information. However, as argued in Chapter 8, the ambiguous nature of the employer-employee relationship in more complex organizational (p.73) forms means that employees may find difficulty in identifying with the culture of their legal employer, but instead feel some commitment to another employer. This may come about because relationships between organizations are difficult to sustain merely by virtue of tightly drawn contractual provisions or key performance indicators: to be successful they may require cooperative working between individuals and teams. Nevertheless, from a legal perspective, it is clear that an employer who wished, for example, to protect confidential information which might be accessible to those employed by another employer, would be obliged to do so by means of express contractual provisions.

So far, we have considered the framework of employment law relating to individual employer–employee rights and duties, but trade union law also operates largely within the boundaries of organizations. One of the most important aspects of collective employment law bounded by the concept of the legal employer is the right to participate in industrial action. The changes to the legislation in this field brought about by Conservative governments during the 1980s progressively narrowed permitted action to a single employer and a single workplace. Thus, workers are now permitted only to picket their own place of work, a ‘trade dispute’ in respect of which lawful industrial action may be taken is confined to a dispute between workers and their own employer (thereby outlawing sympathy strikes and other ‘secondary’ action), and action to persuade an employer to stipulate in a commercial contract that the other party should recognize a union or that the contract should be performed only by union labour, would not be lawful. Statutory recognition procedures are also predicated on a single employer, yet this does not take into account the difficulties which multi-employer situations may present for the meaningful definition of bargaining units. For example, unions will not be able to include agency staff within the definition of a bargaining unit as they belong to another employer, and the linkage of bargaining units to the legal employer could result in the recognition of unions for some workers in a workplace but not others. Moreover, employees may belong to a particular bargaining unit for the purpose of negotiating terms and conditions but its relevance for issues such as discipline and grievance or hours of work may be reduced because they are located in workplaces where the rules of the client organization tend to dominate.

This scrutiny of the legal framework surrounding the employment relationship and of relevant case law demonstrates that the traditional focus on regulation within the confines of a single organization remains largely untouched. Apart from isolated statutory provisions, for example those relating to discrimination against contract workers and aspects of health and safety, on the whole employment protection legislation contemplates claims by employees only against their own employer. This model has become increasingly inappropriate because, with the rise of organizational networks, many employees find themselves effectively working for more than one employer. In consequence, they may in reality be subject to the influence of a non-legal employer in indirect, or sometimes even direct, ways. Yet, such influences, even where they result in (p.74) detrimental consequences to the employee, are rarely amenable to legal challenge. In short, the law is simply out of step with the reality of working patterns in a growing number of organizations.

3.3 The management of human resources in the permeable organization

The management of human resources is increasingly identified as an issue of strategic importance for employing organizations, a perspective particularly associated with the resource-based view of the firm (Barney 1991) that sees organizations as following distinctive paths of development based on the nurturing of internal resources that are relatively rare and inimitable. Accordingly, employers need to match their HR strategies to external market contingencies but also foster the development of internal human resources to achieve a distinctive comparative advantage. This approach emphasizes the importance of congruence between human resource policies and organizational objectives, rather than, for example, with more general professional or occupational orientations that spread across organizational boundaries. Recent research has focused on the links between human resource management and performance (e.g. Pfeffer 1998; West et al. 2002; Guest et al. 2003), whereby implicit assumptions are made that all workers (including temporary or agency staff) are expected to identify with goals set by the employing organization.

An emphasis on each organization pursuing an integrated set of business objectives and HR practices sits rather uneasily with two sets of recent developments. First, it is at odds with the move away from bureaucratic, and in principle internally consistent and transparent, regulations towards more flexible internal structures, associated with the policies of delayering and decentring of responsibilities. Decentring is likely to exacerbate problems in establishing and communicating a consistent message, in line with business strategy. There has been an active debate within the literature over the compatibility between these twin requirements—for an integrated and consistent HR strategy and the need for alignment with business needs (Legge 1995; Boxall and Purcell 2002). This dilemma has focused around the issue of whether all organizations should pursue a high commitment (best practice) bundle or adopt a more flexible approach, allowing business units to aim for best fit with the external environment. One solution has been to emphasize corporate culture as the glue to keep the decentred organization orientated towards the same overall goals, but it is not clear how far a common culture is compatible with differences in substantive policies. Purcell (1999) has tried to move beyond this debate by rejecting the universal best practice solution as inapplicable to different business situations, and the best fit concept as incompatible with a dynamic and strategic approach. Purcell’s formulation provides a more dynamic interactive framework for analysing the tensions between internally and externally orientated HR (p.75) strategies, but it has focused on the voluntary strategies of companies and not on the impact of interventions from clients over internal management actions. However, Swart and Kinnie's (2003) recent research on knowledge intensive firms (KIFs) shows how clients are seeking to influence the HR practices of their suppliers in both direct and indirect ways, as well as attempting to shape the identities of the people working for these organizations. These authors suggest that the balance of power between suppliers and clients has a major impact on the development of HR practices and organizational identity in firms; we develop this further in subsequent chapters when data is presented from our research in organizations representing a range of sectors, not just KIFs.

The second development is the trend towards outsourcing and inter-organizational contracting. This might seem paradoxical in a context where the nurturing of specific internal resources is seen as key to competitive success but the HRM literature assumes this allows employers to develop their core resources within the bounds of the organization while externalising those activities that lack strategic importance (Lepak and Snell 1999). Organizations are enjoined to be selective in their application of HR policies, particularly high commitment systems, and either adopt differential HR practices within the organization (as in the flexible firm, Atkinson 1984) or outsource non-strategic activities.

This simple distinction between internal strategic and external non-strategic activities is altogether too neat because it focuses on only one aspect of the business to business contracting process, the decision to outsource. Yet, every time one organization chooses to outsource, another organization accepts a new client, and is placed under some pressure to meet that client's demand for particular levels of service or product, often with specific requirements relating to how human resources are to be managed. In the HRM literature, there is focus on the remaining core activities and not on how non-core activities are provided, an approach that is both incomplete and misleading. Not only are supplier firms excluded from the focus, but also an organization that is a client in one case may be a provider or supplier in another. Moreover, analyses of subcontracting may be misleading if they assume that externalization is used primarily to protect the core workforce. Authors such as Cappelli et al. (1997) and Ackroyd and Procter (1998) (in the United Kingdom and the United States of America respectively) have argued instead that outsourcing is used to place pressure on the remaining core and submit all activities to the test of externalization. Therefore, far from insulating the core, the process of externalization exposes these workers to heightened competitive pressures. Location within networks of complex inter-organizational relationships may limit the independence of the organization's business and human resource policies, as pressure through the supply chain can be used either to diffuse improvements in HRM (Beaumont 1996; Hunter 1996; Scarbrough 2000) or to shift risk to supplier organizations, thereby restricting the suppliers' scope to develop strong internal human resource policies (Rainnie 1992). In a multi-client environment there (p.76) are multiple sources of external pressure leading to potential areas of inconsistency and conflict, particularly where there are strong imbalances in power relationships between the organizations involved. While an organization may be relatively powerful in some relationships, it can be relatively weak in others (Marchington and Vincent 2004), and indeed relations between clients and suppliers may change over time due to the locking-in effect of contracting or other external changes.

The extent of client interventions in a supplier organization depends upon both their ability and their keenness to exert influence. Keenness depends on the importance of the outsourced activity to the client's own business strategy and reputation. Under these conditions, after-the-event remedies for poor performance, through enforcement of the contract, may provide delayed and insufficient forms of control. Relational contracting in principle provides a solution but this involves foregoing the price and control advantages of transactional contracting based around repeat competitive tendering. In the UK, few firms appear willing to provide guarantees of contract renewal (Purcell and Purcell 1999) even those claiming to work in partnerships. Moreover, many companies, when deciding to outsource, may underestimate the strategic importance of day-to-day operational activities (Boxall 1998). Furthermore, even if efforts are made to forge high trust relations between key boundary spanning agents, it does not ensure trust extends to those workers engaged in forging and maintaining the partnership on a daily basis. The unitarist perspective that is implicit in the notion of organizational trust and relational contracting serves to obscure the continued contested nature of the employment relationship (Ezzamel et al. 2001). If we accept unified orientations are a fiction, clients may be strongly motivated to try and exert direct influence on the labour process in order to ensure conformity with their own objectives.

However, the actual ways in which clients influence the labour process also depends on their ability to intervene, which in turn is shaped by the balance of power between organizations and the nature of outsourcing. Factors that increase ability to intervene include geographical proximity (and indeed geographical overlap of the client and the supplier workforces at multi-employer sites), regulations that require client involvement in checking and monitoring work and client involvement in training the supplier workforce. The latter may be at the discretion of the supplier or imposed by the client. At the other extreme, a supplier may be dominant enough to pursue its own independent policy and resist all attempts by clients to influence the service provided. Where this power is based on monopolistic access to resources or on long-term contracts to provide services to the public sector, insulation from client requests can exacerbate mismatches between the suppliers' arrangements and the needs of the service. For example, one outcome could be continued deficiencies in the supply of trained and motivated labour (see Chapters 5 and 9).

The notion that the internal operations of an organization may be subject to influence by external clients needs to be incorporated into mainstream HRM (p.77) analysis. So far there has been relatively little empirical work on the implications of interventions by non-employers on the internal labour process and, by implication, the employment relationship with the exception of studies of temporary agency workers, the work by Felstead (1991, 1993) on franchising, and a few studies of supply chains. Even within this limited empirical material, most of the focus has been on the dual influence of the legal and the non-legal employer; apart from Scarbrough (2000) and Swart and Kinnie (2003), studies fail to focus on multi-clients or multi-employers.

Our own case studies provide more extensive empirical evidence on the influence of multi-employers on HRM. In Chapter 7 we explore the implications of the development of permeable organizations for internal hierarchies. Advocates of ‘flexible’ human resource policies increasingly stress the need to escape from bureaucratic internal hierarchies and rules so as to reward and motivate staff according to their current performance, market value and the business needs of the organization (see White 2000 for critical discussion). However, even HRM textbooks from the United States of America, where institutional pressures for consistency are perhaps even weaker than in the United Kingdom, recognize the limits to diversity. Beliefs in the fairness of managerial practices underpin the psychological contract and it is felt this is best promoted through the development and application of consistent HR policies, particularly for workers who have to cooperate at work to achieve common objectives (Baron and Kreps 1999: 51–54). Employers may try to follow the flexible firm prescription and seek to have ‘the best of both worlds’ by providing high commitment policies for the core and more market-mediated arrangements for the periphery. However, a contracting out ‘solution’ inevitably results in a larger number of organizations acting as suppliers for a range of clients, and in this context interventions by clients may further disturb internal hierarchies and systems of employment. Management does not, of course, always seek to retain the integrity of the internal system but may use externalization to put pressure on the internal system; for example, recourse to temporary work agencies or outsourcing may be designed to establish a new lower floor to the internal pay hierarchy. Consequently, decisions to outsource, and even threats to explore outsourcing possibilities, can alter the balance of power within employment relations.

In Chapter 8 we analyse the implications of multi-employer environments for the concept of organizational commitment, and associated notions of corporate culture and the psychological contract. These have perhaps been seen too simplistically as handy tools to overcome the problems of organizational coherence and strategy in the context of fragmentation and decentring. Organizational identity is regarded as a key issue in shaping worker commitment (Guest 1998b: 42), but this generates major questions about whether an organizational entity can make a psychological contract with an employee. An organization is neither a person nor a social entity (as opposed to a legal entity as party to the legal employment contract) and should not be anthropomorphized (p.78) or indeed reified as a coherent, unified agent. These conundrums have also led to discussions about whether psychological contracts should be—or indeed are—forged at the company, establishment, or work group level (Guest 1998a: 652).

Employment relationships have been seen traditionally as nested within the boundaries of the organization—within the work group, the department or the company as a whole but inter-organizational relationships introduce a nesting that involves a principal that is not part of the company (McClean Parks et al. 1998: 718, citing March and Simon 1958). McClean Parks et al. (1998: 698) have suggested extending theories of the psychological contract built around full-time permanent employment so as to incorporate the experience of contingent workers. This requires adding the concept of multi-agency; temporary agency workers attempt, through the same single act of labour, to satisfy their obligations simultaneously to two employers—the agency and the client. This simultaneity raises questions about organizational commitment and loyalty, and presents conflicts and contradictions with respect to lines of authority and workload. This approach can be generalized to include anyone who is under direct or indirect pressure to work in the interests—or under the control—of a client organization while simultaneously being required to follow instructions from their own employer. ‘Volition’ is also an important dimension, as agency workers are more constrained in their choice about which type of employment to accept, but commitment within the psychological contract is assumed to be based in volition. Clearly, lack of volition applies to agency workers but it could be extended to any employee who is expected to show loyalty and commitment to non-employers and where the conditions set in contracts by clients impinge negatively on their working conditions. Employees typically have little or no influence over the bidding process between organizations (Colling 2000: 78) but this can have major consequences for their employment experience (Cooke et al. 2004).

Work on the psychological contract complements other literature focusing on potential conflicts of loyalty experienced by temporary agency staff, and on spillover effects on the attitudes and orientations of permanent staff (Geary 1992; Pearce 1993; Gasteen and Sewell 1994; Gottfried 1994; Rogers 1995; Saxenian 1996; Matusik and Hill 1998; Ward et al. 2001). There has also been analysis of whether public sector workers continue to identify with public service after they (and their work) have been outsourced to the private sector (Pratchett and Wingfield 1995; Hebson et al. 2003). Problems of organizational commitment and identity due to the presence of multi-employers extend beyond these examples, as the cases reviewed in Chapter 8 reveal. Non-employers may try to foster the commitment and loyalty of supplier employees through the use of monetary and non-monetary incentives or by offering training in client culture and orientations. In some cases the client may seek to encourage employees to act in ways that are not in the direct and immediate interests of their own employer. Clients may also be keen to present the appearance of a seamless organization to customers, for example, by requiring non-employees to wear (p.79) client uniforms. The outcome of these efforts is influenced by the relative status and attractiveness of the legal employer or the client to employees. Furthermore, the importance of organizational commitment as a device to motivate staff may have been exaggerated because cooperation and collaboration across organizations may depend as much on other forms of solidarity and identity; for example, commitment to public service, to doing a good job or to notions of solidarity with other employees/trade union members in similar positions to themselves employed by other organizations. There may be particular dangers in overemphasizing organizational identity in the management of inter-organizational relations, where such notions compete with, or undermine, employees' commitment to a public sector or customer service ethos (see Chapter 5). Introducing the issue of multi-employers into the debate on organizational commitment and identity, therefore, not only adds an additional layer of complexity but also calls into question the extent to which employees' feelings of commitment and identity can be readily manipulated by HR policies.

3.4 Fragmentation: consequences for employment opportunities and employment relations

Little regard is paid to the consequences of fragmentation for the quality of employment opportunities and employment relations. Optimists claim fragmentation offers opportunities for new ways of working, based around cooperative and less hierarchical relations that provide workers with opportunities for self-development through experience gained with a wider range of employers (Arthur and Rousseau 1996). To the extent that these new forms of working involve reward systems based on shares in companies, some would argue that there is a move to a post-capitalist system of employment relations (Hodgson 1999). However, most literature in this area focuses on new forms of working in particular sectors or for particular groups—primarily for so-called knowledge workers. Pessimists, in contrast, argue that fragmentation exposes workers to greater risks (Cappelli et al. 1997), shifts responsibilities for skill development onto them and provides new opportunities for segmentation along race and gender lines. This diversity of views mirrors the contradictory interpretations of the internalization of employment within large, integrated bureaucratic organizations; for some, such as Marsden (1999: 3) it provides ‘firms and workers with a very flexible method of coordination and a platform for investing in skills’. For others, such as Marglin (1974), it offers capital a means to establish control over the labour process. Moreover, it is argued that bureaucracies have internalized within their values and procedures the power relations and social norms at the time of their formation, thus presenting an obstacle to the achievement of gender equality (Kanter 1977).

(p.80) Our argument is that the impact of changing organizational forms has to be understood and interpreted within its specific context, including the power relations that shape both capital–capital and capital–labour relations. Drawing on our case studies, these controversies are explored in Chapters 911. Chapter 9 focuses on the impact of organizational change on skills, both in terms of job design—skill in the job—and the provision of training for individual workers. In a context of permeable organizations, however, the potential influence of the network on the development of skills and the acquisition of knowledge also needs to be considered. One argument in support of the transition from internalized employment systems to reliance on a wider network is that labour mobility between companies (Finegold 1999)—and through strategic alliances and partnerships between companies—offers greater opportunities to learn from other organizations.

In the first place, there is a need to take into account the changes in the quantity and nature of tasks that arise simply as a result of the process of contracting. In particular, there is likely to be an increase in auditing and relational work, particularly for the key boundary spanners (see also Chapter 6). These developments also influence the number of layers of supervision and whether work outcomes are monitored by direct or indirect methods. The differing interests of clients and suppliers can also impact on work systems, taking a variety of forms. For example, clients may promote higher quality work through the supply chain with implications for HR policies. Alternatively, they may have a primarily short-term interest in work organization within the supplier company and as a consequence constrain the development of a longer-term approach designed to upskill the system of work organization and the training of employees. However, even where clients support a policy of skill development in principle, there may be conflict between clients' production requirements and their willingness to engage in relational contracting to enable the supplier to invest in skill development. There is a danger that fragmentation of the supply chain may result in an institutional failure to allocate responsibility for either the development of a skilled workforce or of new and more productive ways of working. Employers, even within integrated organizations, are reluctant to engage in training because of the asymmetry in costs and returns (Cappelli et al. 1997; Crouch 1997). The former are immediate and certain, the latter longer-term and uncertain, dependent not only on the stability and cooperation of trained staff but also on the continuation of the business contract for which the skills are relevant. When multiple organizations or agencies are involved, opportunities to pass the buck increase. Employers may be even more tempted to rely on the skills produced by other firms in the network without considering how these skills will be reproduced in the future. Relatively powerful employees may demand training to enhance their employability, but there is an immediate dilemma for management in that this can increase staff turnover among groups of workers they are keen to retain. These problems may be exacerbated in inter-organizational networks as individual employees can (p.81) sample external opportunities as well as demonstrate their skills to alternative employers. Not only is there a danger that specific skills will be in short supply in the future, but also organizations may lose the internal capacity to produce those skills, even if they should later consider returning to in-house provision (Cooke 2003). In short, networks may encourage the pursuit of short-term solutions to skill development, if only because permeable boundaries make the protection of internal investments even more risky. Moreover, while there may be a need for greater specialization, and potentially for more flexible organizational forms suited to the particular work processes of highly skilled ‘knowledge’ workers, this optimistic analysis pays little attention to the issue of where knowledge is developed, nor by whom it is funded or controlled. The notion of sharing knowledge does not fit easily into the resource-based view of the firm where comparative advantage depends upon developing unique forms of knowledge and skill. Whether network arrangements lead to sharing of knowledge or learning is thus an empirical issue, dependent upon power relations and the nature of activities involved in specific inter-organizational relationships.

The potential impact of fragmentation on gender equalities and gender relations at work is also similarly contingent and variable, as we see in Chapter 10. While there is validity in the argument that the bureaucratic form was based on the male model of continuous career full-time workers and that the organizational cultures that developed around the bureaucratic form were reflections of male power and masculine values, it does not follow that their replacement with new, more flexible, or open systems will necessarily promote gender equality. Fracturing the system opens up possibilities for change and creates new employment opportunities for groups that have been excluded historically, but now show themselves to be both committed and able to work at a high level. In that sense, restructuring is likely to provide new opportunities for women that might remain closed in a slowly changing system. Furthermore, there are opportunities for more flexible arrangements, capable of adapting to a wide range of lifestyles and participation patterns and more opportunities for the use of ‘feminine skills’—such as communication skills—due to an increase in relational work. Against these arguments, however, one must recognize some limitations and dangers. It is possible that as women move into new employment areas, these jobs become feminized and thereby downgraded (see Reskin and Roos 1990; and Crompton and Sanderson 1990 for examples from the United States and the United Kingdom). Moreover, more flexible arrangements do not prevent these divergences from the standard employment relationship being used as a means of differentiation and marginalization. Finally, progress at the workplace towards gender equality has come, in part, through the development of equal opportunities policies integrated within a wider HR framework. The fragmentation of organizations and devolution of responsibility for HRM to line managers and to supplier companies can put these policies in jeopardy. This problem has been recognized in particular in relation to the gains in equal pay through new job evaluation schemes in the public sector, (p.82) and trade unions have included in their campaign against the two-tier workforce in the public sector the right for equal value job grading to be retained when work is transferred to the private sector.

We examine the implications of inter-organizational contracting for worker voice and representation in Chapter 11. The trade union campaign in 2002/3 about the two-tier workforce might suggest that trade unions are now beginning to focus on the need to intervene in the shaping of inter-organizational relations if they wish to influence the employment relationship and protect condition. The historical role of trade unions and collective bargaining in the United Kingdom has been restricted primarily to the regulation and protection of workers' economic interests, narrowly defined at the sectoral, company, or workplace level, with limited opportunities to engage in policy debates at the societal and national level (Crouch 2003a). This traditional orientation has left these institutions exposed to the impact of economic restructuring, as their only legitimate voice has been within organizations that have voluntarily entered into recognition agreements. Where these have disappeared or been restructured away from organized establishments, union influence has declined. Moreover, it is only through membership of the European Union that the United Kingdom is moving towards a comprehensive set of minimum labour standards. The voluntary tradition in the United Kingdom has meant that collective bargaining agreements have not been generalized to cover whole sectors, and until the 1980s trade unions remained highly sceptical of using the legal system to provide minimum rights because they saw this as a potential challenge rather than as a complement to collective bargaining—at least in areas such as minimum wage policy. Furthermore, the lack of legitimacy at the national level excludes unions from debates about the restructuring of the economic and social system, in contrast to the experience in many other EU member states where, as one half of the social partners, unions are formally involved in wider policy issues.

The emphasis on company-level bargaining has been at the expense of industry or sector level negotiations that would have provided a labour market level of protection. Although the unions themselves were initially keen on company-level bargaining, this later became the preferred policy of Conservative governments. Through the dismantling of sector level agreements and the focus on voluntary agreement at the most ‘relevant’ local level, the UK labour market system was ideally structured to favour devolution, outsourcing, and contracting so as to secure reductions in wage costs. This was the explicit objective of the compulsory competitive tendering policy in the public sector in the early 1980s, introduced at the same time as the rescinding of the fair wages resolution that removed the need for public sector contractors to pay fair—that is, collectively agreed—wages. It was only pressure on the UK government to apply the TUPE Regulations to public as well as private sector workers that prevented privatization being used as a device to cut the wages of transferred staff. Nevertheless, the lack of a comprehensive collective bargaining (p.83) system left many transferred workers, together with new recruits of private sector contractors in public services, facing worse conditions than under public sector employment. Overall, therefore, the decision by trade unions to focus attention on their strong points—well-organized companies and workplaces— ultimately left UK workers exposed to a contracting culture, where employers could reap significant benefits because there was limited employment protection. Furthermore, hostility towards trade unions in the 1980s and 1990s virtually guaranteed that most new companies were likely to develop outside the ambit of trade union influence.

Against this negative assessment, there is a counter argument that focusing on economic issues and concentrating activity at the workplace and company level can be a source of strength in an era when there is little legitimacy for broader social movements, involving alliances between trade unions and socialist movements. Moreover, since it is the organizational level where employers are trying to reshape employment relations, UK trade unions may be better placed to influence these developments than those union movements that are oriented primarily towards sectoral or national bargaining and whose legitimacy is now being challenged by the business community as a cause of inflexibility. It is in this vein that the trade unions in the United Kingdom have focused on a modernization agenda, and in particular on the development of the partnership and organizing approaches (Heery 2002; Waddington 2003).

The partnership approach rests on the assumption that the best way for trade unions to protect and enhance their members' interests is to cooperate with employers in order to achieve mutual gains. It is argued that employers are more prepared to offer good wages and conditions, employment security, and training if workers agree to operate flexibly, contribute to improved decisionmaking through involvement and participation, and show commitment to organizational goals. The pay-off for trade unions under this scenario is that they are offered recognition, allowed access to new recruits and given time for meetings during working time, as well as being provided with information and guaranteed access to senior managers. As with high commitment HRM, partnership rests on the win-win assumption of mutual gains. The TUC has lent support for this approach through its Partnership Institute and its collaboration with the Involvement and Participation Association (IPA) (Coupar and Stevens 1998). Even proponents of partnership (e.g. Guest and Peccei 2001) acknowledge the balance of advantage lies with management more than it does with workers and trade unions. Most of the quoted studies are drawn from simple organizational forms, often in a single industry or a single workplace. In these circumstances it is relatively easy to visualize the benefits that might flow from having an agreement covering the entire workforce that can identify with the employer to try and beat off the competition.

The ability of partnerships to secure advantages for unions in a multi-agency context is much more doubtful given the presence of potentially conflicting objectives both between workers and between organizations. Tensions (p.84) are always likely across a network because competing firms have different interests and requirements from the business contract. This can also spill over into relations between workers on different contracts, either through pressures on terms and conditions of employment or through the allocation of blame for failure to other actors in the network. This can be exacerbated if penalties are invoked for poor performance or there is a strong likelihood that business contracts will be cancelled. If suppliers work for a large number of clients on contracts of varying lengths and complexity, they are unlikely to want to be tied into a partnership agreement across the board for fear that this will remove any flexibility. Moreover, if these business contracts are for quite different types of service and require workers with specific technical skills, there are few opportunities for transferring workers from one contract to another. In this situation, therefore, employers will see little advantage in being tied into a long-term partnership deal, which promises employment security for all workers. Although some employers may actively use agency workers who perform well as a source of future recruitment, most are likely to view them as a cost rather than as a resource and there is little prospect of them receiving any of the potential advantages that flow from partnership. Indeed, a strong partnership deal between unions and management at a particular organization may actually worsen the position of contingent workers as the core organization seeks to cut costs elsewhere, especially if a major reason for subcontracting has been to shift risk to a third party. ‘Permanent’ staff might also have negative views about agency workers, partly because they are seen as a threat to their own continued employment, but also because some agency workers in areas of skill shortage are able to earn premium rates without necessarily having equivalent skills. In short, there are immense difficulties in making partnerships work effectively across organizational boundaries.

For the partnership strategy to be influential, it presupposes the orientations of large companies are geared towards effective performance in the real economy. This assumption can be challenged by evidence that UK organizations are primarily interested in financial returns (Froud et al. 2000), and by association, growth through acquisition rather than success in developing and consolidating their share of specific markets. Without a production orientation, the case for social partnership at the level of the organization, from the perspective of the employer, becomes much weaker. Furthermore, there have to be further commitments to internalize most production activities or extend partnership arrangements to include subcontractors and business partners. Neither of these commitments appears on the agenda in current debates about partnership.

The organizing approach puts a primacy on recruiting new members rather than servicing existing ones, and in attempting to develop workers (and worker representatives) so that they can deal directly with their own problems rather than having to rely on full-time officials. This works on the principle that grass roots activism is the best way to mobilize and sustain union renewal because it (p.85) is embedded within the workplace. As with partnership, the organizing model has been supported by the TUC through the Organizing Academy (Heery and Abbot 2000). Similar conceptual problems arise in relation to the organizing model when it is applied across organizational boundaries, especially if networks do not have the benefit of long-standing and well-developed union agreements. Attempts to organize across business contracts would not only be difficult but would not provide leverage for new recognition or bargaining agreements as union recognition procedures are based on the presumption of single employer workplaces. The difficulty of mobilizing workers in a nonunion environment, either through a partnership or an organizing approach, is well documented (Terry 2003), especially if management takes a negative stance towards unions. This is yet more difficult if work is fragmented and undertaken by workers who have little opportunity to compare notes about their employment conditions. Moreover, it requires remarkable resilience for agency staff openly to declare themselves as willing to be a union representative in an environment where it is known that unions are not welcomed. The possibility is that they will not have completed their training, let alone started to mobilize other workers, before the contract comes to an end. Furthermore, unions are unlikely to reap immediate benefits trying to organize groups of workers in small workplaces, especially if they are on short-term contracts or do agency work.

Rather than trying to create closer relations with other staff working for the same organization but employed at different workplaces, an alternative approach might be to secure pacts or develop relations with similar workers employed by different organizations at the same workplace. Potentially, this could be a source of strength in PPPs where workers have been transferred from the public sector under TUPE arrangements and retain their union membership and connections with other members of the same union branch. However, at a minimum, this depends on the new employer continuing to allow time off for meetings and on a core of transferred workers remaining committed to union activity.

Much of the analytical problem is that industrial relations—like human resource management and employment law—is predicated on assumptions of a hierarchical and bounded relationship between an individual employer and its employees. Most UK definitions of the subject focus on the single employer-employee relationship, with a strong emphasis on the contested nature of workplace activity. Even though they may have disagreed on most issues, even Clegg (1970) and Hyman (1975) both conceived of industrial relations in terms of the employment relationship (‘institutions of job regulation’ and ‘control of work processes’, respectively). The current leading industrial relations text (Edwards 2003: 9) takes a similar line in locating the employer-employee relationship at the centre of the system, not explicitly recognizing that workers at one site may be employed by other organizations. Similarly, analysis of trade union renewal focuses on the recruitment of traditionally under-represented (p.86) groups such as part-time workers, women, ethnic minorities and young people (Terry 2003; Waddington 2003), and new initiatives are typically examined within the confines of de facto enterprise unionism, both within the organizing and the partnership models (Heery 2002). There is no systematic consideration of whether or how agency workers might be represented at the workplace or how trade unions might seek to organize and mobilize workers in a multi-client workplace subject to competing demands from different clients.

Other literature also tends to suffer from this limited perspective. For example, Taylor (2002) focuses on how bargaining agendas have shrunk dramatically within organizations and that a ‘representation gap’ has emerged due to declining levels of union membership. The key question for unions, therefore, according to this analysis, is how to repair problems within organizations to prevent further declines in membership. A further problem is that many scholars treat forces beyond the level of the organization—such as product market pressures or supply chain links—as if they were important merely in terms of setting the context within which employment is regulated, and therefore not open to influence by actors within the organization. The notion that customers might seek to actively influence and control employment relations within the firm is rarely addressed explicitly and generally the employer-employer relationship is seen as totally separate from the employer-client relationship. Similar assumptions are also evident in studies of public sector employment relations, and even if there is explicit reference to privatization or contracting out of services to the private sector (Mathieson and Corby 1999), these are seen as contextual influences rather than a key part of the process of setting terms and conditions. There is no analysis of how the dynamics of interaction between organizations in the two sectors might shape and influence patterns of employment relations.

3.5 Conclusions

From each of the perspectives examined in this chapter, there is a clear need to escape the limitations of analysing the employment relationship within the box that is bounded by the single employing organization. The reality is altogether more complex. The definition of the individual employment relationship as between one legal entity—the employing organization—and an individual employee is incongruent with the situation where individuals are contracted by organizations who are engaged in complex inter-organizational relations. Other agents act instead of, or in addition to, the ‘legal’ employer to control employment relations and shape terms and conditions of employment. Furthermore, protection of the individual employment contract provided by the legal framework at times of merger or takeover, results in another employing organization being required to contract under the same terms and conditions as the previous employer.

(p.87) The problems that arise in the management of employment in a context of inter-organizational relations are not, however, only related to issues of mismatch between the regulatory form and the social context. The situating of employing organizations in a web of inter-organizational relations provides a framework through which we can understand the development of employment relations in the context of the restructuring of capital–capital relations. The twin tensions between cooperation and conflict underpin both capital–capital and capital–labour relations. These tensions and opposing tendencies need to be considered conjointly rather than separately. Just as we need to reject simplistic notions that employment relations are formed solely by the promotion of mutual gains or by the pursuit of conflict, so we need to recognize that inter-firm relations rely on elements of cooperation, competition, and dominance. Moreover, as the employment relationship is a central aspect of organizational activities, so the management of the cooperation/competition dynamics of inter-firm relations interact with and shape the internal form of the employment relationship.

We implicitly reject the notion of a dichotomy between the internal, sheltered labour market on the one hand and market-mediated employment forms on the other. Instead the internal labour market reflects the influence of both internal objectives and the external environment in which it is located (Grimshaw and Rubery 1998; Beynon et al. 2002), including the influence of inter-organizational relations. This approach suggests that effective employment protection depends not only on collective regulation at the organization level but also on the institutionalization of the external environment in which the organization is located. In order to cope with fragmenting production systems, institutionalism needs to be rebuilt through regulatory mechanisms that apply universally across the labour market or the supply chain and provide effective countervailing power to the new configurations of capital. (p.88)