5 Ways the U.S. Can Compete with New European Jobs Act

In January, the Italian government announced the Jobs Act, designed to protect Italy’s growing class of freelancers and the self-employed.

The Jobs Act provides — among other things — five months of maternity benefits to new mothers and rights to wages, productivity bonuses equal to full time employees, and other benefits that make freelance labor more viable and sustaining.

Italy’s aim is to “build a modern rights and welfare system capable of supporting freelancers’ current work and of safeguarding their future.”

The Italian Jobs Act is similar to legislation adopted elsewhere across Europe. Germany and Spain have already recognized the “Dependent Contractor” model. Such a model creates a third category of worker and provides protection and benefits to workers who spend a significant percentage of their time for a specific company.

Creating flexibility for workers

The contents of European legislation reveals important differences between the European and American approaches. While Europe has chosen a more labor-friendly approach of providing protection to the workers, America has generally been more corporate-friendly. However, in this case static legislation does not necessarily mean free-market.

First, it is important to acknowledge that when the structure of the economy changes, the legislation’s goal may also change. While the essence of the U.S. current legislation was to create stability and protect workers, the main goal of any new legislation may be to create flexibility.

Based on current discussions it seems that any new American legislation will not be as protective of labor as the laws coming out of Europe. However, in the new American reality, according to the Work Market 2016 Corporate Freelance Management Survey, “27 million people take part in the corporate on-demand” economy.

With so many Americans’ livelihoods hanging in the balance, any new rules should at least provide clarity to corporations and protection to freelancers.

The European approach will not necessarily answer the needs of American corporations and workers, who are looking mostly for flexibility in the new economy.

What any legislation for freelancers must include

However, below is a summary of the most important factors, that should be included in the new legislation:

Provide clarity. Both freelancers and companies should have a clear understanding of the distinction between full-time employees and freelancers. Such clarity is required for companies to avoid unnecessary risks, and for workers to know when they are misclassified. Work Market has proposed a policy framework that relies on quantitative measures to provide such clarity.
Extend basic labor protections to independent workers. Legislation should be amended to extend provisions that today only cover full-time employees. Thus, independent contractors will be eligible for minimum wage, overtime payment, freedom to organize and collectively bargain, and civil rights protections in the same way as full-time employees.
Enable portability. Freelancers should have the option to purchase annual social services which are not tied to a specific workplace. These services could be subsidized for certain income levels, but also allow workers to buy into national and state safety nets to protect them when there is no work. Even though Obamacare is a step in this direction, it is not enough. Any new legislation should enable freelancers to purchase unemployment insurance, disability insurance, and workers compensation as individuals.
Ownership of virtual assets. A freelancer should own all of his or her virtual information, including the ratings he or she may have acquired on an online platform, and should be able to port these assets to any other service. Currently, freelancers on online platforms are at a severe disadvantage because the platforms own the ratings and recommendations that workers have earned. If a worker cannot port his or her own assets, it makes it much more difficult to bargain for their rights and benefits or switch platforms if necessary.
Encouragement of personal responsibility. Any new legislation should be focused on encouraging freelancers to take responsibility for their own personal and professional future. The greater the percentage of freelance labor in the American economy is, the less employers are responsible for workers’ personal development and retirement savings. Therefore, freelancers should be encouraged by legislation to continue their professional development throughout their career and to save for retirement. At a minimum, tax deductions should be crafted to maximize the benefit of education and retirement savings.

Modernizing the workforce

The workforce structure has been changing dramatically: A growing percentage of the population is being absorbed by the rise of freelance labor.

This changing landscape requires legislation to fit the new reality and provide clear rights and obligations of all the parties in order to maximize the productivity of the American market.

The Europeans have chosen a path, and while of course labor legislation is hardly one-size fits all, America should follow suit in modernizing our labor laws.