Managerial prerogative

Last updated June 17, 2024

Managerial prerogatives are also referred to as the functions and rights of management,^[1] is considered as the discretion of the employer or manager on how to manage its business, not bound by collective bargaining.^[2] It is a term that easily leads to widespread misunderstanding. Different circles have different interpretations of this term. When it is used in the trade unions circles, is perceived as a user's support for unilateral management power and can cause protests.When used by the management circle, It is considered as exclusive right and control right without interference.^[1] Managerial prerogatives give employers or managers the power to control the direction in which their businesses are heading. Employees basically do not have this power.^[3]

Managerial prerogative content

Managerial prerogative is that employers and managers can freely supervise according to their own judgments. Its effective exercise includes recruitment, employment, job distribution, job supervision, working methods, working hours, employee rules and regulations, employee supervision, employee transfer, employee sanctions, layoffs, employee dismissals, employee recalls, and other employment matters.^[4] Its limitation lies in the policies, rules and regulations of different countries so that managerial prerogative must be fair and reasonable.^[5]

Manager's right to manage

The rights of managers include abiding by professional ethics, complying with company regulations and industry laws, communicating organizational values, setting goals, implementing strategies, and conducting risk management. For employees, managers have the right to manage recruitment, performance evaluation, task allocation, punishment, dismissal. Managers are also responsible for providing a safe and healthy workplace for employees, actively communicating with employees, ensuring that employees are treated fairly, and providing training and professional development opportunities for employees.^[6]

Management views on prerogative

The two streams of argument from management relate the primacy of market rationality. They are:

Property rights, in that the rights that management has had over their capital assets incurs this level of control and;
Economic efficiency, the argument that it is better to let management manage as they see fit for the benefit of all stakeholders.^[7]

Both views center on the idea that more efficient work will occur if managers are allowed to use their prerogatives.^[8]

Trade union views on prerogative

Many workers and their representatives do acknowledge part of management’s role to manage. They often do not describe it as a right of management, but as part of the job managers are paid to do. Management use this term to defend their role, but also trade unions use this time to place an element of responsibility upon management.^[7] The function of trade unions is to place limits on managerial prerogatives.^[9] Trade unions protect employees by referring to their worker’s rights as well as their human rights. Without trade unions, managers have full power to practice their rights. Recent laws are imposing rules that employers have to use their prerogatives with good faith.^[8]

Practice of managerial prerogatives in different countries

Australia

In Australia, the industrial relations policies of the Howard government during its initial terms increased the exercise of managerial prerogative by reducing the scope and importance of awards, encouraging decentralized enterprise bargaining, and reducing the power of unions and promoting individual contracts.^[10]

United Kingdom

In the UK, there are constraints on managerial prerogative rights mainly pertaining to the right of firing employees. In order to successfully dismiss a worker, the manager must provide sufficient evidence that his decision to fire was fair to all parties. This is judged in a court of law.^[11]

Johnstone v Bloomsbury: Health Authority

Johnstone v Bloomsbury: Health Authority is an example of managerial prerogatives used in an abusive manner. Dr. Johnstone had been asked to work for a set time per week and also be ready when asked to work for additional hours. This was abused when his manager asked him to work inhumane hours, affecting Johnstone’s health and well-being. His manager was able to impose these hours on Dr. Johnstone but there are human rights in the UK that protect Johnstone and his health.^[12]

Finland

In Finland, there is a clear reciprocation of trust between employers and employees.^[13] The employees are expected to show a certain level of subordination to the employer as well as respect secondary duties such as following instructions given to them by employers. Loyalty is also seen as an essential part of most businesses in Finland, and it is seen as a secondary duty as well.^[14]

Malaysia

In Malaysia, employers have the right to terminate employment under three circumstances. First, the employer has or intends to reduce or discontinue the business of the company in which the employee is employed; second, the employer has or intends to eliminate the business in the area in which the employee is employed; third, The employer has or intends to reduce or discontinue the business requirements in which the employee is engaged. In addition to the above three cases, the employer itself has the inherent right to restructure the enterprise, and no arbitration court will intervene unless the reorganization is proved to be conducted in bad faith or without reason.^[15]

Unfair dismissal and managerial prerogative

Unfair dismissal occurs when employers or managers use their prerogatives to fire employees for reasons specified by them, and these reasons are improper or insufficient to justify the dismissal. Managerial prerogatives give employers and managers the right to dismiss employees. The Unfair Dismissal Law gives employees the right to protect themselves and to claim compensation if they are unfairly dismissed. The specific prerogatives and laws vary according to the national conditions and relevant regulations of each country.^[16]

Related Research Articles

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The National Labor Relations Act of 1935, also known as the Wagner Act, is a foundational statute of United States labor law that guarantees the right of private sector employees to organize into trade unions, engage in collective bargaining, and take collective action such as strikes. Central to the act was a ban on company unions. The act was written by Senator Robert F. Wagner, passed by the 74th United States Congress, and signed into law by President Franklin D. Roosevelt.

Industrial relations or employment relations is the multidisciplinary academic field that studies the employment relationship; that is, the complex interrelations between employers and employees, labor/trade unions, employer organizations, and the state.

Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects of workers' compensation and rights for workers. The interests of the employees are commonly presented by representatives of a trade union to which the employees belong. A collective agreement reached by these negotiations functions as a labour contract between an employer and one or more unions, and typically establishes terms regarding wage scales, working hours, training, health and safety, overtime, grievance mechanisms, and rights to participate in workplace or company affairs. Such agreements can also include 'productivity bargaining' in which workers agree to changes to working practices in return for higher pay or greater job security.

United Kingdom labour law regulates the relations between workers, employers and trade unions. People at work in the UK have a minimum set of employment rights, from Acts of Parliament, Regulations, common law and equity. This includes the right to a minimum wage of £11.44 for over-23-year-olds from April 2023 under the National Minimum Wage Act 1998. The Working Time Regulations 1998 give the right to 28 days paid holidays, breaks from work, and attempt to limit long working hours. The Employment Rights Act 1996 gives the right to leave for child care, and the right to request flexible working patterns. The Pensions Act 2008 gives the right to be automatically enrolled in a basic occupational pension, whose funds must be protected according to the Pensions Act 1995. Workers must be able to vote for trustees of their occupational pensions under the Pensions Act 2004. In some enterprises, such as universities or NHS foundation trusts, staff can vote for the directors of the organisation. In enterprises with over 50 staff, workers must be negotiated with, with a view to agreement on any contract or workplace organisation changes, major economic developments or difficulties. The UK Corporate Governance Code recommends worker involvement in voting for a listed company's board of directors but does not yet follow international standards in protecting the right to vote in law. Collective bargaining, between democratically organised trade unions and the enterprise's management, has been seen as a "single channel" for individual workers to counteract the employer's abuse of power when it dismisses staff or fix the terms of work. Collective agreements are ultimately backed up by a trade union's right to strike: a fundamental requirement of democratic society in international law. Under the Trade Union and Labour Relations (Consolidation) Act 1992 strike action is protected when it is "in contemplation or furtherance of a trade dispute".

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References

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