The Idea and Practice of Contract in U.S. Employment Relations: Analysis and Policy

Source: David Lewin, Perspectives on Work, Vol. 17 nos. 1-2, Summer 2013/ Winter 2014
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For several decades, the idea of contract in U.S. employment relations was predominantly reflected in practice by collective bargaining agreements negotiated between representatives of unionized employees and employers. At their peak, these agreements directly covered only about one third of the U.S. workforce, but they often spilled over to affect the terms and conditions of employment of non-union employees, including supervisors and managers. … Beyond collective bargaining, implicit employment contracting—largely unwritten and unpublicized—was also practiced on a wide scale. The terms of those implicit contracts were quite clear: an individual, typically a man, joined a company, worked at that company for his entire career, and retired from that company whereupon he received defined-benefit pension payments. Early on during his career that individual was paid less than the value of his performance (i.e., productivity), whereas later on he was paid more than the value of his performance. This helps explain why long-term employment contracting prevailed for a time in the U.S.: there was an obligation of one party to the other party during an employee’s career. Such implicit contracting was accompanied by explicit layoff and recall provisions of collective bargaining agreements. Hence, even during recessions, the dominant presumption was one of continuous employment with the same employer. …