Learning from the story of a wine family that decided to hire sharecroppers as employees, a new article depicts the employment relationship as a flexible instrument, capable of adapting to the changing nature of hyper-digitized labor markets. Within the evolutionary model of labor law, social institutions can be better appreciated in relation to their capacity to provide a comprehensive umbrella for organizational innovations in times of digital transformation.
Authors: Antonio Aloisi, Assistant Professor of European and Comparative Labour Law at IE Law School and Valerio De Stefano, BOF-ZAP Professor of Labour Law at KU Leuven, the University of Leuven, Belgium
Angelo Gaja—one of Italy’s most iconic wine producers—shared a revealing anecdote about the secret of his wine’s long-lasting tradition of success. The story goes that, in bygone days, his father Giovanni was obsessed with the idea of creating superior Barbaresco wine by using very high-quality raw materials. He used to spend time walking through the vineyard getting rid of imperfect grapes with his pruning shears. In a time of austerity, this practice was perceived as a sacrilege in the eponymous village of Barbaresco, in the wine district of Langhe—a hilly region at the foot of the western Alps. The mezzadri, the independent sharecroppers who tended the lands owned by the Gajas in exchange for a percentage of the harvest, believed that this attitude was a sin against Nature, which gave them fruits that Giovanni dared to throw away with such a complete disregard.
Giovanni, however, was so committed to excellence that he accepted the risk of producing even less in order to raise the quality of his wine by developing new techniques and testing ground-breaking processes. Still, the sharecroppers were dependent on volume, since their income was based on the quantity of grapes they were able to collect: the more, the better. Understandably, they were skeptical about Gaja’s wasteful approach. To reassure them, but also to make them follow stringent orders, Giovanni decided to hire them as employees. As a result, they could work without worrying about the harvest. More importantly, they had to tolerate the landowner’s legendary eccentricities and obey him—“even those who thought he was crazy” (Ferrero, 2018).
The innovator, intimately involved in all particulars of viticulture, has been rewarded for this attitude. Today, the winery—which celebrated its 160th anniversary in 2019—is recognized as a worldwide reference for quality and modernization.
We do not relate this anecdote merely out of a love of good wine. This is a good example of mutualization of risk, integration of the production chain, organizational efficiency, investment in long-term relationships, support for commitment, promotion of incentive alignment, and, not less important, flexibility. Undoubtedly, it is a case of fruitful innovation. The Gajas’ story illustrates the argument that we made in an article recently published in the International Labour Review Special Issue on the Future of Work.
We do not relate this anecdote merely out of a love of good wine. Undoubtedly, it is a case of fruitful innovation.
Contrary to warnings about the imminent fall into disuse of the standard employment relationship in the wake of technological disruption, calls for deregulation and the rise of alternative business models, existing social institutions may well co-exist with authentic modernization, even in the era of smart factories, hyper-digital systems and gig work. They can be true innovation facilitators, upholding and accelerating the digital transformation by providing legal solutions to genuine requests for flexibility.
In the article, we present employment regulation as a resilient and developmental legal tool, capable of adapting to constantly changing socio-economic landscapes. Moreover, we show that, compared to non-standard employment templates, standard forms of employment offer various efficiencies and cost advantages that cannot be disregarded if—as in the winemaker’s case—the purpose is to implement innovative and effective organizational strategies.
First, they allow for the full exercise of managerial prerogative and functional flexibility in the use of the workforce—all the more so after the recent reforms implemented in several European countries in order to reduce purported rigidities. Second, standard employment and its regulation constitute the most effective device to deliver training and nurture long-term investment in firm-specific or transferable skills, which are key strategies for innovating and competing successfully.
After describing the processes of the vertical disintegration of the firm and “platformization” of labor relations and their impact on regulation, we rebut the allegation that the existing legal frameworks are unsuitable for dealing with changing business needs and unforeseen situations. The organizational function of employment, as a cornerstone of business’ flexibility, has not experienced any decline. As shown in the article, the foundational aspects of the employment relationship are adaptive enough to be relevant for a wide array of business models. The key element of the employment relationship is the worker’s personal subjection to the organizational, monitoring and disciplinary powers of the employer. More specifically, managerial power—whatever the means used to exercise it—and the duties of obedience, loyalty and co-operation are hallmarks of the employment relationship.
The over-reliance on work arrangements that are excluded from meaningful labor protection results in lower productivity growth because it erodes firm-specific skills and decouples managerial power from protective obligations. If at all, what we are experiencing in todays’ labor markets is an expansion of managerial powers and prerogatives well beyond the traditional sphere of the employment relationship, without this being accompanied by the elements of social and labor protection of employees that are a usual legal counterweight to those powers. Therefore, while the organizational features of employment remain as a cornerstone of modern firms, as we argue in this article, adopting new legal frameworks to extend protection well beyond the traditional scope of the employment relationship could be opportune. This would much better align effective protection to the new reality.
There is no inconsistency between labor regulation and innovative organizational patterns. Moreover, the evidence indicates that classifying workers as employees does not entail a loss of flexibility for employers and businesses.
The winemaker’s decision to hire the sharecroppers as waged employees illustrates how, far from setting up and operating a light business, disruptive firms need to be functionally flexible in order to anticipate, lead and react to changes in economic circumstances and operational requirements. In addition, the inherent flexibility of standard contracts represents a powerful vehicle for integration and success. Viewed in this way, there is no inconsistency between labor regulation and innovative organizational patterns. Moreover, the evidence indicates that classifying workers as employees does not entail a loss of flexibility for employers and businesses. Therefore, at a time when both employers and workers crave more flexibility, autonomy and discretion, the goal should be a labor market where innovation is a synonym for flexible, yet regular, employment, high-quality jobs, sustainable conditions and enhanced dynamism.
Aloisi A. and De Stefano V. (2020), “Regulation and the future of work: The employment relationship as an innovation facilitator” in International Labour Review, Vol. 159, No. 1, pp. 47-69.
Antonio Aloisi is an assistant professor of European and Comparative Labour Law. Prior to joining IE University, he was a Max Weber postdoctoral fellow at the European University Institute (EUI), Florence, and an academic fellow at Bocconi University, Milan. His research focuses on forms of work in the so-called “platform economy,” the effect of digital technologies such as artificial intelligence and algorithms on labor regulation, and new processes of collective action.
Prof. Dr. Valerio De Stefano joined the Institute for Labour Law and the Faculty of Law of the University of Leuven as a BOF-ZAP Research Professor in October 2017. He earned his master degree and doctoral degree at Bocconi University. Prof. De Stefano acted as a consultant for the International Labour Office, Eurofound, the Joint Research Center of the EU Commission and national governments. In addition to numerous academic conferences, lectures and seminars, he was invited to speak as an expert on the labor protection of new forms of work at the European Parliament, the European Social and Economic Committee, the OECD, and the Parliament of Brussels.
Note: The views expressed by the author of this paper are completely personal and do not represent the position of any affiliated institution.