(Bloomberg) — President Barack Obama’s outgoing wage and hour enforcement chief says fellow Democrats who want to revamp labor laws to accommodate the gig economy are making a big mistake.
“If your business model is unsustainable and incompatible with basic notions of what we do as a matter of law, then you’ve got a problem with your business model,” David Weil, administrator of the Department of Labor’s Wage and Hour Division, said in an interview. Too much of the policy conversation about the “future of work,” he says, amounts to companies seeking to cut corners — which is nothing new.
As app-based driver service companies like Uber Technologies Inc. and Lyft Inc. have grown in recent years, so has the number of legal disputes over whether the workers providing their services are independent contractors, as the companies contend, or employees whom federal and state laws promise rights such as minimum wage and collective bargaining.
Weil says he personally doesn’t use Uber because of its treatment of workers as contractors.
Uber’s head of federal affairs Niki Christoff said that two-thirds of Uber drivers have multiple jobs, and the vast majority choose Uber in order “to be their own boss and set their own schedule.”
New deal
"We believe the law is clear that people who choose to drive with Lyft are independent contractors," says Adrian Durbin, Lyft’s director of communications. "They choose when, where and for how long they drive, and all of them tell us that this flexibility is what they value most."
Some industry leaders and politicians from both parties have urged that New Deal-era labor laws be changed in ways that would make it easier for the firms to keep treating those workers as non-employees, putting an end to the tussling while paving the way for those workers to get benefits like paid time off.
Seth Harris, Obama’s former acting secretary of Labor who is now with law firm Denton’s, teamed up with another Obama alum, former Council of Economic Advisers chairman Alan Krueger, to propose an intermediate category of “independent workers” who would get some employee perks like payroll-tax contributions from their bosses, but not others like overtime protection.
Weil, whose office enforces the current laws against shortchanging employees by misclassifying them as contractors, isn’t enthused. Figuring out how to classify workers who are somewhere in between an employee and a contractor has been a challenge long before the advent of the digital economy, he says. Creating a third category would just mean new boundaries to fight over.
Shunted workers
Some workers who are now treated as employees would get “shunted” by companies into the intermediate category with fewer rights, Weil warns, and “baseline principles and protections” would be eroded. “I don’t see what we’ve solved.”
He is just as critical of the idea of making it easier for on-demand companies to treat workers as contractors if the firms agree to contribute to benefit funds, something two influential Democrats plan to introduce in New York’s state legislature this month. While providing workers better training, benefits and retirement support is important, says Weil, “I do not believe it’s appropriate, nor wise, to bargain away baseline protections to get more of those. I think that’s perilous, to be quite frank.”
Many on-demand workers are already legally entitled to full employee rights, he says. Apps that dispatch workers to provide services, and control the quality, pricing and overall business model, he says, have “created, in my mind, an employment relationship.”
New approach
Weil, who is returning to Boston University where he taught before joining the government in 2014, says there’s no reason ride-sharing companies like Uber couldn’t remain viable while treating drivers as employees – they just might have to raise prices a little and accept lower profits. “I think they could do just fine – and when I say fine, I mean do really well.”
But Uber won’t have Weil to worry about for long.
Following President-elect Donald Trump’s January 20 inauguration, Republicans will have unified control of the federal government. That creates an opening for pro-business legislation on worker classification as well as a very different approach from the Labor Department, says Century Foundation fellow Shayna Strom, former chief of staff of Obama’s Office of Information and Regulatory Affairs.
“There are many possibilities, including a third category, moving where the threshold is for employee versus independent contractor, and simply less enforcement of misclassification by the federal government – which would have the net effect of making more workers independent contractors in effect, if not in law,” she says.
CKE Restaurants Inc. CEO Andrew Puzder, Trump’s choice for labor secretary, was a frequent critic of Obama appointees’ approach to labor law enforcement. He and other Trump appointees are likely to show more deference to industry prerogatives.
“Companies are worried that if they provide training or benefits or anything extra to their contractors, that they’re going to have somebody from the government knocking on their door,” says Trump DOL transition team member F. Vincent Vernuccio, speaking to Bloomberg in his capacity as director of labor policy for the Mackinac Center for Public Policy. “Contractors and companies should be free to engage in whatever business model they both choose.”
