Regulation and the future of work: The employment relationship as an innovation facilitator

• Author: Valerio STEFANO,Antonio ALOISI
• DOI: http://doi.org/10.1111/ilr.12160
• Date: 01 March 2020
• Published date: 01 March 2020

International Labour Review, Vol. 159 (2020), No. 1

Copyright © The authors 2 020

Journal compi lation © Inter national La bour Organ ization 2020

* IE Law School, IE University, Madrid, email: antonio.aloisi@ie.edu. ** KU Leuven, University

of Leuven, email: valerio.destefano@kuleuven.be. Valerio De Stefano’s contribution to this study was

carried out within the framework of the Odysseus grant “Employment rights and labour protection

in the on-demand economy” awarded by the FWO Research Foundation – Flanders.

Responsibility for opinions expressed in signed articles rests solely with their authors, and

publication does not constitute an endorsement by the ILO.

Regulation and the future of work:

The employment relationship

as an innovation facilitator

Antonio ALOISI* and Valerio DE STEFANO**

Abstract. Digital transformation and the reorganization of the rm have given

rise to new forms of work that diverge signicantly from the standard employment

relationship. Advocates of digital disruption suggest that the existing legal frame-

work cannot accommodate “innovative” working templates and business models.

This article, however, argues that labour regulation can continue to facilitate in-

novation, presenting the employment relationship as a exible instrument, and

standard forms of employment as the means of achieving eciencies and cost ad-

vantages. First, they allow for the full exercise of managerial prerogative and at-

tendant internal exibility in workforce deployment, and, second, they constitute

an eective device to deliver training and develop skills.

Keywords: future of work, technological change, regulation, labour exibility, cost

eectiveness, employment relationship, platform work.

In a recent interview, Angelo Gaja – one of Italy’s iconic wine producers – shared

a revealing anecdote about the secret of his wine’s long-standing tradition of suc-

cess (Ferrero, 20 18). In the middle of the last century, his father Giovanni was

obsessed with the idea of developing a superior Barbaresco wine by using 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 Barba-

resco, in the 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 it was a

crime against Nature.

Giovanni, however, was so committed to excellence that he accepted the risk

of producing less in order to raise the quality of his wine by developing new

International Labour Review

48

techniques and testing groundbreaking processes. Still, the sharecroppers were

dependent on volume, since their income depended on the quantity of grapes

they were able to collect: the more, the better. Understandably, they were scep-

tical about Gaja’s wasteful approach. To reassure them, but also to make them

follow 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” (ibid.).

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 eciency, investment in long-term relationships, support for

commitment, promotion of incentive alignment, and, not least, exibility. Un-

doubtedly, it is a case of “fruitful” innovation. The Gajas’ story illustrates the ar-

gument that we intend to make in this article. Contrary to warnings about the

imminent fall into disuse of the standard employment relationship1 in the wake

of technological disruption 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. Social institutions

can be true innovation facilitators, upholding and accelerating the digital trans-

formation (Däubler, 20 04), by providing legal solutions to genuine requests for

exibility. In particular, hierarchical models based on authority mechanisms

are crucial for businesses, since they provide structures that can issue and en-

force guidelines and directives quickly and eectively (Simon, 1991). This allows

rapid adjustments of production lines to meet new requests or requirements and

results in a signicant amount of organizational elasticity (De Stefano, 2009).

When it comes to pursuing innovative strategies, exibility, motivation and in-

volvement are crucial: the employment relationship might well provide both

contractual parties with these.

This article represents the employment relationship as a resilient and de-

velopmental legal category, capable of adapting to constantly changing so-

cio-economic landscapes. Moreover, it shows that, compared to non-standard

employment templates, standard forms of employment oer various eciencies

and cost advantages that cannot be disregarded if – as in the winemaker’s case

– the purpose is to implement innovative and eective organizational strategies.

First, they allow for the full exercise of managerial prerogative and functional

exibility in the use of the workforce – all the more so after the recent reforms

implemented in several European countries in order to “mitigate” alleged rigid-

ities (Carinci, 2 004). Second, the employment relationship constitutes the most

eective device to deliver training and nurture long-term investment in rm-

specic or transferable skills, which are key strategies for innovating and com-

peting successfully. Conversely, in non-standard arrangements, the contingent

1 “Employment relationship” is an umbrella term covering the “standard employment relation-

ship”, which is only one of its modalities. The former “expands the coverage of EU labour regulation

from a narrower scope limited to a ‘contract of employment’, based on the criterion of subordina-

tion of the employee to the employer” (Eurofound, 2011). “Standard employment relationship” is

“understood as work that is full time, indenite, as well as part of a subordinate and bilateral em-

ployment relationship” (ILO, 2016, p. 7).