Labour relations laws and conclusion (4)

Cahier spécial : Labour relations laws  and conclusion (4)

Characteristic 4 Labour relations laws

The final characteristic of labour markets is the extent to which labour relations laws maintain a balance in the relations among employees, unions, and employers and, more broadly, enhance the flexibility of the labour market.

Balance and flexibility

Balance and flexibility in a labour market is crucial in providing an environment that encourages productive economic activity. Labour relations laws that are biased in favour of one group or another, or are overly prescriptive, inhibit the proper functioning of a labour market and thus reduce its performance.

Empirical research indicates that rigid labour relations laws increase unemployment and reduce the participation rates of the young and elderly.


Labour relations laws have also been shown to affect investment.

Using data from 20 OECD countries from 1985 to 1995 and all US states from 1990 to 1999, found that more prescriptive labour relations laws were associated with lower levels of foreign direct investment and slower economic growth for the US states.


Characteristic 4 evaluates labour relations laws in the private sector for the 10 Canadian provinces and 50 US states based on whether or not they encourage flexibility and choice by balancing the needs of employers and employees.

Labour relations laws are grouped into three areas:

1.      organizing a union (certification and decertification),

2.      union security, and

3.      regulation of unionized firms. This section also presents the Index of Labour Relations

Laws, a composite measure of labour relations laws for each Canadian province and US state.

Jurisdictions with labour relations laws that lead to a more flexible labour market receive higher scores, while jurisdictions with more restrictive approaches receive lower scores.


Jurisdictional authority over the regulation of labour relations among employers, unions, and employees in Canada differs greatly from that in the United States.

In Canada, regulation and enforcement of labour relations are largely decentralized; each province maintains its own set of labour relations laws.

In the United States, on the other hand, private-sector labour relations laws are almost entirely centralized, regulated through federal law and enforced under federal authority by the National Labor Relations Board (NLRB).

Since US labour relations laws are largely federal, US states differ in their regulation of labour relations only in having or not having worker choice laws, otherwise known as Right-to-Work laws.


The 22 Right-to-Work states have the highest score (9.2 out of 10) among the 10 Canadian provinces and 50 US states, indicating that they create a labour relations environment with the most flexibility among all the jurisdictions.

The remaining 28 US states tied for the 23rd position with an overall score of 7.5. The Canadian provinces occupied the bottom 10 positions (51st to 60th). The only province with a passing score (higher than five) was Alberta, which had an overall score of 5.3.

Quebec (with a score of 1.3) has the most rigid set of labour relations laws of any jurisdiction in Canada and the United States.

Index of Labour Relations Law

1.      Certification and decertification

Certification and decertification refer to the processes through which a union acquires and loses its power to be the exclusive bargaining agent for a group of employees.

Index of Labour Relations Law 1

2.      Union security

Union security refers to regulations governing union membership and the payment of union dues by workers covered by a union agreement: whether or not provisions regarding mandatory union membership and dues payment can be included in a collective agreement.

These provisions range from restrictive,

1)      where every worker must be a union member and pay full dues as a condition of employment,

2)      to flexible, where employees have the choice to become a union member or not and do not have to pay union dues.

The results for this measure of labour relations laws indicate that there are three distinct groups of jurisdictions.

1)      The first group includes American Right-to-Work states, in which workers are permitted to choose whether or not to join a union and pay union dues.

2)      The second group consists of American states without Right-to-Work legislation. Workers in these states are permitted to choose whether or not to join a union but must remit at least a portion of the union dues to cover costs associated with negotiating and maintaining the collective agreement.

3)      The final group, the one that scores poorly on this measure, are the Canadian provinces. All 10 Canadian provinces, in one way or another, permit clauses in collective agreements that make union membership mandatory and require payment of dues in full.

3.      Regulation of unionized firms

The regulation of unionized firms examines components of labour relations laws that come into effect once a firm is unionized; these include successor rights, provisions for technological changes, arbitration of disputes, replacement workers, and third-party picketing.


Labour Relations Laws Certification Decertification


Union security

Labour Relations Laws—Union security


Regulation of Unionized Firm

Labour Relations Laws—Regulation of Unionized Firm

 Successor rights

Provisions governing successor rights determine whether and how collective bargaining agreements survive the transfer, by sale, consolidation, or other means, of a business from one employer (owner) to another.

Successor rights are important to investment because they may deter potential investors from purchasing a business if an existing collective agreement (which they had no part in negotiating) prevents them from reorganizing the business to improve its performance.

Stringent successor laws will impede the reorganization of a business or portion of a business that is struggling and the reallocation of its capital. Consequently, workers will not be provided with capital to improve their productivity and business performance will continue to suffer.

Technological change provisions

Provisions in labour relations laws that govern technological change require that employers give notice of technological investment and change to the union (and in some Canadian provinces to the minister of labour). Such provisions are barriers to technological change and could have serious adverse effects on productivity.

Arbitration of disputes

An important component of labour market flexibility is how disputes about a collective agreement, its meaning, application, and alleged violations are resolved when both parties cannot negotiate a solution or no longer wish to do so.

Laws that force parties into immediate binding arbitration, without allowing voluntary efforts such as mediation or conciliation, may not only impose costs on both parties (for the arbitrator’s fee and time from work) but may also create hostility between management and Replacement workers

In the event of a legal strike or lockout, an employer may wish to hire replacement workers. Employers can then continue partial business operations, maintain market share, and secure investor confidence while addressing reasons for the strike.

Third-party picketing

Third-party (or second-site) picketing refers to the ability of unions to picket and, therefore, disrupt the operations of enterprises not covered by the collective agreement.


Canadian provinces generally lag behind their US counterparts in the level of flexibility afforded to workers through labour relations laws. Such flexibility has been proven to provide great benefits to citizens not just in the United States but also around the world.

Canadian provinces would be well advised to pursue balanced and less prescriptive labour laws in order to promote greater labour market flexibility.

Tables des matières:

1)      Measuring Labour Markets in Canada and the United States 2011 Edition

2)      Public-sector employment (1)

3)      Minimum wages (2)

4)      Unionization (3)

5)      Labour relations laws and conclusion (4)

Source : Measuring Labour Markets in Canada and the United States 2011 Edition, by Amela Karabegović, Alex Gainer, and Niels Veldhui, Fraser Institute, September 2011