By: César F. Rosado Marzán, PhD JD*
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In the early 20th Century U.S. employers effectively escaped from government regulation of employment relations by arguing to the courts, and convincing them, that such actions violated the right of liberty and its alleged derivative, the freedom to contract. Lochner v. New York crystallized this right and was the law of the land for the first decades of the 20th century. This doctrine, however, changed about three decades after Lochner in cases such as West Coast Hotel Co. v. Parrish, where, amidst the worst economic depression experienced in the U.S., the Court upheld the constitutionality of minimum wage legislation. Government could now restrict freedom to contract in employment relations as such regulations were seen to be in the public interest.
But the pressure for profits in an evermore competitive, market economy compels employers to fashion new strategies and repackage old ones to lower their labor costs. Chilean employers, one of the key political forces behind the country’s internationally discussed free market model, have been particularly creative and assertive in trying to escape government regulation of employment relations through a number of creative legal strategies.
One of these strategies has been to persuade the country’s cortes, the appellate-level courts, including the Supreme Court, that the Chilean constitution’s protection of property rights and the right to not be judged by so-called “special commissions,” — a nineteenth century term given to special courts created by the executive (a dictator’s “kangaroo court,” in essence) — means that any adjudication of a contractual controversy cannot be performed through administrative processes but, rather, must be done through the courts. In plain language, this means that if an employee and an employer have differences regarding any term of their contractual relationship, the matter cannot be resolved by the country’s Labor Directorate, an agency that counts with hundreds of labor inspectors that can quickly investigate cases and fine employers found to be in violation of the law, but has to be decided by a court. Hence, different from the American Lochner doctrine that altogether barred government regulation of employment relations, the Chileans have discovered a less radical but similarly effective strategy — the judicialization of labor law.
Judicialization can be an effective deterrent of labor regulation because, generally speaking, courts are much slower in determining violations of law than administrative agencies. For workers living for the next paycheck, slow justice is no justice, so workers seldom seek the redress of a court.
Labor law, however, is the result of necessity, not caprice. It addresses the need to equalize the bargaining relationship between employers and employees. Hence, in employment relations, deregulation cycles are generally followed by waves of regulation because the core social problem — bargaining disparities between workers and employers — remains.
As a result of the significant judicalization of labor law, labor advocates and reformers in Chile pushed the government to adapt its institutions to meet new social and moral exigencies. These reforms have included the hiring of specialized labor judges, hiring-free, public lawyers to represent workers, as well as creating faster procedures to resolve labor disputes. A “Labor Justice Reform” completed in 2009 led to the hiring of eighty-nine new labor judges to sit across the Chilean territory and fill the gap left by the absence of administrative authority to decide important labor law matters and the extremely slow and archaic proceedings of the former labor courts.
Although civil law Chile does not provide for class action proceedings or the large compensatory awards offered by American juries, an interesting role is being played by the inquisitorial orientation of judges there — an orientation common to civil law countries. Some assertive Chilean labor judges are using their capacity to take the leading role of discovering evidence to make visual inspections of workplaces. In this sense, the labor judge is becoming a sort of “super” labor inspector with the capacity to inspect and decide legal controversies, concurrently.
I recently had the opportunity to see one of these visual inspections by a prominent labor judge in Santiago who had to decide whether or not an employer, a national pharmacy chain, was correctly paying commissions to its sales employees. 
One point of controversy was whether or not the employer provided to the employee a detailed record of every sale made by the employee. Given the incapacity of the parties to present clear evidence regarding the sales records given by the employer to the employees, the judge called for a visual inspection of the employer. Simply, the judge adjourned the hearing and walked to the closest retail outlet of the pharmacy, along with his clerk, the parties’ lawyers and some members of the public present in the hearing, including me. At the pharmacy outlet the judge asked one of the sales employees, right there and then, to produce a record of her sales. He also made some questions to the employee pertinent to understand how the employer recorded her sales and calculated commissions.
In an almost textbook example of the sociological insight of “unintended consequences,” we can see that in an attempt to keep labor inspectors out key employment relations, judicialization of labor law has created, paradoxically, a “super” labor inspector, the labor judge. Clearly, the country’s 89 labor judges, who hear about 4-5 cases each day in Chile, can in no way perform even a small fraction of a fraction of the amount of inspections performed by the country’s hundreds of labor inspectors. However, it is still undeniable that the labor judge is a fledgling, significant authority in the country. Employers must now be aware that their property is subject to inspection by a labor judge who, after entering the workplace, may decide a matter that may end up costing thousands of dollars to the employer, if not more, as well as negative publicity.
The logic of unintended consequences in the cycles of deregulation and regulation of the economy is similarly applicable in the U.S. context. Employers’ aggressive anti-union initiatives have effectively constricted the role of collective bargaining and the provision of labor-management health care and pension funds and “for cause” termination of employees in the United States. Inequality has shot up, significant swathes of working people have been left without health care and the effective capacity of workers to retire is now a real concern.
Hence came the need for health care reform in the U.S. The withering away of self-regulatory institutions to provide for these social rights, labor unions, compelled reformers to choose the more traditional way, “command and control” policies, to mandate the provision of health care in the U.S. In an attempt to escape regulation, American capital now finds itself in a situation where Uncle Sam, not organized employees, is serving the tutelary role. Which health care provision orientation — “self-regulation” or “command and control” — will be better or worse for capital and workers is yet to be seen.
Reformers have used crises and setbacks to spur reform, producing “super” labor inspectors in Chile and mandated health care protections for individuals in the U.S. While it may be true that “class struggle” undergirds these processes — for example, subcontracted miners in Chile are leading militant strikes at the edges of legality, compelling state leaders to address the conflicts one way or another, including through repression and legal reform — it is certainly true that the role of reformers has been key in providing the final say on the “what is to be done” question.
There is more to do in order to address the social problems caused by our market societies, but recent victories on the side of workers, small and large, show the important role that reformers’ determination and creativity can have in solving them. So onwards we go.
* Professor Rosado-Marzán is currently performing an extensive, ethnographic field study of the Chilean Labor Directorate and the country’s new labor courts.
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