Labor secretary weighs in on 'gig economy'

Labor secretary weighs in on 'gig economy'
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Secretary of Labor Tom Perez has decried what he calls a “false choice” between worker protections and innovation during a conversation about the burgeoning "on-demand economy."

Companies like Uber and TaskRabbit have built their businesses by using independent contractors instead of employees. Contractors don’t get the same benefits as employees, so they cost the companies less. Critics say that in some cases, the workers are closer to employees than contractors.

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“Our current law provides a useful framework for understanding the rights and responsibilities of workers and employers,” Perez said Monday evening during a Facebook question-and-answer session organized by the tech-based news site Engadget. “I am concerned that some observers have framed a false choice of protecting workers OR promoting innovation in today's economy.”

The Department of Labor (DOL) recently announced new guidelines meant to crack down on worker misclassification across the economy.

Still, any reforms to the way workers are classified to better accommodate on-demand economy services would likely have to come from lawmakers, not the DOL — something Perez acknowledged. Sen. Mark Warner (D-Va.) has said he is working on legislation to create a new safety net for the workers.

“Many people have discussed the need for a third category of employment,” Perez said. “Such a solution would require legislative action from Congress.”

The effect of the on-demand economy on workers, and economic inequality more broadly, has become a hotly contested topic.

Republicans have said that new regulation could stifle the growth of the companies, which have become some of the most valuable startups in the world, while many Democrats have taken a more cautious approach.

Democratic presidential candidate and former Secretary of State Hillary Clinton has said that workers are regularly misclassified, but has not tied that concern specifically to the on-demand economy. She said in an economic policy speech that companies like Uber are raising “hard questions” about workplace protections.

Those on the left, who have not yet taken a strong position on workers' status, may be treading carefully for fear of alienating Silicon Valley. In addition to being a potent symbol of American entrepreneurship, the tech industry has created a new class of wealthy political donors. Customers of on-demand economy services may also be put off by politicians who target services they use, tech advocates said.