Regulatory Policy

Labor Secretary Marty Walsh Wants More Servants in the Workforce

Secretary of Labor Marty Walsh speaks during a news conference at the White House, April 2, 2021. (Erin Scott/Reuters)
Labor law should adapt to the gig economy — not the other way around.

Labor Secretary Marty Walsh has said that he thinks more workers in the “gig economy” should be reclassified as employees. The trouble is that Secretary Walsh is attempting to relitigate battles of the 1930s, when he should be looking at how work and the priorities of workers have evolved.

The secretary appears to think that gig-economy workers are being exploited by the platforms they work with and not being given their fair due in terms of benefits. On this view of the world, workers are best off with an employment contract that grants access to a trove of government-mandated benefits, including healthcare and restrictions on working hours.

Yet taking a step back and considering what people want from work reveals a different view. The employment contract is just one way of working, and one that is increasingly out of step with what workers want.

At heart, the employment contract puts one in a subordinate relationship with the employer — so subordinate that the law calls it a master-servant relationship. The employer buys your time and is entitled to ask you to do whatever she wants with it (within reason). That’s why, for instance, if an employee crashes his van into you, you sue his employer and not him (unless the employee was engaged in what the law calls a “frolic” unrelated to the employer’s needs).

This doesn’t exactly sound very empowering, does it? The power of the employer over the employee explains why a host of labor and employment laws were passed in the 1930s to try to reduce the power of employers. Labor laws gave unions the right to negotiate contracts on behalf of all employees, and employment laws burdened employers with delivering a variety of social policies demanded by government.

The 1930s were a different time, however. Many jobs could be performed by anyone with minimal training (they were literally “labor” jobs). The Great Depression meant that there were many people willing and able to do a given job. So what employees wanted was job security and some limitations on what employers could ask of them. They were willing to sell their time and labor without many conditions.

Times have changed. Many jobs require specific skills, giving the worker more power. Workers also have other demands than those of workers in the 1930s. In the private sector, most see no need for labor unions. The rise of the gig economy provides alternatives. For instance, people who value flexibility in hours had been held back by the master-servant economy (they had to settle for rare part-time arrangements employers were often loath to offer) but suddenly found new choices in the gig economy. This was particularly the case with parents who valued being able to see to their children’s needs over the security of a 40-hour, 9-to-5 work week.

Employment itself has also changed. The idea of a vertically integrated firm with career progression and jobs for life has waned in most sectors. Firms these days organize along different lines, contracting out non-essential services to other firms or to freelancers. Many employers don’t want to operate in a master-servant relationship, preferring to contract commercial terms instead. Gig-economy platforms are the most obvious example of that, but any firm that offers, for instance, extended time off or tuition benefits that encourage workers to leave the firm are operating under a different set of preconditions than employment law currently imagines.

However, the idea that a master-servant relationship with an employer is somehow best for the worker remains prevalent. This has been the motive behind various attempts, most notably California’s AB5 bill, to forcibly convert gig workers into employees. The effect of these attempts has been to sweep up many traditionally freelance jobs that survived the legislation of the 1930s into an employment relationship. This is what helped doom the California attempt. Voters recognize that some people do not want an employment relationship and gravitate towards freelance work — which would not exist in an employment-only world. So many people were affected by AB5’s broad brush that California voters rejected AB5 by a large majority in a ballot initiative.

Yet Secretary Walsh’s remarks indicate that the Biden administration might attempt to repeat AB5’s mistakes. The PRO Act, for instance, which President Biden has touted as an essential part of his infrastructure package, aims to make all gig-economy and freelance workers eligible for unionization, a first step on the road to AB5 and the imposition of a master-servant relationship neither the workers nor the platforms want. Instead of trying to force everyone into an outdated model, Secretary Walsh and his department should be looking at how work has changed, and should provide the president with proposals to send to Congress that reflect those changes.

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