"Orthodox understandings of ‘free' labour markets today tend to be premised on a particularly Hayekian, liberal-individualist conception of industrial relations. It generally follows from this ideological premise that employees and their employer firms can—and, moreover, should—contract with one another on a reciprocal and individually negotiable basis, in a manner not fundamentally dissimilar from any other standard incidence of market exchange. Accordingly, any form of collective mobilisation by employees vis-a-vis employer firms in the form of adversarial industrial action is typically viewed as a cause of allocative inefficiency for employer firms. The present article disputes this logic by demonstrating how, contrary to Hayekian logic, the common law employment relation does not comprise a set of discrete and reciprocally (re)negotiated contractual terms. Rather, it exhibits the peculiar dynamic of a diffuse extra-contractual command structure, whereby employer firms are vested with unilateral discretionary prerogative vis-a-vis employees. On this basis, the article highlights the structural imperative of effective adversarial counter-pressures (in favour of employees) in legitimising—and thereby sustaining—the resulting reciprocal power imbalance that is central to the employment relation. In particular, it argues that the continuing collective capacity of employees to mobilise their human capital via adversarial industrial action, as facilitated by underpinning labour law institutions, is fundamental to securing labour's acquiescence in management's possession and exercise of discretionary prerogative. In this way, a legally constituted system of collective employee adversarialism is conducive to securing continuing employee ‘buy-in' to the employer's unilaterally determined objectives and values, thereby preserving the inherent decisional power imbalance on which the administrative efficiency of the employment relation is contingent. This in turn has the crucial functional effect of mitigating agency costs in the employment relation, enabling employer firms to economise on their overall costs of production."

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