Today's News & Commentary — December 11, 2015

Published December 11th, 2015 -  - 12.11.151


The Wall Street Journal has picked up on the growing debate over whether the gig economy necesitates the creation of a new “independent worker” category of employees.  This argument was most recently made in a paper by Seth Harris and Alan Kreuger, who view the control that gig laborers have over the amount of work hours they input as defina major factor distinguishing them from typical employees.  Still, they argue that these workers warrant some of the protections that independent contractors typically lack, such as protection against discrimination, and that an in-between category would aid in imposing such requirements.

Professor Sachs published a powerful response to their argument on OnLabor, demonstrating that those working in the gig economy, and more specifically Uber drivers, do in fact fit comfortably into the typical definition of “employee,” and therefore deserve all of the attendant protections.  The New York Times added credence to this point in its coverage of the debate over the wisdom of recognizing a third “independent worker” category.  In fact, the NYT viewed a case study of one company’s experience as suggesting that “the traditional employee-contractor dichotomy in the laws governing work may still hold up reasonably well when it comes to this new world.”  The company that was studied, along with various other companies in recent years, underwent an initiative to change the status of all of its workers from “independent contractors” to “employees” in order to ensure “a more reliable and knowledgeable work force, one that can be held to a specific standard of quality and a more consistent schedule.”

Ultimately, many view Uber and other ride-hailing platforms as desiring and effectuating a similar degree of control over their drivers.  On this point, the article quotes former chairwoman of the NLRB, Wilma B. Liebman, as commenting that “the nature of the control exercised by Uber and Lyft over the way the work is performed, and the fact that the drivers perform a service integral to the business model itself, provide a strong indication of an employment relationship.”  The Times emphasizes these facts to underscore a point of great importance: “creating an entirely new category of worker would not only be politically and logistically tortuous, it would also risk depriving workers who would otherwise be classified as employees of the benefits they might enjoy.”

The Wall Street Journal, on the other hand, seems to endorse the Harris/Kreuger view that creating a category somewhere in the middle ground would guarantee greater protections for workers while still accommodating the type of business model employed by these companies.  This endorsement, however, seems to come without any consideration of the important threshhold question that Professor Sachs has previously alluded to which is: if the business model employed by these companies cannot comply with the current regulatory scheme, might the model not be worthy of protection?

The Department of Labor’s most recent commentary on the gig economy came from David Weil, a DOL Wage and Hour administrator.  Politico reports that as the agency prepared to address labor leaders, academics, and worker advocates at the “Future of Work” symposium on Thursday, Weil assured Politico that while the gig economy will “play a role in the discussions,” the gig economy is “not the future” and will by no means “dominate” the discussions.

Another piece in the WSJ highlights the fact that the union contracts recently procured by the UAW with General Motors Co., Ford Motor Co., and Fiat Chrysler Automobiles NV allow the companies the option of altering workers’ healthcare plans if the plans seem likely to trigger a 40% federal tax applicable to some high-cost plans (the Affirmative Care Act’s “Cadillac tax”).  Although any changes will have to be approved by the UAW, the companies plan to to pass along part of the resultant tax burden by adding in a provision requiring yearly deductibles for any affected workers (capped at $400 for individuals and $800 for family plans).

The UAW hopes that it will be able to keep costs low enough to avoid triggering the Cadillac tax.  However, along with the wage increases that the UAW secured in this last round of negotiations, the UAW estimates that the plan will increase the cost of healthcare per union worker by at least 63%, from about $8/hour to $13-14.  These costs are not of small significance: they only exaggerate the already considerable gap between the wages and benefits earned by workers of domestic automakers assembling cars in the U.S. as opposed to those received by employees of Asian automakers in the U.S.  Analysts have projected that GM’s labor and benefit costs will increase from $55/hour to $60 this year. Ford says it will reach a similar level by 2019.

Still, the UAW has a strategy for keeping costs down.  It says that by grouping new hires (who are presumably younger and healthier and utilize fewer benefits) into the same health care plans as older employees, the companies can effectively offset the costs of older, more (medically) costly workers.

On a separate note, the WSJ recently surveyed 65 economists on their predictions for economic growth, unemployment, and interest rates in the U.S.  Significantly, about 97% of those economists agreed that the Fed will decide to raise its benchmark interest rate next Wednesday.  Due to the risk of strengthening the U.S. dollar too much, which would spur negative effects for U.S exporters and manufacturers, the economists project that the hikes in the interest rate will be modest, follwing “a gradual path.”

Fortunately, even after accounting for the aforementioned interest rate increase, the economists expect that the economy will grow from 2.2% in this year to 2.6% next year while unemployment will reach “a nine-year low of 4.7% by the end of 2016.”  That the economy has consistently generated new jobs in every month since October 2010 bodes well for the economists’ prediction that the labor market will create 2.3 million new jobs in 2016.

 

Finally, the Los Angeles Times reports that the L.A. restaurant chain 3 Amigos Fresh Mexican Grills restaurant is on the hook for nearly $104,000 in backpay and damages for failing to pay its employees in compliance with the Fair Labor Standards Act (FLSA).  The 33 hourly workers, which included cooks, assistant managers, and kitchen managers spread across 3 different restaurants, were refused time-and-one-half for overtime hours worked and instead paid in straight time rates, regardless of the number of hours they worked.

121 views
bookmark icon