Twenty-one years ago, Fortune boldly declared “The End of the JOB.” Thanks to rapid advances in technology, people had been freed from the tyranny of the nine-to-five workplace. Now they could set their own hours and schedules, do without constant oversight and supervision, and concentrate on a more powerful objective: not just “doing their jobs,” but finding better and more innovative ways of “doing what needs to be done.”
In today’s world, Uber Technologies Inc. stands as a perfect example of a “post-job” success story. It is now serving millions of hugely satisfied customers and providing part-time or full-time work for 200,000 active drivers in 311 cities around the world. Its app-based method of connecting users and providers of taxi service is the feather that has knocked a whole industry on its ear—an industry that had been doing the same things in the same way for three-quarters of a century.
One can also cite the sprouting of dozens of major franchise operations like Two Men and a Truck that have combined to provide millions of new jobs through thousands of small business startups over the past two decades. Like Uber, they have discovered work that clearly needed to be done—once people hit upon the right way of doing it.
But none of that cuts any ice with the Obama administration and its appointed chieftains at the Department of Labor and the National Labor Relations Board. Far from applauding greater freedom and creativity in the workplace, they want to restore the old-fashioned job to something like its former prominence, but with a raft of new government-imposed rules and regulations. By limiting the growth of independent contracting and other means of farming out work to individuals or small businesses, the Labor Department wants to herd as many workers as possible back into the corral of corporate employment—with Big Brother there to watch out for their best interests.
Former college professor David Weil, the Labor Department’s top wage-law enforcer, explains the broad thinking behind such policies in his book The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It, published last year. Weil blames decades of outsourcing or subcontracting for deteriorating conditions in the workplace. He argues that big companies have tried to have it both ways—on one hand, making harsh or impossible demands on subcontractors; on the other, taking no responsibility for the plight of workers. The solution that follows from Weil’s analysis is to force big employers to bring many jobs back in-house—and then subject them to farther-reaching and more stringent rules and regulations.
But if the analysis is faulty, the solution is no good. Why should we suppose that it is so easy for companies to mistreat or abuse subcontractors, or be motivated to do so? Should we always assume the worst of capitalist enterprise?
In public statements, Weil has complained of “jaw-dropping” violations of standard labor laws and accused employers of “finessing” job descriptions and duties in order to miscategorize workers who remained under their supervision as independent contractors rather than employees. He claims this practice has caused many dispossessed workers to incur expenses related to their jobs while losing access to overtime pay, vacation pay, and other benefits.
While waiting for Labor Department lawyers to bring forth the proof behind such accusations, you can expect to witness a good deal of hair-splitting over the legal definition of an employee. On July 15, Weil released a 15-page memo that was supposed to “clarify” the Labor Department’s stance regarding “employees who are misclassified as independent contractors.” The memo concluded that the “ultimate determination” would turn on “whether the worker is really in business for himself or herself (and thus an independent contractor) or is economically dependent on the [putative] employer (and thus an employee).”
But that surely is a false dichotomy. For example, does an Uber driver automatically become an Uber employee because he chooses to drive 40 or more hours a week and gets most or all of his income from the company? Or does he remain an independent contractor
(1) because he picks where and when he works, (2) because he (like other Uber drivers) is free at any time to accept work from Lyft, its chief competitor, and (3) because he has no wish to be an employee?
Or consider the owner of a Two Men and a Truck franchise. He might depend upon the franchiser’s name, brand, and preestablished business plan for the origination of 90 percent of his orders, but he would still be very much in business for himself in almost every other sense—bearing full responsibility for hiring, firing, and disciplining workers, meeting payroll, doing satisfactory work, and running a profitable business.
These examples also highlight a disconnect between the broken work environment described in Fissured Workplace and the much more vibrant conditions that exist today among companies that have come under scrutiny from the Labor Department (or freelancing plaintiff’s attorneys) for alleged misclassification of workers and other infractions of labor laws.
Clearly, no one can accuse Uber, Lyft, and others of that ilk of farming out work they used to do in-house. Nor can the same accusation be made against major franchise operations such as McDonald’s Corp., which has a systemwide workforce of close to two million people, nearly 80 percent of whom are employed by franchisees in locally owned and operated stores. Through six decades of operation, McDonald’s has always been heavily weighted toward locally owned as opposed to company-owned outlets.
Even so, the NLRB announced last summer that it was prepared to treat McDonald’s Corp. as “joint employer” of its franchisees’ employees. This is no small matter. Franchisers and franchisees in dozens of different industries (not just fast food) are up in arms against the ruling—seeing it as a dagger aimed at the heart of the whole concept of franchising.
If the NLRB ruling becomes law, the “joint employer” standard will collapse a longstanding set of complementary incentives. It will subject franchisers to almost unlimited risk and deprive franchisees of the ability to act on their own in making decisions critical to running their businesses on a profitable basis, including the setting of wages and benefits and hiring, firing, and disciplinary matters.
And if government is suddenly able to treat a major franchiser as lord and master over all the little fiefdoms using its name, then it can turn the same franchiser into a one-stop enforcer of government policies. McDonald’s has already agreed to raise the average wage in company-owned stores to around $10 an hour. Now it might be coaxed, cajoled, or coerced into ordering systemwide pay increases (at 10 times the number of stores)—even if that meant throwing its franchisees under the proverbial bus.
As a final matter, let us take a look at one of the new workplace rules. With a whiff of gunpowder from the class-warfare front, it is described in a Labor Department press release as “a critical first step toward ensuring that hard-working Americans are compensated fairly and have a chance to get ahead.”
Do you worry that the manager or assistant manager at your favorite fast food restaurant is getting a raw deal? Do you think she should be paid time-and-a-half if she has to work more than 40 hours a week? Consider it done—or almost done. That is included in a proposed new regulation from the Labor Department that would extend mandatory overtime pay to about five million white-collar workers. If a midlevel manager is paid $25 an hour now, she will soon be boosted to $37.50 an hour for overtime work. What’s more, it will be incumbent on her employer to keep close track of her time and to make sure she is paid overtime for checking on company emails or catching up on paperwork during her off-duty hours.
Is that so bad?
On one level, in mandating overtime pay for salaried workers making up to $50,400 a year, the new protocol does nothing more than repeat the foolishness of the idea that the president can “give America a raise” or that mayors and local politicians can help unskilled workers by raising minimum wage levels in their cities or towns. To force companies to pay some people more than their actual value to the business is to ensure that any well-managed, profit-seeking company will keep employment of such people to an absolute minimum. What is true for unskilled workers is equally true for middle managers.
However, this is also a rule that sets a new high-water mark in government meddling in other people’s business—or businesses. Why is the government telling companies what they can or can’t do when it comes to managing their managers? The CEO of one restaurant chain complains that the new rule will demote entry-level managers into “glorified crew members”—making the overriding incentive one of logging more time rather than getting results and being rewarded with bonuses and promotions. At the same time, the new rule will force employers in law offices and other professions to hang out a sign that says, in effect: We don’t want any go-getters around here. You are strictly forbidden to make any special efforts for this company on unpaid time.
Obviously, that is not a good message to send for any company that wants to grow and prosper. But it is just one of the many job-killing effects of Jobberwocky, as I have called it—the mistaken belief, or the false pretense, that government can impose onerous restrictions on business and conjure up new benefits and protections for workers . . . without paying a heavy price in lost growth and employment.
Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, a free-market think tank in St. Louis.
