Regulation and the Future of Work: The Employment Relationship as an Innovation Facilitator

Abstract

Digital transformation and the reorganization of the firm have given rise to new forms of work that diverge significantly from the standard employment relationship. Advocates of digital disruption suggest that the existing legal framework cannot accommodate “innovative” working templates and business models. This article, however, argues that labor regulation can continue to facilitate innovation, presenting the employment relationship as a flexible instrument, and standard forms of employment as the means of achieving efficiencies and cost advantages. First, they allow for the full exercise of managerial prerogative and attendant internal flexibility in workforce deployment, and, second, they constitute an effective device to deliver training and develop skills. The first section provides a summary of the current debate regarding the implications of digital transformation and its impact on labor regulation. In particular, after describing the processes of digital transformation, the vertical disintegration of the firm and “platformization” – often resulting in a situation of “disorganization of labor law” – we argue that some self-proclaimed change-makers present a rather distorted picture of flexible innovation, based on cost-cutting, risk-shifting and the misapplication of legal provisions. The second section takes a critical approach in tracing the socio-economic foundations and organizational justifications of labor institutions. Rebutting the allegation that the existing legal frameworks are unsuitable for dealing with changing needs and unforeseen situations, we claim that the employment relationship goes hand in hand with the development of the modern enterprise, since it confers managerial powers to the employer, thereby supporting adaptable organizational needs. The third section concludes by claiming that flexibility is embedded in the employment relationship. When it comes to boosting innovation and competitiveness, there are a number of alternative measures to be implemented instead of tolerating fraudulent practices aimed at circumventing the manifold labor-related responsibilities to the detriment of workers, partners and competitors.

Keywords: Labor Regulation, Flexibility, Employment Protection Legislation, Platform Work, Employment Relationship

JEL Classification: K31