Regulators Want You Punching The Clock On A Smartphone App

It's not your grandfather's workplace anymore.

As anybody who has worked for 20 or more years will tell you, the world of work has changed. Twenty years ago only 5% of us ever telecommuted from home, according to Gallup. That figure is now 37%. Franchise businesses employ a million more people now than they did in 2008. And increasing numbers of us are working part-time or more with a "sharing economy" platform, such as Uber. That's great news for people who value flexible schedules or seek extra income. But now government regulators threaten to bring it to a screeching halt.

A recent deluge of rulings and rule-making from the Department of Labor and the National Labor Relations Board seeks to turn back the clock — to the time of punch clocks.

The Department of Labor's proposed overtime rule is a case in point. Since the last time the agency significantly raised the wage threshold for its overtime requirement, businesses have developed new practices to give ambitious junior managers the chance to prove themselves by, yes, working longer hours, but also by giving them more responsibility. In franchise businesses, these are often the people who become managers, then owners.

Under the new overtime rule, these aspirational people will no longer be able to work longer hours in many cases and thus miss out on a chance to prove themselves. Managers will have to closely watch hours worked, probably with automated assistance, and may even require some former telecommuters to start showing up physically at work. The Labor Department admits that most people won't see much difference in their paychecks as a result of the rule. It's all about the department controlling hours worked.

Things could be worse for the sharing-economy firms if regulators and courts designate Uber and Lyft drivers as employees rather than contractors. That would open up a new world of employment regulation and significantly cut into their competitive advantage. You might need to punch the clock on your smartphone app — if you can get the job at all.

Other regulator decisions threaten to kill off a growing form of business ownership: the franchise. A ruling from National Labor Relations Board could force franchising corporations to take control over the individual franchise businesses, remaking independent entrepreneurs into middle managers.

In effect, government regulators are trying to halt the rise of modern business methods and models that don't require a traditional employer/employee relationship. That puts regulators directly at odds with the new American Dream.

In just the past decade, people have found revolutionary ways around old barriers to opportunity, what economists call "transaction costs" — the costs of making a transaction happen. When those costs are high, the transaction doesn't happen. But technology has helped reduce such costs, making it easier to run a franchise business or offer telecommuting and flexible work options. In today's "sharing economy," people are brought together in market transactions through a simple app on your smartphone.

Is your boss your master? Today, that seems a nonsensical idea. People regard their boss as a colleague, perhaps even a friend. But U.S. labor law, stuck in the New Deal era, regards your employer as your master, and you as his servant. Employment regulation, most of it developed in the 1930s, revolves around this distinction, with all the bureaucratic rigidities that entails.

But for most of the past 40 years, regulators had a measure of hands-off approach, often allowing economic forces to dictate changes in business practices. No longer. Now the Obama administration is trying to turn back the clock to reward its union allies. Larger corporations are much easier to unionize and regulate than hundreds of individual franchises, freelancers or contractors. It's a win/win for unions and regulators, not for people who value flexibility and independence at work.

A few years ago, entrepreneur Tim Ferris explored the possibilities of this new "unbundled" workplace in his best-seller, "The 4-Hour Workweek." Today, if regulators have their way, we may all be stuck with the 40-hour workweek — working 9 to 5, what a way to make a living.

Originally posted at Investor's Business Daily