The Social Responsibility of the Firm: Menace or Opportunity for Labour Law?

The permanent contract of employment is now under challenge in the context of the network economy. Hitherto, in an era of industrial manufacturing when companies were organized like hierarchies, the permanent contract of employment, was the prevalent method of regulating labour relations. In an effort to concentrating on their core business, companies now prefer other forms of mobilizing work, replacing the contract of employment with contracts in civil or commercial law, as in the cases of subcontracting and franchising. Even if the work performed may in fact remain exactly the same, the legal norms governing these relationships are completely different. While labour law has been created to compensate the economic imbalance between the worker and the employer by a set of norms either defined by public authorities or negotiated by the social partners, civil and commercial law consider that the two parties to a contract are on an equal footing. The two parties are thus able to determine the content of the contract, without any third party having to protect one of them through a precise legal framework, such as that of a labour code. Of course, the workers of subcontractors or franchisees are still formally protected by the national labour law, but these norms become completely ineffective in this new context, because the only person compelled to observe these norms is the subcontractor and not the multinational company that defines the economic strategy for the whole supply chain. In other words, by shifting its organizational structure from a hierarchy to a network, a company manages to maintain an economic control over the global supply chain without being, from a legal point of view, liable for its social and environmental impact.

In this context, any tool that recognizes the company’s social responsibility for the global supply chain, such as codes of conduct, social labels or social reporting, are therefore interesting instruments that can usefully complement labour law, which seems to be inadequate to regulate even fundamental social rights in global supply chains. The aim of this article is to analyze more in depth the legal nature of these different tools and their impact on labour law. Will corporate social responsibility (CSR) tools reinforce the crisis of labour law in the era of globalization or will they be part of a solution to this crisis? Do we have to consider codes of conduct, social labels and social reporting as competitors to labour law or as an opportunity for rethinking the way that labour law norms should be produced and applied?

First of all, this article argues that CSR tools are not really voluntary. Everybody agrees that these instruments are often adopted to respond to or to prevent pressure from different stakeholder groups, including the increasing influence of socially responsible investment. At least from an economic point of view, CSR tools can therefore not seriously be considered as a form of voluntary regulation. But even from a legal point of view, CSR tools are not purely voluntary. For example, an analysis of law in the Member States of the European Union shows that there is an increasingly precise legal framework, which gives companies incentives to behave in a socially responsible fashion, for example by adopting codes of conduct, and to report on this in a transparent manner. These incentives are addressed either to investment funds, which subsequently exert financial pressure on companies, or directly to companies. What is even more important is that if a company decides to adopt a CSR strategy, its commitment has a legal character whenever it is sufficiently precise and public. As recognized in May 2002 by the Supreme Court of California, the non-respect by a supplier of a company’s commitment in the field of social responsibility may be considered as a case of misleading advertisement.

From this point of view, CSR tools cannot be considered as a danger for labour law, they are rather an opportunity for renewal. Nevertheless, a closer look shows that corporate social responsibility in general may modify the balance between different branches of law. Indeed, these instruments are the sign of an increasing incursion of commercial and consumer law in the field of labour relations. Firstly, none of the legislation giving incentives to corporate social responsibility is part of labour law; it is commercial law. Secondly, the concepts of boycotts and misleading advertisement, which play an important role in the implementation of CSR, are those of consumer law.

This article argues that this shift from labour law to consumer law is not neutral and has more than a purely theoretical impact. It means that the existing law is more likely to protect consumers (in Europe or North-America) than workers (in developing countries). It also may lead to conflicts of interest between the company’s different stakeholders, and especially between workers and consumers. Finally, it can result in the increasingly selective character of labour regulation, since consumer pressure only concerns some companies and some social rights, while neglecting others.