Labour law, institutionalist regulation and the employing organisation.

Frazer, Andrew

INTRODUCTION

Research on law, not least in the Anglo-American common law tradition, has traditionally been concerned with the identification and analysis of legal rules and the elaboration of their underlying principles. This so-called legal formalist or 'black letter' approach is directed inward, towards the operation of the legal system as defined by the formal institutions of courts and legislatures which make or declare the law. It is concerned with the rationale and coherence of the body of legal rules rather than their effects on social actors (McCrudden 2006: 633-4). Limited attention is given to the social environment in which the law operates, and the social impact of law is generally assumed to occur through the responsive actions of parties considered as informed, rational and receptive to law as inherently legitimate.

This doctrinal approach has been challenged and supplemented over the last four decades by socio-legal perspectives which view law as both a product of social forces and a constituent element of the social order. The law and society movement originated in the United States in the 1960s and was heavily influenced by anthropology and sociology. Originally adopting a political and critical agenda to prevailing academic approaches to law and to the dominant legal order, it has become institutionalised as an academic sub-discipline, though located more in the social sciences than in law schools (Seron & Silbey 2004; Galanter 2006). While largely grounded in sociological and political theory, socio-legal approaches are also informed by empirical social science research (Abel 2010). These 'external' orientations have tended to focus attention away from the state and towards more informal aspects of the social operation of law. In recent years there has also been an increase in empirical legal studies, although such works are not necessarily socio-legal in orientation (Hillyard 2007; Suchman & Mertz 2010).

More recently, research in many areas of law has responded to changes in the ways that the state now engages in the regulation of economic and social actors. Changes to manifestations of governance in modern post-industrial societies have given rise to a new trans-disciplinary academic field of regulation studies, which has also influenced the practices of regulatory agencies. Regulation 'has become a central organising principle for worlds of practice and research alike' (Baldwin, Cave & Lodge 2010: 9).

LAW AND REGULATION

The new regulation

Since the 1980s, structural changes associated with privatisation, liberalisation (in Australia, 'economic rationalism': Pusey 1991), and market-oriented deregulation, have resulted in new regulatory strategies being adopted by the state. The change is marked by a shift away from the state directly operating and funding of services, as was typical under the post-World War II welfare state, and towards a role for the state involving the formulation and monitoring of rules and the co-ordination of service provision (Majone 1997). Accompanied by such changes in the ways that the state operates, the development of the 'regulatory state' often involves an increase in the scope of government regulation. Governments have increasingly adopted quasiautonomous agencies which engage closely with key industry bodies and other private actors whereby such actors participate in the formulation, administration and enforcement of policy and services through processes of 'co-regulation'.

Although regulation has traditionally been exclusively associated with state activity, this is no longer the case. Instead, regulation is 'decentred' from a focus on the state and instead is conceived as a complex 'web' of interactions both formal and informal. In the new regulation theory it is defined, at its broadest, as 'the sustained and focused attempt to alter the behaviour of others according to defined standards or purposes with the intention of producing a broadly identified outcome or outcomes' (Black 2001: 142). Hence much of the new regulation scholarship gives prominence to the influence of not only non-state organisations, but to informal social institutions which were previously considered aspects of 'social control'. These regulatory influences include conventions and other established patterns of behaviour, informal normative influences based on values and social roles or expectations, as well as cognitively internalised patterns of thought based on what is considered to be practicable, normal or natural (Parker & Braithwaite 2003: 131).

The signal feature of the new regulatory state is its use of techniques of meta-regulation, the regulation of regulation. Rather than attempt to dictate outcomes by direct regulation ('command-and-control'), the regulatory state often exerts its influence through the distribution of economic benefits, by licensing, and by co-opting industry bodies and other non-state actors in systems of co-regulation. State agencies are less involved in directly ensuring outcomes and more concerned with distanced steering and synchronisation, overseeing the process of regulation by formulating procedural standards rather than substantive rules (Morgan 2003: 490; Gilad 2010). Rules and standards have tended to become general rather than specific, and concerned with process rather than outcomes, allowing for greater flexibility and management by regulatory subjects (Coglianese & Meldelson 2010: 149). The aim of this more distanced and process-oriented regulation is to influence how social actors will behave, rather than to dictate substantive outcomes. Meta-regulation gives the subjects of regulation latitude as to how the regulatory goals are interpreted and implemented. Non-state actors, chiefly private organisations, participate to varying degrees across the regulatory process, with state regulators often left to general standard-setting and monitoring at a distance (Parker & Braithwaite 2003: 129).

Meta-regulation, then, implies regulatory pluralism. Regulation broadens out to become the whole network of formed and layered relations between actors, both public and private, each exerting a regulatory influence on the others within a particular regulatory space. This approach takes us well beyond the notion of regulation as a single type of power wielded by the state: it recognises that no single actor can act alone in achieving its goals. Regulation is conceived as the sum total of numerous intersecting and conflicting influences, each modifying or attenuating the others (Parker & Braithwaite 2003: 137). More recently, theoretical perspectives have asserted the rise of the 'post-regulatory' or governance state, which recognises that the state is no longer able to manage social and economic forces by direct control or even distanced meta-regulation, and that regulation or governance as a social phenomenon is increasingly located among private actors and exercised by informal technological and cultural means (C. Scott 2004; Jordana & Levi-Faur 2004).

Consequences of a regulatory approach to law

The new regulation leads to a pluralist, state-decentred and socially constitutive approach to law. The state is one of many actors which seek to regulate, law is only one kind of regulation, and law is not the exclusive domain of the state. Externally-oriented trans-disciplinary studies of law have been a strong contributor to this development, particularly through the law and society movement. As Baldwin, Scott and Hood (1998: 4) put it, 'the distinctive contribution of socio-legal studies has been to eschew any distinction between activities based on formal differences between state and non-state activity or between rule-based oversight and other forms of social control'. Socio-legal studies has brought a recognition that the way the site of regulation is structured influences the behaviour of the actors and the outcome of their interaction. A regulatory perspective allows for an examination of the ways that legal regulation relates to other governance mechanisms. It allows for study of how the regulatory goals of law are affected by other social forms of ordering such as custom and organisational patterns (Parker et al 2004: 5). And because the approach to regulation is not confined to the state and legal system, a pluralist approach allows for studies of how law is itself modified and regulated by other forms of social ordering, such as private actors, as well as embedded social relations and customs--social institutions (Parker et al 2004: 7). Regulatory studies in law are increasingly moving from the study of regulatory agencies towards the examination of encounters between regulators and business organisations, emphasising the constitution of law and regulation within the organisation (Ford & Condon 2011: 449).

The changes to the modalities of regulation associated with the rise of the regulatory state imply a different role for law. Rather than acting as the source of rules and the site of formalised dispute resolution, the legal system is increasingly invoked as the foundation of legitimacy for regulatory agencies (particularly if they involve private actors) and the source of processes and concepts (eg constitutional validity, procedural fairness). Law thus plays a constitutive function, by providing the means of creation and recognition of agencies and their processes. According to Colin Scott (2004), the separation of policy and operational tasks in government (often through privatisation and contracting out) is linked to greater emphasis on formal rules and independent monitoring by external agencies. Actors can no longer rely on trust, professional standards or personal networks; instead there is an expansion of 'more formal and juridical enforcement styles'. Within this approach of Meta-regulation, the role of law is to provide the 'underpinning for indirect control over internal normative systems' (C. Scott 2004: 168). Regulatory agencies and the strategies they adopt often fall outside traditional notions of legality since their methods transcend the distinctions between judicial, legislative and executive powers (Morgan 2001; Feaver & Sheehy 2014). The new regulation studies recognises that state power may continue to be expressed by forms and language of legality, but is increasingly manifested in ways that depart from traditional notions of law as concerned with the creation and distribution of rights and obligations.

REGULATORY APPROACHES TO LABOUR LAW

The regulatory paradigm in the social sciences had a particular impact in areas of law in which the state explicitly adopted a new, responsive, regulatory approach: in corporations and trade practices, broadcasting and media, environmental and planning law. Until recently labour law has not been one of these. As with most legal analysis, and perhaps even more than some areas, the focus in labour law has been on formal legal institutions and the rules they produce. While most labour law academics work within an implicit law-incontext perspective and are aware of research in other disciplines examining the 'world of work', labour law has not seen the debates over the limits of law and legal pluralism which have commonly occurred in other legal fields. Nor has there been a sustained developed approach to labour law from a sociolegal perspective.

Labour law and employment relations

The state's adoption of a relatively distanced position in employment relations, and the existence of the separate academic field of industrial relations, have arguably retarded the development of a regulatory perspective in labour law. Apart from discrete areas like occupational health and safety (OHS), labour lawyers have not tended to engage in analysis of regulation and its impact from a socio-legal perspective (Deakin 2010: 309). The study of those practices of tribunals and parties which are not purely mandated by legal rules has traditionally been regarded as falling outside the province of legal scholarship and has instead been left to the discipline of industrial relations (Gahan & Mitchell 1995:71; Hammond & Ronfeldt 1998). This has been so even as industrial relations studies have moved away from the study of the formal institutions and their outputs, reflecting the disciplinary transformation from industrial relations to employment relations as including human resource management with its focus on 'workplace institutions and organisational behaviours' (Gollan & Patmore 2013: 494).

For its part, industrial relations has traditionally maintained a pluralist view of regulation, but it has tended to adopt a relatively narrow view of law, drawing a strong distinction between legal rules and the norms generated by the parties. Indeed, a significant component of the post-war British industrial relations paradigm was to de-emphasise the significance of law in labour relations in order to promote the importance of joint regulation by the parties themselves (Ackers & Wilkinson 2005: 447). It has been claimed that industrial relations as a discipline still tends to treat law as part of the framework within which industrial relations takes place, rather than as a component of the construction of industrial relations practices (Dickens & Hall 2005: 33). While law has long been considered a key part of the industrial relations system, its operation has tended to be regarded as essentially external to the parties (although its formation may be influenced by the parties' political influence). In Australia, industrial relations scholars have tended to integrate the state, especially in the form of the industrial tribunals, as an actor in a tripartite model of negotiation and rule-making, but have still seen law as either an instrument of state control, or more broadly as part of the environment within which industrial relations operate. In recent years, though, industrial relations scholars have emphasised the multi-faceted complexity of regulation, drawing on the new regulation literature (Bray & Waring 2005; Bray, Waring & Cooper 2011: ch 9; Bray, Waring, Cooper & Macneil 2014: 245).

Broadening the perspective of labour law

Labour law is a contextual discipline. Rather than being defined by a discrete body of doctrine (like contract, tort or trusts), labour law is concerned with laws from a variety of sources which converge on a particular context. In the case of labour law, the context, as traditionally understood, was paid work within an employer-employee relationship as represented by the contract of employment (Collins 2003: 5). Contextual fields of legal study carry with them their own 'points of reference, conceptual structures and value systems' and these are connected with the supposed purpose of the law in the particular field (Deakin 2007: 1168). As a contextual discipline, labour law has been attentive to related research in the study of work relationships, particularly in the field of industrial and employment relations (Deakin & Njoya 2008: 284). However, the view of labour law as centrally concerned with the dyadic relationship of employer and employee, has promoted a narrow and formalist approach to law, one which has tended to exclude consideration of other forms of labour engagement or the wider social context within which employment relations are situated, including the organisational environment of corporate employment which is still the dominant form of labour engagement in developed societies. The limitations of the dyadic approach are highlighted by the idea of regulation which is pluralistic and institutionalist; one which sees state-authored law as only one dimension of the web of norms which regulate social life, and which sees the effectiveness of law as contingent, dependent on becoming accepted and embedded in everyday life. In many countries over the last two decades, labour law as an academic subdiscipline has been under challenge. The challenge has come through significant changes to employment relations and labour markets, as well as changes to state regulation in these areas. Three well-recognised trends in particular have caused concern to the traditional discipline of labour law: an increased diversification of forms of labour engagement beyond the direct employment relationship; the long-term decline in trade union membership and collective bargaining; and a reduction in powers of traditional labour regulators (Howe 2008).

The effects of these changes have been felt in other areas within the general field of employment relations and labour studies, but have been felt in a particular way in labour law. This is not just because of the substantial changes to industrial relations and employment legislation in the last two decades, but also because the rationale for this legal change has been contrary to the accepted primary function of labour law, namely the protection of the weaker party to the employment relationship, the employee. Labour law in the twentieth century was commonly regarded as defined by a protective function to act as 'a countervailing force to counteract the inequality of bargaining power which is inherent ... in the employment relationship' (Kahn-Freund 1977: 6). This normative approach, based on ideas of justice and equity, has been described as labour law's 'vocation' (Collins 1989: 473). For many, labour law was defined as essentially concerned with securing and advancing the material and participatory position of workers by collectivist means, mainly through collective bargaining by trade unions. Often the subject matter of the discipline has been taken to be also its purpose: labour law is concerned with perpetuating the employment relationship and union-based representation. It is the well-recognised decline of unions and collective bargaining that has largely led to declarations or predictions of the 'death of labour law' (Estlund 2006).

Internationally, labour law scholarship has taken up the challenge to transcend these limitations, chiefly by expanding the field of study. Considerable work has been done on shifting the focus of labour law away from an exclusive concentration on the employment relationship (Davidov & Langille eds 2006; Davidov & Langille eds 2011; Fudge, McCrystal & Sankaran eds 2012), although there remains controversy about whether the new focus should be on dependent labour or the constitution of labour in all its forms.

Particularly in Australia, where major legislative change has produced five distinct regulatory regimes in the last twenty years (Bray & Stewart 2013), the study of labour law as regulation has been prompted by reformulation of the objectives of labour law and by the development of new regulatory agencies and methods by the state. The introduction of the WorkChoices legislative amendments in 2006 made this trend more explicit by introducing new state enforcement mechanisms, while seeking to dismantle traditional forms of state regulation by industrial tribunals and the representative role of trade unions as private collective actors (Stewart & Forsyth 2009). The subsequent Fair Work Act in 2009 continued many of the regulatory innovations introduced by WorkChoices, while attempting to strengthen collective bargaining within a less prescriptive meta-regulatory framework.

Law and labour market regulation

Apart from responding to changes in the mode of state regulation, many Australian labour lawyers have sought to recast the whole field of labour law as being concerned with the constitution and regulation of work through labour markets. In this context, labour markets are conceived as complex socially embedded institutions which reproduce patterns of work relations. The shift towards a regulatory approach reflects a change in the purposes of labour law. Since the 1990s, as Richard Mitchell has pointed out, 'there is little doubt that our labour law is now more fundamentally about the regulation of enterprises for the pursuit of business success in a global economy than was the case 20 years ago' (Mitchell 2004: 219).

The most ambitious attempt to reformulate labour law has been conducted since the mid-1990s under the banner of the 'Labour Market Regulation Project' (LMRP) by members of the Centre for Employment and Labour Relations Law (CELRL) at the University of Melbourne (Frazer 2008). This project was prompted by recognition of the interaction of labour law with other areas of law, as well as by a felt need simply to know more about the operation and effects of existing law (Mitchell 2011: 54).

Four potential changes may be identified in the adoption of a labour market regulation approach to labour law (Deakin 2007):

(1) The focus on the labour market involves a wider view of the scope of labour law, away from individual employment relationships and collective labour relations to the constitution and reproduction of the conditions of marketised labour.

(2) The emphasis on regulation rather than law implicitly adopts a pluralistic approach to law, which gives recognition to the normative and other regulatory outputs from non-state actors.

(3) A regulatory perspective involves a change in method, with greater use of interdisciplinary approaches, which then links doctrinal analysis to a greater awareness of the economic and social environment within which the law operates. This is the particular contribution of a regulatory perspective, which implicitly adopts an institutionalist approach to the relationship between law and society--that law plays a significant part in the construction and patterning of society and the economy rather than being a mere reflection of them.

(4) Finally, there is a shift in what Deakin (2007: 1172) calls 'normative focus': the purpose of labour law studies. Labour law as regulation involves moving away from a normative approach which concentrates on the protective function of law, towards a more positive and empirical perspective whereby academic legal research is concerned with identifying how the law actually operates, including its effects on social conditions like employment participation and inequality.

The first and third aspects were specifically addressed by advocates of the LMRP in pursuing their aim, which they express as broadening the scope and focus of labour law (Mitchell & Arup 2006: 4). This involves the use of regulatory analysis in adopting new methods of legal research, consistent with developments in the wider field of legal scholarship; and the adoption of the labour market focus in order to expand the subject-matter of labour law as extending beyond the employment relationship (Gahan & Mitchell 1995; Arup et al 2006: ix). The fourth issue, concerning the purpose of labour law, is also identified by at least some authors as a major part of the new perspective. Broadening the scope of labour law (as well as its temporal dimension) allows us to recognise that labour law contains many more values and objectives than the ones at the heart of the traditional 'vocation' of labour law as being concerned with justice and protection (Mitchell & Arup 2006: 6-7). In this respect, the purpose issue is at its heart also a methodological one: one determines the functions of labour law by what it does rather than by what it is supposed to be for--by an analytical and positive understanding rather than a essentialist and normative one.

The focus on labour market regulation has been effective in widening the boundaries of labour law, by including state action affecting labour market entry and participation (including welfare, skills development and family support). Those on the periphery of the conventional labour market--the unemployed, illegal workers, volunteers--as well as atypical workers like casuals who do not fit the standard employment model, are now at least recognised as forming part of the regulatory field of labour law. Attention is now also given to dependent work beyond the traditional employment relationship: to franchisees, dependent contractors and agency workers. But the second and third issues, concerning the definition of law and the method of analysis, have been advanced far less by the adoption of a labour market regulation perspective.

Recent Australian research on labour law as regulation

In recent Australian labour law scholarship, the term 'regulation' is used increasingly instead of law, and there is some recognition of regulation as being achieved by informal as well as formal legal techniques. For the most part, though, the term 'regulation' is used either as a synonym for 'law', or else has the same descriptive function as formerly taken by the 'labour law system' created by legislation; that is, to include a consideration of the general strategic impact of law on the major institutional parties, employers and unions (eg Stewart 2009). There are few signs of researchers adopting a new paradigm of law based on pluralist and socially institutionalist regulation. Apart from studies specifically dealing with new regulatory techniques like government contract compliance (Howe & Landau 2009), or informal regulation through supply chains, there is limited consideration of the interaction between different sources of regulation or the effects of regulatory change on the behaviour of non-state actors. The most extensive reliance on the new regulatory perspective has been in a few case studies of informal or 'soft' regulation through government policies, industry codes and supply chains (eg Howe 2008; Howe & Landau 2009; Rawling & Kane 2012). An avowedly regulatory perspective has been taken by an interdisciplinary team which investigated the range of work relationships and how the boundaries between them have been influenced by law (Johnstone et al 2012). Within this approach, labour law is considered as 'the body of legal rules--formal and customary--that order (or construct or structure) and regulate (or govern) labour for specific goals' (Johnstone et al 2012: 1). So the approach taken certainly regards law as constitutive of labour conditions, but the idea of regulation is still primarily concerned with traditional legal sources, while the concept of law remains a traditional one of legislation and common law.

The primary focus in Australian labour law scholarship remains strongly at the level of formal legal relations and on direct regulation by the state. In recent work on the transition from WorkChoices to the Fair Work Act, there is often discussion of the shift in the regulatory purposes of legislation under WorkChoices (eg Murray & Owens 2009), with a theme of continuity between that legislation and its successor. However, the predominant focus remains on the legislation rather than the regulatory regime it introduced. There has been relatively little discussion by labour lawyers of the concrete effects of the legislative changes, although one project has charted the impact of recent legislative change in Australia on 'aspects of labour market and employment relations institutions, arrangements and behaviour' (Mitchell, Taft et al 2010: 274; also Mitchell, Gahan et al 2010), emphasising the relationship between politically-motivated changes of objectives and shifts to the balance of power towards employers.

Some projects have adopted a wider perspective on regulation, exploring the relationship between law and 'informal' regulation, and the effects of legal change on relations and conditions of work. These projects have been undertaken by a relatively small group of researchers, nearly all of whom are associated with the LMRP. They also tend to use more sophisticated research techniques, such as quantitative impact assessment, interviews with regulatory personnel, and content analysis. Thus the content of enterprise agreements has been examined for their inclusion of new content on ownership of intellectual property (Howe & Newman 2013), and to examine whether such agreements achieve one of their supposed objectives of reducing regulatory complexity (Sutherland 2013b; Sutherland 2013a). Australia's temporary migrant work visa program has been examined by reference to change in regulatory objectives and techniques (Campbell & Tham 2013).

Taking the reformulation of labour law even further, some researchers have adopted the pluralistic and state decentred approach involved in new regulation studies by considering ways that work relationships are regulated by non-state agencies, particularly networks involving multiple business actors, such as supply chains, labour hire arrangements and franchise agreements (Johnstone et al 2012; Rawling & Kaine 2012). In much of the writing since WorkChoices there seems to be an implicit acceptance of a model of law and its relationship with society which is more interdependent and contingent than before. Thus the effectiveness of law may be constrained by its social acceptance and interpretation, legal rules operate both symbolically and instrumentally, and the social impact of law operates as much though the language and performance of actors as by the coercive force or legitimacy of rules.

The area of labour law with the greatest immediate potential for regulatory perspectives is the area of state monitoring and enforcement. There, not only has the state adopted regulatory strategies and techniques drawn from the wider regulatory domain, but there is a well-developed literature on relations between state regulatory agencies and private actors. Before 2006, noncompliance by underpayment of wages and award breaches were principally dealt with by trade unions, with only a very small inspectorate. The WorkChoices legislation introduced a new regulatory regime for compliance and enforcement which established, for the first time at the national level, a state agency equipped with a range of responsive regulation tools. This approach was continued under the Fair Work Act 2009 with the office of the Fair Work Ombudsman. Research on these significant changes in enforcement, like the agency itself, draws explicitly on the new regulation literature (eg Arup & Sutherland 2009; Hardy 2009; Hardy & Howe 2009; Howe, Hardy & Cooney 2013). This work takes a pluralist and historical perspective to discuss the functions and strategies of enforcement regimes, including non-state actors such as trade unions, and the issues of policy, organisation and priorities arising from the establishment of a new state regulatory agency.

But one area has received little attention by labour lawyers adopting a regulation perspective: the employment relationship itself, particularly in the organisational context. In the move to expand the scope of labour law, the relationship between labour law and employment relations within organisations has simply not been recognised as a regulatory field. Yet direct employment within large, complex and bureaucratic organisations remains a dominant form of labour utilisation. In Australia, more than half of all employees work in businesses with 100 or more employees, including 30% who are employed by businesses with 1,000 or more employees. Less than one-quarter are employed in businesses with fewer than 20 employees (ABS 2013). Adopting a regulation perspective opens the potential for exploring the operation of labour law within employing organisations as pluralistic, contested, mediated and constitutive.

INSTITUTIONAL REGULATION AND THE EMPLOYING ORGANISATION

Institutionalism

Development of the full potential of a regulatory approach to labour law, particularly its pluralist and methodological dimensions, can be realised by integrating social institutionalist theory as developed since the 1980s, particularly in the field of organisational sociology. At the heart of the new institutionalism is the idea that purposeful social action occurs within a social fabric comprised by the building up of networks of personal interactions (Granovetter 1985:497). Like the new regulation, social institutionalism 'deprivileges' the formal legal institutions by widening the perspective to all kinds of ways in which societies are ordered and regulated. Here a social institution is defined as any persistent pattern of socially meaningful behaviour which is shared and reproduced through norms and values rather than force, and which therefore participates in the constitution of social reality by constraining, facilitating or regularising social action (Goodin 1996: 19; Nee & Ingram 1998: 19; Searle 2005). An institutionalist approach to governance and law is implicit in the new regulatory perspective. Regulation through law is recognised as relying on a range of social institutions for its effectiveness. However, institutionalism has received little explicit attention in the regulation literature (Baldwin & Cave 1999: 30; Black 1997).

Within an institutionalist approach to regulation, compliance consists essentially in the internalisation of rules and norms, and may operate by social pressure or role expectations as well as threats of punishment. It is through pathways created recursively over time that institutions mediate between society and the individual actor. Ways of seeing, acting and relating become part of the social structure through repeated observance of rules, norms, customs or habits. It is the total web of such social constructs which provides constraints, opportunities and incentives to actors in any given social situation (Sjostrand 1995: 25; Nee & Ingram 1998: 19). This approach reduces the differences between formal and informal institutions. Indeed, as Nee and Ingram (1998: 19) note--and this point is affirmed by the study of legitimacy in the sociology of law (Tyler 2006)--it is the social relationships in which rules and norms are embedded, and not the rules or norms themselves, which produce social order and compliance.

Institutionalist approaches, as in Scott's (2014) influential 'three pillars' model, consider regulation as one of the constituent elements of social institutions, along with norms and culture. Law is usually consigned to the regulation pillar as exercising a coercive function. When applied to organisations, regulation tends to appear as an exogenous force operating from the organisation's environment rather than within it. While organisational studies have often seen business organisations as responsive to change in legal rules, the law is seen as external to the organisation itself, as an environmental variable which may affect strategic decisions but which has few significant effects on organisational structure or functioning (Stryker 2003: 342-3). The three pillars model has been criticised for treating institutional elements as operating differently, when all institutionalism essentially occurs cognitively (Phillips & Malhotra 2008: 711). It should be noted that Scott, drawing on law and society research, recognises that the elements are not functionally distinct and that law may exert normative and cognitive effects (2014: 62). Influential institutionalist studies have shown that internal processes of employing organisations have increasingly become 'legalised', partly as a response to regulatory influence in areas such as workplace discrimination (Sitkin & Bies 1994; Sutton et al 1994).

An institutionalist conception of law, drawing on socio-legal scholarship, emphasises the social significance of law far beyond the content of legal rules, to include the construction of normative, symbolic, and cultural-cognitive aspects of social behaviour. Law becomes incorporated into the patterning of social action at all these levels, not just by reaction to coercive force. Contrary to popular views, legal rules are generally not concrete and determinate, but inevitably contain vagueness and ambiguity, not only linguistically, but in relation to their supposed intention and their application to specific social situations (Suchman & Edelman 1997). Legal constructs include not only specific rules but ideas, norms, rituals, symbols and other behaviours which are associated with the legal domain. Law functions socially through command-like rules as well as by the diffusion and reinterpretation of legal constructs at cultural and cognitive levels. Organisations function as among the principal means by which this diffusion and reinterpretation takes place. The internalisation of legal constructs then feeds back into the wider social understanding of the legal constructs and into the legal domain itself. Law, then, is culturally mediated, its practical meaning and application 'a highly interactive process of social construction' (Edelman & Suchman 1997: 502).

Legal endogeneity and the organisation

An institutionalist approach to legal regulation has been advanced in the work of Lauren Edelman and colleagues. Drawing explicitly on socio-legal scholarship, this work applies institutionalist theory to law in the overlapping fields of organisations and regulation (Edelman & Talesh 2011: 104; see Gilad 2014: 3-4). The key concept in this approach is the endogeneity of law: that the meaning of law is 'generated within the social realm that it seeks to regulate' (Edelman 2003: 238). Law which seeks to regulate organisations is endogenous 'because its meaning is formed in part through the actions of organisations and the models of organisational action that become institutionalised in organisational fields' (Edelman 2003: 244-5). Concomitantly, an institutionalist view of organisations sees them 'as inhabiting highly structured organisational fields in which legal rules and social norms generate structures and rituals that become institutionalised elements of organisational life' (Edelman 2003: 235). Organisations conform to legal rules and norms 'because law enunciates social values, ethics, and role expectations, which organisations (and their members) then elaborate and, to various extents, internalise' (Edelman & Suchman 1997: 496). The organisational endogeneity of law points to the meaning of law as socially constructed by interaction and collaboration based on beliefs and values (for example, efficiency, economic rationality, managerial prerogative) held in common between legal and organisational fields:

The socio-legal field overlaps with the fields of regulated organisations, so that ideas of rationality, morality, and legality flow freely between the legal system and extra-legal organisational realms. Practices in one field help to constitute ideas of legitimacy in the other, and the dynamic interplay between these fields gives rise to socially constructed legalities in both arenas. (Edelman & Suchman 1997: 502)

Research by Edelman and others has shown how a legal construct like discrimination may be mobilised and appropriated by participants within organisations (eg human resources and other compliance professionals such as in-house lawyers) in order to secure status and legitimacy, or as part of professional role expectations. A construct may also become so widely accepted that the organisation is impelled to adopt it in order to maintain its legitimacy and avoid scrutiny by state regulators and other social and market actors. Or legal concepts and procedures may spread within the organisational field so that their adoption is regarded as normal and rational (Edelman, Leachman & McAdam 2010). Organisations become 'legalised', internalising state regulatory and other constructs of the legal domain so that an internal legal order is created within the organisation (Sutton, Dobbin, Meyer & Scott 1994). However this internal order is not a mere reflection of the external one: the process of internalisation involves accommodating the legal rules and norms to the organisation's own internal priorities and culture, so that the intended effect of the state regulation may be modified, adopted only symbolically, or even excluded (Edelman 2002: 196; Edelman & Suchman 1999: 964; Casey & Scott 2011).

In the process of being internalised within the organisation, however, the legal construct is transformed and institutionalised through processes of interpretation and adaptation, so that the legal construct is only mediately connected to the legal domain and may now carry very different meaning and effects which are part of the organisation's own legal culture (Edelman & Suchman 1999: 978; Edelman 2003: 241-2). Through such procedures as internal grievance resolution and performance reviews, issues that might otherwise be recognised as legal (eg discrimination) are 'infused with managerial values' and recast as instances of management deficiency or interpersonal problems (Edelman 2007: 78, 76). In more recent work, Edelman (2007: 74) calls this process the 'rhetorical reconstruction of legal ideals'. It is these endogenised constructs that operate within the organisation, rather than the legal construct which is external to it. Employees in particular are affected by internalisation and rhetorical reconstruction, so that their legal consciousness--their understanding of legal rules, norms and ideals and their relevance--is significantly shaped by their experience of the endogenous legal culture within the organisation (Edelman 2007: 79).

Organisational compliance with law is thus not a simple matter of implementation by 'checking the boxes' to ensure that organisational practices correspond to legal requirements. Instead, regulatory compliance is a complex process of transforming and accommodating the legal constructs within existing processes, practices and cognitive understandings that have been institutionalised within the organisation (Edelman 2003: 241; Edelman, Leachman & McAdam 2010: 656). Legal rules, norms and other constructs are 'managerialised' into organisational policies and practices by combining legal and managerial goals, or by reframing the legal constructs within managerial concepts and values; for example, replacing non-discrimination with diversity, which is seen as more harmonious and productive (Edelman 2003: 242). Law is 'filtered through managerial traditions and prerogatives and through the lenses of professionals within organisations who manage organisational responses to law' (Edelman 2003: 236). Legal pluralism may occur within an organisation, representing a range of responses to and adaptations of law which reflect and promote intra-organisational cultural difference and political contestation (Suchman & Edelman 1997: 939). The shift in state regulation towards meta-regulation increases and even encourages the managerialisation of law, as organisations are left with considerable discretion as to how legal norms will be interpreted and implemented (Edelman & Talesh 2010: 115).

Conversely, the endogenised legal construct is often recognised and interpreted by judges and other actors in the legal domain as evidence of organisational practice which should be recognised in the interpretation and application of the legal construct itself, since an ideal of the legal system is to be responsive to accepted social norms and practices. Thus commonly adopted organisational practices over time become an input into the legal domain itself as a representation of the normal or taken-for-granted (Stryker 2003; Edelman 2003: 244; Edelman 2007: 82, 88). Just as organisations become 'legalised' by the adaptive internalisation of legal constructs, so the legal domain in turn becomes 'managerialised' (Edelman 2002: 196; Edelman & Stryker 2005: 541).

CONCLUSION

The development of the regulatory state and techniques of meta-regulation have meant an expanded understanding of regulation as not merely confined to the state and as operating not just coercively, but by normative and cognitive means as well. An institutionalist approach to law and regulation allows for both to be seen as having instrumental, symbolic and constitutive dimensions. The legal endogeneity of organisations allows for development of insights in both new regulatory theory and socio-legal studies in the field of workplace regulation. One of the founders of legal sociology, Eugen Ehrlich, recognised that law as a social phenomenon is not just the product of law as stated in statutes and textbooks, or even as practised in the courts: it is also found in the legalistic practices of organisations, which he termed 'the inner order of associations', as well as in the 'living law' of everyday popular understandings of legal norms (Ehrlich 1936; Frazer 2009: 82).

In contrast to employment relations scholarship, labour law has not yet explored the consequences of institutionalist regulation theory for an understanding of workplace governance within organisations. Employing organisations operate with a myriad of workplace instruments that operate as a form of localised law in relation to their employees and managers. Some attention has been devoted to enterprise agreements by labour law scholars (eg Sutherland 2013b). However such agreements are exceptional: their content is limited by statutory constraints; they are agreed to by a majority of employees and approved by a state agency, the Fair Work Commission. Other forms of regulation within employing organisations are more endogenous. Employers have increasingly introduced workplace policies in recent years, covering such topics as conflicts of interest, sexual harassment, bullying, objectionable material and the use of social media. Such policies have a connection to official law: they often expand on or modify established legal rules concerning employer and employee duties, may be introduced in response to a perceived legal risk, while their breach may have real legal consequences, for example in a claim of unfair dismissal. However the relationship between such policies and the official law is indirect and mediated by their interpretation and application within the organisation. Frequently they are introduced not because of a real risk, but because they have become normal (through benchmarking and best practice) and operate as a badge of managerial legitimacy, prudence and efficiency: they have become part of the way things are done within an organisational field.

A next step for the regulatory study of labour law lies in the constitution of law by workplace policies and practices within employing organisations, and their effect in turn on official law. Such a step would draw upon the insights provided by employment relations and organisational behaviour. The work by Edelman and others, in exploring the ways in which legal constructs become transformatively internalised within employing organisations, shows how a pluralised approach to law and regulation can combine with organisational studies. The distinctive contribution of a socio-legal regulatory perspective to such studies is that it problematises the nature and operation of law itself.

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Andrew Frazer

University of Wollongong