Non-Compliance with Labour Law – Theoretical Considerations and Empirical Findings

Non-compliant behavior of firms has been studied in particular with regard to environmental regulations and anti-corruption laws, whereas only a few scholars have addressed the issue of non-compliance with labour law.  A number of more recent investigations however both documented and fuelled a renewed interest in this issue, by providing ample evidence that the violation of  minimum standards such as minimum wages is far from anecdotic, even in wealthy countries like the USA or Canada (Weil;  Bernhardt et al.; Voskoh et al.). They thereby underscore the need to extend research on labour market de- and re-regulation to questions of (deviant) rule enactment instead of focusing on rule making only.  The paper sets out to explore the interrelationships between rule making and deviant rule enactment. Based on a review of the literature on compliance and enforcement, the paper firstly discusses a range of influencing factors on the scope and forms of non-compliance in the case of labour standards (economic, social, normative motivations of firms; their ressources and knowledge; institutional, societal and economic structures). It then assesses current trends with regard to these factors which might help to explain the persistence or even increase in deviant rule enactment. Looking in particular at changes in labour market regulation and wage setting over the past decade in a number of European countries the paper argues that non-compliance with labour law is by no means a phenomenon restricted to liberal market economies (or even to developing market economies), but is bound to grow in importance in coordinated market economies as well. This is, on the one hand, because minimum employment standards set by the law are on the rise following the erosion of collective bargaining. So there are more legal norms firms can fail to comply with; and on the other hand there are also more possibilities to avoid compliance, through forms of employment whose working conditions are (intendedly) much less under control of commissioning firms and employee representatives at the work place than working conditions of those directly employed by a firm (outsourcing, posting of workers, temporary work, contracts for work and labour). The paper therefore advances the hypothesis that deregulation of labour markets in coordinated market economies has not turned non-compliance into an outdated strategy stemming from times of high labour market rigidities, but rather contributed to facilitate and stabilize deviant rule enactment. Focusing on Germany, available evidence from a few empirical studies as well as from a recently started research project on the implementation of the new national minimum wage will then be scrutinized with a view to falsify the hypothesis and elucidate how deviant rule enactment is shaped by other factors and dynamics as well.