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Statutory Protection of Employment Law

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The Failed Promise of Statutory Protection

The subject of the legal regulation of labor is one of great complexity. Up to the present time a priori objections to such regulations have delayed their introduction, and only gradually, as experience has demonstrated their usefulness, have they been extended to situations which seem to require them. In … the United States the notion that the legislative power should not be used ... to regulate conditions of employment has been abandoned by most thoughtful persons, but the prejudice against interference ... is as strong as ever.

Henry R. Seager, Economics, 1904, p. 431

Following a period of legislative inaction, selective statutory restrictions on the right to dismiss came into existence largely as a byproduct of labor legislation of the late 1920s and early 1930s. The introduction of limitations to the at-will rule within the NLRA framework, in particular, marked the long overdue recognition that, as long as employers had the right to dismiss employees, at-will public policy goals, such as industrial peace and the extension of orderly collective bargaining, were unattainable.

Following a roughly historical chronology, this chapter explores how, from the 1920s onwards, restrictions on dismissals were constructed around notions of “orderly” collective bargaining. Thematically, the focus of the chapter is on the creation of new institutional structures and their impact on the status of workers in terms of job security. Underlying this analysis is the tentative hypothesis that the NLRA, and the practices which evolved from it, provided unions and their members with a sense of control over dismissal rights which was largely illusionary. This mistaken sense of control, in turn, encouraged unions to put efforts into job security enhancing measures at the plant and company level which ultimately did not constrain managerial prerogatives effectively. This lack of real control became apparent in the mid 1960s, when the Supreme Court handed down several decisions which reaffirmed the right of management to close branches and discharge employees without union interference. Apart from excluding non-unionized workers, the NLRA system, perhaps against the intentions of its original sponsors, ultimately came to severely circumscribe the right of unions to bargain over job security at the very time when such protection was needed.

The Promised Lands of Protected Bargaining

At the turn of the century, many US industrial relations scholars questioned the assumption that injustices in the labor market could be remedied through legislative acts and/or, more generally, via a strengthening of individual employment rights. Opposition to legislative approaches was grounded primarily in the belief that solutions to the “labor problems of industrial societies” could be created more easily by strengthening the standing of organized labor as collective bargaining agent rather than by creating a host of specific employment regulations.[1] Accordingly, in 1911, the Harvard economist Taussig suggested that the most urgent task in reforming US employment relations was not detailed new legislation per se, but rather the protection of bargaining representatives:[2]

The workmen clearly gain by having their case in charge of chosen representatives, whether or not these be fellow employees; and collective bargaining and unionization up to this point surely bring no offsetting disadvantages to society. As to the immediate employees, there is often a real danger that he who presents a demand, or a grievance, will be “victimized.” He will be discharged and perhaps blacklisted; very likely on some pretext, but in fact because “he has made trouble.”

In the 1930s, Taylor's influential Labor Problems and Labor Law argued, very much along the lines of earlier reform advocates, that individual workers had been deprived of their ability to bargain primarily because of the expansion and centralization of management.[3] To remedy this situation, Taylor argued, the state had to enable workers to bargain collectively, both for wages and for the protection of their jobs. Said Taylor:[4]

Legally free to dispose of his services at any price he deems just, immediate necessity in the face of an oversupply of labor reduces that freedom to empty words. His [meaning the worker's] inferior bargaining position is not wholly due to economic inequality, but in part to a lack of knowledge of labor conditions, and a bargaining skill less effective than that of his employer. The injustices growing out of the individual bargaining burden affect not only the individual worker but the entire group to which he belongs. Unregulated competition resulting from individual bargaining tends to pull down the terms of employment to the level of the weakest employer...

Taylor's notion that inequalities of labor were due to the exposure of workers to individual rather than collective bargaining echoed the opinions of some of the nation's leading judges of the time. Judges Holmes and Field had earlier opposed bans on union activity on account of the fact that union activity merely counterbalanced the combination of capitalists.[5] Despite the gradual acknowledgement of the legitimacy of strike action by some courts, up until the 1920s, few judges had been willing to offer protection to those workers who were discharged for union membership or strike activity. In theory, collective bargaining could serve to limit the power disequilibrium between the employer, who, as Holmes says “is free to discharge the worker, and the worker who depends on his job for his livelihood.”[6] In practice, however, the relationship between job security and collective action had remained largely antonymous. Post World War I, workers who participated in collective action, be it as organizers or as strike participants, were likely to face retaliatory discharges or even blacklisting.[7] Industrial actions in which in excess of 1,000 workers were permanently dismissed included the Homestead strike of 1892, the Pullman strike of 1894, and the steel strike of 1919-20, which involved approximately 365,000 workers and resulted in over 10,000 permanent discharges. In the Boston police strike of 1919, in which the policemen struck for the right to organize with an AFL affiliate, meanwhile, more than one third of the police force were permanently discharged.

The first congressional statute addressing issues of dismissal and organizing activity, the Erdman Act, had attempted to prohibit the retaliatory discharge of union members working on the railroads; at a time when the railroads were the only area where the Federal Government had the authority to regulate such matters. Passed by Congress in 1898, Section 10 of the Erdman Act made it an offense to threaten an employee “with discharge” or to blacklist the employee after a discharge because of membership in a labor organization. Specifically the Act read: [8]

That any employer subject to the provisions of this act and any officer, agent or receiver of such employer who shall require any employee, or any person seeking employment, as a condition of such employment, to enter into an agreement, either written or verbal, not to become or remain a member of any labor corporation, association, or organization; or shall threaten any employee with loss of employment, or shall unjustly discriminate against any employee because of his membership … or who shall, after having discharges an employee, attempt or conspire to prevent such employee from obtaining employment or who shall after the quitting of an employee, attempt or conspire to prevent such employee from obtaining employment, is hereby declared to be guilty of a misdemeanor, and … shall be punished for such offense by a fine of not less than one hundred dollars and not more than one thousand dollars.

In 1908, section 10 of the Erdman Act was declared in violation of the Fifth Amendment by the Supreme Court in Adair v. United States. This rather predictable decision again rendered members of labor organizations unprotected from retaliatory discharges.[9]

Unionized workers were given some support by the courts in the Brandeis and Holmes Supreme Court decisions of the 1920s.[10] Explicit legislative protection of those engaging in organizing activity however commenced as late as 1926 with the passage of the Railroad Labor Act (RLA), which, apart from requiring employers to bargain with unions, prohibited employers from discriminating against union members.[11] The RLA applied originally to interstate railroads and related undertakings, but was later amended to include airlines engaged in interstate commerce. The Norris La Guardia Act (NLGA) of 1932 gave some federal sanction to the right of labor unions to organize and strike.[12] Implicitly, it also limited the ability of federal courts to enforce “yellow dog contracts,” under which workers promised not to join a union or promised to discontinue union membership.[13] The National Industrial Recovery Act (NRA) of 1933, the predecessor of the National Labor Relations Act, introduced the idea of codes of “fair competition” which fixed wages and hours in certain industries. Title I of the Act, which was declared unconstitutional in 1935, guarantied the right of employees to collective bargaining without interference or coercion (which included the dismissal of employees). [14]

The National Labor Relations Act (NLRA) of 1935, or Wagner Act, included some previously invalidated labor sections of the NRA, as well as a number of additions. Primarily concerned with restricting employer activities against union organizing and bargaining efforts, the NLRA prohibited employers from, firstly, “dominating or otherwise interfering with the formation of labor unions”; secondly, “interfering or restraining employees engaged in exercising their rights to organize and bargain collectively; and, thirdly, from “refusing to bargain collectively with unions representing a company's employees.” In doing so, sections 7 and 8 of the NLRA effectively tied the legal protection of employees from retaliatory discharges to the right of employees to organize collectively. The Act stated to this effect that:[15]

Sec. 7. Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in concerted activities, for the purpose of collective bargaining or other mutual aid or protection.

Sec. 8. It shall be an unfair practice for an employer—

(1) To interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7.

(2) To dominate or interfere with the formation or administration of any labor organization or contribute financial or other support to it…

(3) By discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization…

(4) To discharge or otherwise discriminate against an employee because he had filed charges or given testimony under this act.

(5) To refuse to bargain collectively with the representatives of his employees…

Under the NLRA regime, employers were required “not to refuse to bargain collectively with the representatives of his employees” with regard to “rates of pay, wages and hours of employment, or other conditions of employment.”[16] While the Act had made it clear that retaliatory dismissals of union members were illegal, it gave no guidance on the question of whether bargaining over “other conditions of employment,” included issues relating to job security.[17] Moreover, despite the appearance of sweeping legislation, coverage under the NLRA's protective umbrella was narrow. Public employees at the federal, state, and local level, agricultural workers, domestic workers, and supervisory employees all were excluded.[18] Nonetheless, for those covered by the Act, statutory dismissal protection was available in connection with established categories of protected activity the courts had created. This included dismissals for strike action, union membership and related activities.

Indeed, at its outset, the NLRB rulings allowed significant numbers of dismissed employees to gain reinstatement. From the appointment of the Board in the Fall of 1935 until March 1939, the Board handled a total of 20,192 cases involving over 4.5 million workers. Of these cases 19,018 or four fifths were closed. Of the total cases closed, about 52% were decided by agreements, while the remainder were dismissed, withdrawn or closed in some other way before coming to the Board. About two thousand cases were strike cases, involving 356 thousand workers, of which 75% were settled and in which 227 thousand workers had to be re-employed. An additional 15 thousand cases were decided in favor of workers alleging non-strike related discriminatory discharges, and resulted in the reinstatement of the respective workers. Between January 1 of 1938 and April 1 of 1939 alone, the Board heard 1,675 cases alleging discriminatory discharges and ordered the reinstatement and/or compensation of 1,022 workers.[19]

In theory, there was a potential for collective bargaining agreements to include job security guarantees of some form. Given existing cultural pre-dispositions, both amongst the judiciary and managers, however, the possibility of partial union control over personnel and investment decisions was remote. Judicial support for the right to manage had a strong pedigree and its influence would not wane quickly. In the 1890s already, some state courts had felt the need to defend the right to manage. In the view of most courts this right was as much a part of the free labor creed as was the right to work. “Free labor” required that both employers and individual workers were fully responsible for their decisions. Permitting workers to organize and successively influence managerial decisions was viewed as a danger to free economic competition. In State v. Glidden, an outraged Connecticut judge stated, that once workers could influence managerial decision, no longer would the heads of industrial and commercial enterprises rise from the “ranks of the toilers, no longer could self-reliant ambitious men push to the fore.”[20] Unable to manage as they saw fit, businessmen would stop risking their capital, time and experience. “At best, the nation's business would be conducted by paternalistic enterprises, at worst anarchy pure and simple ...” would prevail.

At the turn of the century, Taussig had already predicted that union demands for job security would clash with managers' insistence on “the right to manage.” His Principles of Economics stated to this effect that:[21]

Private ownership carries with it the seeds of conflict--the inevitable clash between those who employ and who are employed. Disguise it as we may, smooth over to our utmost, adjust where we can, there the conflict is, ever liable to break out. ... The private employer ... regards his business as his own, its methods of management as subject to his own judgment. It is almost invariably urged by him and his spokesman that the effective working of the business machine depends above all on unfettered freedom in the selection and tenure of employees. So long as this attitude prevails, the workman will feel in turn that he must retain his weapon of defense, the strike, even though it entail injury to a wide circle of persons. ... Even if employers were to consent to restrictions on their power of discharge, contests would remain, strikes would brew. And on the other hand discharge is but one of the matters in which employers absolute rule is to be questioned. Discharge is conspicuous because it is the outstanding weapon.

As long as unions and their members had little formal protection through the law, management had been able to assert its dominance with relative ease, if only by dismissing those who questioned it. Once NLRA legislation protected concerted action, this situation had changed radically, and conflicts between unions and management over dismissal rights were pre-destined.

When President Truman called the second National Labor Management Conference in 1945, labor and management representatives found themselves unable to agree on the boundaries of collective bargaining. Disagreement had arisen particularly with regard to management's right to make workers redundant, close and/or relocate branches. The statement of the management representative at the conference expressed the employers dismay over this matter:[22]

Labor members of the Committee on Management's Rights to manage have been unwilling to any listing of specific management functions. Management members of the Committee conclude … therefore, that the labor members are convinced that the field of collective bargaining will, in all probability, continue to expand into the field of management.

The only possible end of such a philosophy would be the joint management of the enterprise. To this management members naturally cannot agree. Management has functions that must not and cannot be compromised to the public interest. If labor disputes are to be minimized, ... labor must agree that certain specific functions and responsibilities of management are not subject to collective bargaining.

In theory, the evolving conflict about the appropriate limits of collective bargaining, and particularly the rights of labor to interfere with management's redundancy and dismissal decisions, was resolved by reference to new management concepts such as the residual rights doctrine. In practice, a set of employer friendly court decisions and the decline of unions in the US settled the issue, first, in rough terms, during the first decade of NLRA rule, and then, in greater detail, over the following three decades.

The notion of residual rights, which deserves a passing mention in this context, developed from the 1940s onwards to become a prominent feature of the management of industrial relations in the 1960s and 1970s. The residual rights doctrine postulated that management rights were the result of an evolutionary process, whereby initially management possessed total freedom in ordering the affairs of the enterprise. This included freedoms with regard to whom to hire and dismiss and when to do so. Union demands and labor legislation encroached on this freedom. It followed that every time a manager made a contractual concession, and/or every time a labor law restricted management options, the original rights of management were reduced. What remained then were the residual rights, not specifically renounced by management or restricted by law.[23] If, for instance, management renounced the right to dismiss according to productivity or any other performance criterion and agreed to dismiss according to seniority, seniority replaced management's previous decision criteria. Meanwhile other issues, such as how many workers could be dismissed in a specific time period, remained within the exclusive sphere of managerial decision making.[24]

Adopting this view, many arbitration decisions applied a two-stage approach to questions about the appropriate bargaining remit of a union. If union representatives and management disagreed on whether an issue was a legitimate bargaining item, previous contractual agreements as well as legal requirements had to be investigated. If no explicit statement restricting management's rights in the respective matter could be found in these sources, the issue typically had to be considered as falling within management's remit. Since explicit renunciations of the rights to dismiss were typically rare, management usually maintained broad discretion over dismissals, which fell outwith causes covered explicitly by just-cause rules.

Because existing practices and informal agreements had little legal bearing on conflicts over the interpretation of the NLRA, the residual rights doctrine offered almost no guidance to the courts in evaluating the legitimacy of union involvement in termination decisions. Here an alternative, and in many ways even more restrictive approach, evolved over time. While the NLRB of the early years generally looked favorably upon workers whose discharge could in some way be linked to union activity, it also condoned a wide set of permissible grounds for dismissal. In this context, several NLRB decisions early on vindicated traditional assumptions about managerial prerogatives. Discharges were sustained by the NLRB in cases involving gross inefficiency of a worker, incompetence, change in equipment, “ruckus and horseplay”, absenteeism, brawling, cursing of the boss, and the violation of company rules.[25] Most importantly, discharges in the absence of employee misconduct were frequently declared permissible if there was no evidence for anti-union activity. This included discharges for lack of work, which were generally approved by the Board even in absence of union consultation, as long as anti-union bias could not be proven. In its Seagrave decision of 1938, for instance, the Board set a precedent for the preservation of employment-at-will within collective bargaining.[26] Seagrave, an automotive equipment plant had discharged an employee three weeks after he got his job. The foreman testified to the fact that the employee's work was satisfactory. The worker, a CIO member, had previously been arrested for disorderly conduct during a strike and alleged that he was fired because of this previous involvement, and, more specifically, because his foreman had received a blacklist showing his name. The spokesman of the company explained that the polisher was hired because of a temporary emergency arising from the receipt of a special order, and that he was dismissed when the work on that order let up. The Board found no evidence for anti-union activity and declared the dismissal legal.

In the case of Sheba Ann Frocks (1938), similarly, thirty employees, who had been dropped from the payroll of the Sheba garment plant, complained to the Board alleging that their discharge was based on their CIO membership.[27] Company officials testified that the layoffs took place because of a lack of work at the end of the regular production season. The Board accepted this explanation because the company retained over half of its CIO employees and discharged non-union employees as well, although not proportionally. In its conclusion the Board stated that, in the case of a dismissal for legitimate business reasons, such as slack work, no consultation with union members was required.

While NLRB decisions of the late 1930s, such as Seagrave and Sheba, delineated the space between dismissal protection and managerial prerogatives more or less by default, several court decisions attempted to give guidance which was general enough to be applied to other contexts. This tendency towards establishing a formula which ringfenced managerial decision making from union intrusion could already be detected in the Supreme Court's ruling on NLRB v. Jones & Laughlin Steel, the landmark case better known for its acceptance of the NLRA. In Jones, the Supreme Court stressed that although the Act required bargaining, it did not “compel” agreement.[28] For the Supreme Court, in other words, the NLRA was legal because, and only because, the Act did not interfere with “the normal exercise of the right of the employer to select employees or to discharge them.”[29] That, in defining normal rights, the Supreme Court emphasised the right to discharge workers did not bode well for those who expected the Act to significantly reduce arbitrary dismissals. With Jones, the court had indicated that outwith matters directly related to collective bargaining, employment-at-will was still very much in place, with restrictions only affecting those discharges which were explicitly declared illegal in the NLRA. More importantly, it had implied that would be difficult to create an agreement sanctioned and protected by the Act which would eliminate the right of employers to discharge workers for “legitimate” reasons.

In NLRB v. Sands Manufacturing (1938), a federal appeals court was even more explicit in affirming management's freedom to dismiss workers.[30] In Sands, a collective agreement between the company and MESA, a labor union, was broken by the union. The company apparently bargained collectively with MESA. After two months, the company signed an agreement with another union, some of whose members were employed in order to replace MESA members. The NLRB ordered reinstatement of the MESA employees and requested the circuit court to enforce its order. The 6th circuit set aside the order and dismissed the petition to enforce. With respect to the termination of the employer-employee relationship the court stated that:[31]

The statute [meaning the NLRA] does not interfere with the normal right of the employer to select or discharge his employees ... If employees violate their contract they may be discharged for that reason and this does not constitute a discrimination in regard to tenure of employment nor an unfair labor practice, nor does it continue a discharge because the employees are members of a union. ... [T]he statute does not provide that the relationship held in status quo under Title 29, Section 152(3) [meaning the prohibition of dismissals during strikes] shall continue in absence of wrongful conduct on the part of the employer and of rightful conduct on the part of the employees. If such were its meaning, the right of the employer to select, and discharge his employees ... would be cut off.

The Sands decision was in many regards more radical than previous rulings. In Sands, the court had concluded that, provided the employer had engaged in bargaining, NLRA legislation had to be interpreted so as not to otherwise constrain the employers' rights to select and discharge employees. In other words, the court indicated that any action which would effectively restrict the right of employers to discharge, after basic bargaining obligations were met, could be struck down.

While both the Jones & Laughlin Steel and the Sands cases redefined space for at-will discharges relatively broadly, the Supreme Court's 1942 Montgomery Ward decision attempted to give a comprehensive definition of management's rights which gave managers broad control over discharge decisions.[32] In its Montgomery Ward decision, the 9th Circuit excluded from arbitrable grievances:[33]

... changes in business practice, the opening and closing of new units, the choice of personnel (subject, however to the seniority provision), the choice of merchandise to be sold, and other questions of a like nature not having to do directly and primarily with the day-to-day life of the employees and their relations with supervisors.

Although Montgomery Ward supported traditional concepts of management rights with respect to day-to-day arbitration, it left open a number of important questions with regard to dismissals arising as a consequence of longer term strategic decisions. This included questions relating to the dividing line between a rational business decision to relocate a plant, and one involving, for example, the elimination of a unionized plant--an illegal antiunion activity. Moreover, the Court's decision to exclude changes in business practice from arbitrable grievances, merely prohibited unions from insisting on arbitration in these matters; and hence relieved management from the legal duty to discuss these matters in good faith. This did neither mean that union representatives could not bargain about these issues when contracts were negotiated, nor did it imply that once management conceded to union involvement in these matters, this involvement was illegal or unenforceable.

The latter issue of bargaining about alleged management prerogatives was addressed first in 1952 in NLRB v. American National Insurance Group.[34] In American National, the Supreme Court held that management could enforce limits to bargaining on the basis of a management prerogative clause, under which the union was ousted from involvement in certain matters. American National's management prerogative clause included issues of discipline and work schedules; that is, statutory rights with respect to mandatory bargaining. The court, nonetheless, rejected the Board's position that employers were obligated to establish ongoing bargaining during the terms of the collective agreement on issues subject to defined managerial prerogatives.

While in American National the company had attempted to impose broad limitations on bargaining rights, many companies insisted “only” on the type of management prerogatives listed in the Montgomery case, such as the freedom to decide on the closure of units. In the mid-1950s, Haber and Levison reported that over 80% of the contracts signed in the building industries contained one or another form of a managerial rights clause. Many of these clauses explicitly prohibited bargaining over issues of job security.[35] The management literature, meanwhile, welcomed American National because companies were now less likely to face NLRA proceedings if they refused to discuss issues of employment security. This was the case, not only where companies had gained past assurances that union representatives would respect managerial prerogatives, but also where such clauses could be “inferred” from existing bargaining agreements.[36]

Management rights in matters of dismissals and layoffs were “clarified” further in the 1958 Supreme Court decision on Borg-Warner. In NLRB v. Wooster Division of Borg-Warner the Court held that there were three subjects of bargaining: mandatory, nonmandatory, and illegal.[37] The obligation to bargain, as specified in the NLRA, applied only to mandatory subjects. A nonmandatory subject was “permissive,” meaning that it could be raised by either party. However, when a party insisted on a position regarding such an area to the point of impasse, it was acting illegally under the provisions of the Act.[38] Since the law had defined the mandatory subjects of bargaining, Borg-Warner played an important role in the preservation of managerial prerogatives with regard to redundancies and dismissals. Under Borg-Warner, union demands for job security or employment guarantees could be rejected, as they could not be reasonably classified as mandatory bargaining items.[39]

When determining what were mandatory and nonmandatory bargaining subjects, the NLRB and the courts of the 1950s and 1960s typically referred to the relevant NLRA section 9(a) which mandated bargaining for pay, wages, hours of employment, and other conditions of employment. Given these specifications, any issue involving pay and hours was obviously a mandatory bargaining item, requiring both parties to bargain in good faith or face sanctions through NLRB proceedings. More problematic was the clause including, “other conditions of employment.” When issues like redundancies, mass layoffs and mass discharges were at stake, the courts and the Board usually interpreted “other conditions of employment” to mean that union involvement in decisions about which workers were to be laid off or made redundant, was mandatory. To this effect union representatives were to be informed about planned manpower reductions. Union representatives were free to address issues related to discharges, make suggestions with regard to manpower relocation, or suggest alternative ways of cutting costs. If the company refused, unions, however, could not insist on a settlement of the issue. While strike action relating to these matters was not per se illegal, any protracted industrial action on non-mandatory manpower issues was likely to be declared an unfair labor practice by the NLRB or the courts.[40] This approach, needless to say, gave unions with little power to influence a company's manpower decisions even in industries where levels of organization were high. Since it was often difficult to link a redundancy decision to union avoidance or to invoke contractual clauses which limited the extent of subcontracting, one avenue available to unions was to offer concessions when the threat of discharge arose.[41]

Concession Bargaining and Job Security

In its Borg-Warner decision the Supreme Court had ruled that a union violated its duty to bargain in good faith, if it induced a strike in order to force employers to offer concessions in connection with an issue which was not “a term or condition of employment.” This decision, together with a host of successive case law, ultimately came to severely restrict the ability of unions to influence managerial decisions on redundancy, closures and relocation. During the late 1970s and the first half of the 1980s, however, redundancies became a matter of great concern to unions particularly in the manufacturing sector. An estimate by the Bureau of Labor Statistics reported that between 1980 and 1984, approximately 2 million jobs were lost in manufacturing alone, of which slightly less than half were held by union members.[42] Some industries were hit particularly hard. Kochan et al. reported that employment among the major auto producers and parts suppliers dropped from a December 1978 peak of 800,000 to about 490,000 in January 1983. In 1983, employment in the steel industry had dropped to 44 percent of peak 1979 levels.[43] While many of these redundancies could be attributed to a decline in profitability, it has been argued that the redundancy craze of the time also entailed elements of a disinvestment strategy which was aimed at shedding “costly” union workers and moving production to the non-unionized South.[44]

Given the limited options available, the union leadership of key manufacturing unions started granting concessionary modifications to either existing or new contracts from the early 1980s onwards. Such concessions were no novelty to US collective bargaining. What was novel, however, was that these concessions were granted within the “orderly” system of collective bargaining established under the NLRA. During the depression of the late 1920s and early 1930s, wage concessions had been widespread, causing the real weekly earnings of those employed in 1932 to fall to more than 20% below 1928 levels.[45] Since the Depression, however, instances of concession bargaining had been confined to specific industries undergoing structural change, such as the shoemaking industry in the 1950s, or unionized meatpacking in the 1950s and 1960s.[46] Throughout the early 1960s, however, the NLRB as well as the national union leadership, looked unfavorably upon bargaining concessions, which were often attributed to employer domination.

From the mid 1960s onwards, nonetheless, some NLRB decisions lent implicit support to concession bargaining, prompted, in part, by the recognition that a number of companies had focused on ridding themselves of “costly” union labor. In its 1964 Coama Knitting Mills ruling, for instance, the Board concluded that it was “likely that the employer would expectsome form of favorable union consideration in return for employing union labor.” The Board further argued that any actual intrusion into the bargaining capacity “may well be so small as not to outweigh the benefits of a cooperative bargaining relationship.”[47]

If the Board had no objection to concessionary modifications of existing contracts, employers certainly did not. What followed in the early 1980s was a bonanza of concession agreements, in which union representatives, threatened by employment losses, agreed to a host of wage, benefit, and work-rule concessions. Capelli and McKersie report that in the apparel, rubber, leather, metal, machinery, transportation equipment, and trucking sectors, between 30% and 50% of all unionized employees had to assent to some form of concession. In the first half of that year alone, 210 concession bargaining agreements had been reached. Of those 210 agreements, 98% were triggered by threats of layoffs or plant closings, while 90% percent of all plants involved had actually experienced layoffs. [48]

Despite this strong link between concession bargaining and employment termination, evidence for substantial and/or immediate effects of these agreements on job security has remained tenuous. Thus Capelli and McKersie's 1985 study reported that between 1977 and 1981, 22 tire plants signed concession bargaining agreements. Later on, 16 of these plants were closed, 1 was sold, and only 5 were still open in 1985. A Business Week poll of 1983 found that only 2% of the firms surveyed were willing to give unions explicit job guarantees in exchange for concessions.[49] A greater willingness to give assurances was noted with regard to indirect measures, such as keeping plants open for the time being or maintaining production levels for a certain period.[50]

The question of immediate effects aside, McKersie and Capelli noted that, in virtually all cases, concession bargaining expanded the range of issues over which the parties negotiated.[51] Thus, even if jobs were lost despite concessions, concession agreements are likely to have strengthened the unions' overall position vis a vis management.

Unions versus the “Core of Managerial Control”

Another route for countering redundancy decisions was for unions to claim that the respective decision required the bargaining involvement of the union, or to claim that the decision was driven by the desire to destroy or to weaken the bargaining unit. Up until the mid 1960s it was still largely unclear where the dividing line between the employers duty to inform a union of a plant or branch closing, and mandatory union involvement was to be drawn. In its 1964 decision in Fibreboard Paper Products v. NLRB, the Supreme Court gave an-albeit incomplete-clarification on the question as to whether partial plant closings represented a mandatory bargaining item.[52] In Fibreboard, the company had subcontracted maintenance work, which resulted in the elimination of an entire bargaining unit. Deciding in favor of the union, the Supreme Court ordered the reinstatement of the maintenance workers and awarded a substantial backpay to them.

Although representing a defeat for the company involved, the Fibreboard decision posed severe limitations on the unions' ability to restrict layoffs. In deciding the case in favor of the unions, the Supreme Court applied three principles. First, whether the subject matter, a branch closing, was within the literal definition of conditions of employment. Secondly, whether the negotiation of the subcontract would contribute to industrial peace in the company, and thirdly, whether the practice of the industry mandated negotiations about subcontracting. The last element--the nature of subcontracting--was of particular importance in the court's decision. Said Justice Stewart in a special concurring opinion:[53]

This kind of subcontracting falls short of such larger entrepreneurial questions as what shall be produced, how capital shall be invested in fixed assets or what basic scope the enterprise shall be. In my view, the Court's opinion in this case has nothing to do with whether any of those larger issues could under any circumstances be considered the subject of compulsory arbitration.

Apart from highlighting the special nature of Fibreboard's subcontracting decision, the court stressed the limits of mandatory bargaining in decisions which involved job losses. Regarding this point, the court noted that the company's decision “did not alter the company's basic operation,” as “the maintenance work still had to be performed in the plant.” The company, moreover, was not contemplating any capital investment because it was merely replacing its employees with others. Based on these facts, the court then concluded that its decision to order reinstatement would not significantly abridge the company's “freedom to manage the business.”

These stipulations provided significant implicit limits to unions seeking to stop discharges and plant closings. In theory at least, if, and only if, in a redundancy decision, a company's operation remained unchanged and no investment was contemplated, then was a decision to replace union labor subject to mandatory arbitration. In his analysis of the court's decision, Atleson noted that Stewart's desire to emphasize that not “every managerial decision which necessarily terminates an individual's employment is subject to the duty to bargain.” Some decisions that clearly affected “conditions of employment are excluded because of the nature of the managerial action.” For Stewart, many managerial decisions did “affect job security yet cannot be subject to mandatory bargaining; many employer decisions may imperil, or terminate employment, yet are not within the scope of bargaining,” including labor saving investments, the liquidation of assets, or decisions to close business.[54]

The Fibreboard decision established a trajectory for future decisions on plant closings which favored management. Accordingly, most post-Fibreboard appellate court decisions denied mandatory union involvement in managerial decisions leading to mass redundancies. In NLRB v. Royal Plating & Polishing for instance, an employer, faced with economic difficulties and the prospect of ouster by redevelopment authorities, closed one of its two plants, terminated the employees there and sold the plant machinery and equipment.[55] The capital was then used to erect a new plant on a greenfield site. The Board found failure to bargain, but the court of appeals reversed, reasoning that it was one to “recommit and reinvest funds in the business” and “involved a major change in the economic direction of the company.”[56] Similarly, in the 1965 decision of NLRB v. Adams Dairy, the 8th circuit decided with reference to Fibreboard that the dispute focused upon “a change in the capital structure of Adams Dairy which resulted in a partial liquidation and a recoup of capital investment. To require Adams Dairy to bargain about its decision would significantly abridge its freedom to manage its own affairs.”[57]

An even more far-reaching affirmation of managerial prerogatives was given in the 1971 Supreme Court decision on General Motors v. NLRB.[58] In this case, GM had converted a self owned and operated retail outlet into an independently owned outlet, to be operated by Trucks of Texas Incorporated. When Trucks informed the former GM employees that none of them would be retained, the union sought NLRB assistance. While the UAW contended that the transaction was akin to subcontracting, Justice Clark stated that the decision was fundamental to GM's business strategy and hence beyond the reach of mandatory consultation and bargaining requirements.

Conceptually, the argument initiated in General Motors was brought to a close in the 1981 Supreme Court decision of NLRB v. First National Maintenance, which defined the line between non-arbitrable and arbitrable components of plant closings in a manner which informed most later decisions.[59] In First National a dispute had arisen between the employer and a newly certified union because of the employer's decision to terminate a service agreement with a nursing home. The appellate court of the 2nd circuit decided in favor of the union. The Supreme Court rejected the appellate court's position arguing that the court's standard--a weighing of the potential benefits of union involvement with the potential detriments--was not sufficiently precise. Justice Blackmun, writing for a majority of seven, argued strongly against union participation by suggesting that, “the harm likely to be done to an employer's need to operate freely in deciding whether to shut down part of its business purely for economic reasons outweighs the incremental benefit that might be gained through the union's participation in making the decision.”[60] The Court moreover noted that, since it was unlikely that the union could make the company revise its decision, the delay would only harm management's interest in speed, flexibility, and secrecy. Accordingly, Blackmun concluded that the decision to partially close a company was not a subject of mandatory bargaining. Meanwhile, the effects of this decision, including relocation allowance, retraining or severance pay, were ironically deemed to be bargaining issues because they, unlike the loss of employment, affected working conditions.

The Managerial Prerogative Preserved

Although interpretations of the political ideology underpinning the NLRA differ widely, there is some consensus that New Deal elites, on the whole, tended to view the unrestricted right of management to dismiss workers as contrary to the “orderly” extension of collective bargaining.[61] This recognition of a need to protect workers from arbitrary dismissals led, inter alia, to the creation of labor rights, which partially restricted managerial discretion in hiring and firing decisions. How these rights were to be exercised, however, was not clearly stipulated by the Act. Perhaps unsurprisingly, in the late 1930s some legal writers considered that further legislation defining job rights more extensively was to follow. In his 1937 Beacon lecture, the constitutional scholar Corwin, for instance, mapped out his vision of legislatively protected positive labor rights:[62]

In the Coppage case, as was mentioned earlier, the Court had held that an employer's right to “hire and fire” was an element of such liberty, and embraced the right to force an employee to choose between his job and his labor union. In the Wagner Act cases, the Court ruled, on the other hand, that the right of employees which the act protects “to form, join or assist labor organizations,” and “to bargain collectively through representatives of their own choosing” is a fundamental right, “growing out of the fact that employees are helpless in dealing with an employer”, and that “discrimination and coercion prevent the free exercise” of this fundamental right “is a proper subject for condemnation by competent legislative authority.” From a purely negative concept, restrictive legislative power, liberty thus becomes a positive concept calling for legislative implementation and protection.

The expectation of an expansion of job rights remained unfulfilled during the War years, when the imperatives of War production took precedent over the assertion of labor rights. Later on, when in the first two postwar decades, unions challenged termination decisions, US courts tackled the problems of interpreting the new rights created by the NLRA under conditions of “normal” industrial practice very much with a view towards preserving managerial rights. In doing so, the courts effectively reaffirmed many of the traditional managerial prerogatives in matters of plant and branch closings. As a consequence, the idea of joint union-employer decision making, which many union leaders had ascribed to the NLRA in its early years, gradually eroded, being replaced by a new mainstream ideology which restricted collective bargaining to matters of pay and hours.[63] In his ruling on First National Maintenance Corp. v. NLRB, Justice Blackmun was able to summarize a new orthodoxy which had come to replace expectations of extended bargaining rights. In this orthodoxy, there was no room for codetermination or even for a creeping extension of labor rights. Said Blackmun: [64]

Congress stated ... that the scope of bargaining should be left, in the first instance, to the employers and trade unions, and in the second place, to those skilled in the field ... subject to the review by the courts. Nonetheless, Congress had no expectation that the elected union representative would become an equal partner in the running of the business in which the union members are employed. (emphasis added)

Problematic with Blackmun's analysis was that it did not explain how “inequality” could be reconciled with the notion of unions as effective representatives of employee interests. If unions were to remain attractive to potential and actual members, they had to address the very real concerns employees had over job security within the constraints the law had created. With legal doctrine on management rights having evolved since the inception of the NLRA to severely circumscribe the unions' ability to bargain for job security, the options available to unions had become severely restricted. One approach, which neither the courts nor employers had been able to close off, was the pursuit of job security within the context of plant level bargaining.

[1] The term “labor problems of industrial societies”, can be found in John A. Fitch, The Causes of Industrial Unrest (1924). Fitch identified individualized bargaining as a prime cause of industrial unrest, but his analysis also remained critical of collectivist approaches.

[2] Frank W. Taussig, Principles of Economics, at 293-294 (1921).

[3] Albion G. Taylor, Labor Problems and Labor Law, (1938), expands on the author's earlier arguments made in Labor Policies of the National Association of Manufacturers (1927). Taylor used historic examples of collective bargaining to argue that a stabilization of employment could be achieved via arbitration. Taylor's view countered an older tradition of social reformers who opposed collective solutions to labor problems. William Graham Sumner, “Industrial War,” 2 Forum (1886), for instance, argued that the problem of how this “wage-class” was to conduct itself, was not a “class question ... but the most distinctly individual question that can be raised.”

[4] Albion G. Taylor (1940), supra note 3, at 182-183.

[5] Holmes' opinion in Vegelhahn v. Guntner, 167 Mass. 92, 44 N.E. 1077 (1896), is part of a set of well known court decision which have come to be known as the Massachusetts doctrine; see Charles O. Gregory, Labor and the Law, at 52-82 (1946). The Massachusetts doctrine on trade unions and conspiracy dates back to Justice Shaw's decision in Commonwealth v. Hunt, 4 Metc. 111 (1842), where the Boston Journeymen Bootmakers Society stood accused of criminal conspiracy because it had forced an employer to fire a worker who had refused to become a union member. Overruling an earlier decision, Shaw decided in favor of the union arguing that the union's actions were “perfectly justifiable” in light of its goals to further the welfare of its members. Massachusetts cases following Hunt held some strike actions legal, depending on the purpose and the actions taken. If an association had achieved the near impossible task of doing nothing which fell within any established category of tort or crime, the harm it inflicted on the plaintiff in the pursuit of economic gain was in theory not actionable but rather seen to be justified as competition. The more liberal New York state supreme court had ruled several times that unions causing harm to others while in pursuit of gain were behaving lawfully unless they conducted specific tortuous or criminal acts such as assault or trespass. By contrast to Massachusetts decisions, courts following the New York doctrine refused to judge the purposes of union activity when holding a strike action legal or otherwise; see, Curran v. Galen, 152 N.Y. 33 (1897); National Protective Assn. v. Cumming, 170 N.Y. 315 (1902); and Jacobs v. Cohen, 183 N.Y. 207 (1905).

[6] Charles O. Gregory (1946), supra note 5, at 62.

[7] Joel L. Seidman, The Yellow Dog Contract (1932) gives a detailed contemporary analysis of employers' union avoidance strategies, including employer tactics of retaliatory dismissals and the blacklisting of employees.

[8] Cited from Albion G. Taylor (1940), supra note 5, at 188. The Erdman Act was narrower than the Wagner Act in that it covered railroad workers only. Prior to the passage of the Act, some state legislatures, including Masachusetts, Conneticut, New York, Pennsylvania, New Jersey, Ohio, Illinois, Indiana, Wisconsin, Minnesota, Kansas, Missouri, California, Colorado, Idaho and Georgia, had also passed laws in the 1880s or earlier prohibiting employers from discharging employees on the ground that they were members of registered labor organizations; see Philip Taft, Organized Labor in American History, at 162-64 (1964). All of these statutes were eliminated through judicial review.

[9] Adair v. United States, 208 U.S. 161 (1908). Paradoxically American courts were very eager to protect workers whose discharge was caused by unions, say in the context of closed shop policies. Daniel R. Ernst, “Free Labor, the Consumer Interest and The Law of Industrial Disputes, 1885-1990,” 36 The American Journal of Legal History, 19, at 29 (1992) cites an alarmed Connecticut judge, who upon reviewing a closed job discharge, stated, that such actions “were contrary to the genius of our people and to the fundamental principle of our government.” Unless retrained by law, unions would be given the power to “unauthorized and irresponsible tribunals” which could ruin an independent worker, who “branded by the peculiarly offensive epithets adopted, must exist ostracized, socially and industrially, so far as his former associates are concerned. Freedom of will under such circumstances cannot be expected.” Leonard W. Levy, The Law of the Commonwealth and Chief Justice Shaw, at 185 (1957) reports that between 1806 and 1842, the date of Shaw's “Hunt” decision, at least a dozen decisions involving union led discharges resulted in the conviction of union leaders. In Berry v. Donovan, 188 Mass 353 (1905) a union caused the discharge of a worker who was unwilling to join the union. The Massachusetts court concluded that the contract for the closed shop was unlawful and ordered the union to pay substantial monetary damages to the worker.

[10] Justices Brandeis and Holmes had opposed the abuse of temporary injunctions by employers in order to break strikes, see Duplex Printing Press v. Deering, 254 U.S. 443 (1921); and Coronado Coal Company v. United Mine Workers, 268 U.S. 295 (1925).

[11] The Railway Labor Act, 45 U.S.C. §§151-188, entailed elaborate dispute resolution mechanisms administered for the most part by the National Mediation Board (NMB). Provisions for extensive mandatory and voluntary arbitration procedures under the RLA were created in the interest of minimizing work stoppages in the transportation sector, which was believed to be vital to the national interest. Whilst in part modeled on the RLA, the dispute resolution mechanisms of the NLRA were less encompassing.

[12] Norris La Guardia Act, 29 U.S.C.A. 103 (1932).

[13] The Norris La Guardia Act effectively forbade federal court judges from issuing injunctions or granting damages in cases of interference with anti-union contracts. The act sought to restore the protection given to unions by the Clayton Act of 1918, which the federal courts had removed.

[14] The National Industrial Recovery Act, 40 U.S.C. 401 (1933) offered considerable protection of organized and organizing workers but was held unconstitutional by the Supreme Court, as were, in 1935, sections 7 and 8 of the National Labor Relations Act of 1935. The National Recovery Act was part of a bundle of reform bills which the President had sent to Congress in 1933, together with a request for authority to effect drastic economies in government. Most of the proposed reforms were vehemently opposed by the then dominant legal establishment. Congressman James Beck, a distinguished constitutional scholar, for instance, commented: “I think of all the damnable heresies that have ever been suggested ... the doctrine of emergency is the worst ... It is the very doctrine that the German Chancellor is invoking today in the dying hours of the parliamentary body of the German republic, namely, that because of an emergency it should grant to the German Chancellor absolute power to pass any law, even though that law contradicts the constitution of the German republic. Chancellor Hitler is at least frank about it. We pay the constitution lip-service, but the result is the same,” 77 Congressional Record 753, cited from Carl B. Swisher, American Constitutional Development, at 84 (1943).

[15] National Labor Relations Act, 49 Stat. 499 (1935), at section 7 and 8 (1-5). The NLRA eventually was declared constitutional in NLRB v. Jones & Laughlin Steel Corporation, 301 US 1, 57 S.Ct. 615 (1937). De facto enforcement of section 7 & 8 rules started in 1934, with the formation of the first Labor Relations Board, formed under NRA legislation. With the NLRB being primarily concerned with employer misconduct, Congress tried to counterbalance the NLRA with the Taft Hartley Act of 1947, which placed limitations on union conduct. In 1959, with the Landrum Griffin Act, Congress enacted legislation to deal with internal union affairs, with employee rights in union representation being the main issue.

[16] James B. Atleson, Values and Assumptions of American Labor Law, at 136-142 (1983) gives a detailed analysis of the NLRA's ambiguities with regard to scope of mandatory bargaining and managerial prerogatives.

[17] NLRA (1935), supra note 15, at section 8(5) and section 9(a). Mark Barenberg, “The Political Economy of the Wagner Act: Power, Symbol and Workplace Cooperation,” Harvard Law Review, 1381 (1993) provides an implicit explanation for this lack of clear boundaries. According to Barenberg, the Wagner Act was profoundly cooperationist, not adversarial as is conventionally assumed. As part of this cooperatist agenda, Wagner envisaged a political economy of high trust cooperation in which the boundaries of what could be negotiated could be set consensually by the parties involved. Initially, it was assumed that the purpose of the NLRA was meant to ensure union organizing activity free from employer interference, as well as good faith bargaining thereafter between the employer and the selected bargaining committee--and nothing more. This interpretation was affirmed by the Supreme Court; specifically in the “celebrated” case of NLRB v. Fansteel Metallurgical Co., 306 U.S. 240 (1939). Following employer discouragement of union organization, the Fansteel workers started a sit-down strike, seizing the plant and proposing to hold it until the manager dealt fairly with them. When the sit-down ended, the employer took back some of the strikers, but refused their old jobs to some others. All of the strikers who had been denied reemployment filed charges with the NLRB, which ordered reinstatement. The majority of the Supreme Court refused to enforce the order, declaring that the Board had gone too far when it required an employer to take back into his shop men who had, by their “highhanded proceeding without shadow of legal right forfeited any claim to continued employment.” Despite employer expectations, the decisions in Fansteel were not expanded. Where evidence for discrimination against striking employees was available, the courts typically decided in favor of reinstatement, see e.g. NLRB v. Jones & Laughlin Steel Co., 301 US 1 (1937) or NLRB v. Newark Morning Ledger Co., 314 U.S. 693 (1941).

[18] William B. Gould, A Primer on American Labor Law, at 37-38 (1986) suggested that there was no logical basis for the exclusion of these groups. Essentially their exclusion from NLRA protection resulted from their lack of political clout when the NLRA was enacted. An extension of coverage took place in 1974, when employees in non-profit health care institutions were included due to an extension of the definition of employer to non-profit enterprises. The 1994 Supreme Court decision in NLRB v. Health Care & Retirement Corp. of America 330 U.S. 485, again restricted NLRA coverage by declaring that nurses who directed less skilled employees were to be considered supervisors.

[19] These data are from “Report of the NLRB to the Senate Committee of Education and Labor” (April 26, 1939; Hearings. Pt. 3 at 478-84) which was reprinted in Julia E. Johnson, The National Labor Relations Act; Should it Be Amended? 136-151, at 138-139, 153 (1940). It is perhaps worth remembering that prior to the establishment of NLRB jurisdiction, the courts only reluctantly enforced the contractual rights of employees emerging from collective bargaining agreements. In the not untypical case of Hudson v. Cincinnati, N.O. & T.P. Ry., 152 Ky 711 (1913) an employee was fired and tried to use the grievance procedure specified in his collective bargaining agreement in an appeal. When the supervisor refused to give Hudson a hearing, he sued on the contract for wages due. The court rejected his claim, arguing that the employee's name was not explicitly included in the agreement, that there was no evidence that the union had acted as his client, nor was there evidence that the plaintiff had ratified the agreement when he took the job. The court concluded that the collective bargaining agreement was no more than “a memorandum of rates of pay and regulation ... which acquires legal force because people make [individual] contracts in reference to it.” The union's role was merely “to induce employers to establish usage in respect to wages and working conditions ... leaving it to its members each to determine for himself whether or not or for what length of time he will contract in reference to such usages.”

[20] State v. Glidden (189_) 55 Conn. 46, 72-73 as cited in D. Ernst (1992), supra note 9, at 31.

[21] See Frank W. Taussig (1992), supra note 2, at 285.

[22] President's National Labor Management Conference, Proceedings, Vol. 3, doc. 125 II/13, November 29, at 47 (1945) which is discussed in Nelson Lichtenstein, Labor's War at Home: The CIO in World War II, at 221 (1982).

[23] Frank Elkouri et al. How Arbitration Works at 412-550 (1973) gave a detailed analysis of the residual rights doctrine.

[24] Edwin F. Beal, Edward D. Wickersham, and Philip K. Kienast, The Practice of Collective Bargaining, at 273-287 (1976).

[25] Russell L. Greenman, The Worker, the Foreman and the Wagner Act, at 42-60 (1939), includes a chapter entitled “Discharge Sustained” which cites a number of early Board decisions including: on inefficiency, Indianapolis Glove Co.--C-251, February 11, 1938, 5 NLRB. No. 34; on incompetence, Douglas Aircraft Co. Inc.--C-268-269, April 20, 1938, 6 NLRB. No. 108; on equipment change, Uxbridge Worsted Co. Inc.--C-131, April 21, 1938, 6 NLRB. No. 109; on ruckus and horseplay, American Radiator Co.--C-444, June 24, 1938, 7 NLRB No. 132.; and General Industries Co.--C-30, April 30, 1936, 1 NLRB. at 678; on absenteeism, Empire Furniture Co.--C-305 and R0-386, April 26, 1938: 6 NLRB. No. 124; on brawling, Harlan Fuel Co.--C-489, July 5, 1938, 8 NLRB. No. 3; on cursing the boss, T. W. Hepler--C-349, May 19, 1938, 7 NLRB. No. 34; on violation of rules, Cleveland Chair Co.--C-18, June 4, 1936, 1 NLRB. at p. 892.

[26] (Russell L. Greenman (1939), supra note 25), id. at 42-45, discussing The Seagrave Corporation--C-189, January, 21 1938, 4 NLRB. 1093.

[27] (Russell L. Greenman (1939), supra note 25), id. at 52-53, discussing Sheba Ann Frocks, Inc.--C-186, February 1, 1938, 5 NLRB. No. 5.

[28] William B. Gould (1986), supra note 18, at 97, discusses this aspect of NLRB v. Jones & Laughlin Steel, 301 US 1 (1937). Justice Holmes (writing for the majority) stressed the constitutionality of the NLRA by stating that “in the present application the statute goes no further than to safeguard the right of employees of self organization and to select representatives of their own choosing, for collective

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