Trump's labor pick will be a big win for 'gig economy' start-ups like Uber

Donald Trump's administration is likely to resist new labor regulations, which could be a boon for some start-ups.

Andrew Puzder — an antiregulation, pro-entrepreneurship Labor secretary — will take office as a growing share of Americans earn income from start-ups like Uber and Airbnb, where work is more flexible but less certain than a traditional job.

President-elect Donald Trump gestures as Andy Puzder, CEO of CKE Restaurants, departs after their meeting at the main clubhouse at Trump National Golf Club in Bedminster, New Jersey, U.S., November 19, 2016.
Mike Segar | Reuters

Still, while new mandates may not come from the Trump administration, companies will continue to face mounting pressure to provide safety nets for their workers, sharing economy executives told CNBC.

"I hope the secretary thinks about all workers and this trend that people are moving toward more independent arrangements," said Marco Zappacosta, co-founder and CEO of Thumbtack, an online platform that connects customers to local professionals for tasks like house painting, personal training and voice lessons. "The biggest one is basically leveling the playing field in terms of benefits and privileges between W-2 employees and independent workers of all stripes."

'I don't like regulation'

While freelance jobs have existed for decades, more workers now list their services via on-demand platforms like Postmates or TaskRabbit. Many of these non-W-2 jobs involve working as an independent contractor without employer-sponsored benefits, the so-called "gig economy."

Proponents of the gig economy, like Uber CEO Travis Kalanick, have urged politicians to look at the thousands or millions of jobs they create, rather than the more stable industries they disrupt.

That would almost certainly ring true to Andrew Puzder, the chief executive of the restaurant company behind Hardee's and Carl's Jr. Puzder has not officially been named as labor secretary, but a source said he would be nominated by Trump.

Puzder credits start-ups as the driver of the U.S. economic engine, calling "entrepreneurial vision and ambition" the invisible hand of America's economy, according to a book he co-authored. Puzder has advocated the repeal of Obamacare and lambasted campaigns to raise the minimum wage or increase overtime pay.

"Far too many politicians believe that government can orchestrate economic activity through regulations and taxation. We beg to differ," Puzder wrote in his book.

Trump doesn't want Airbnb in his buildings
Trump doesn't want Airbnb in his buildings

Hotelier Trump, who has also been accused of stiffing some contractors himself, told CNBC last year that he was trying to stop the use of Airbnb in his buildings — but he also said that he wouldn't want to regulate them out.

"A lot of people are happy with [Airbnb]. A lot of landlords are liking it a lot," Trump told CNBC. "And then of course there are some groups — hotels in particular — that aren't. As to whether or not it should be regulated, I don't like regulation. I'm not a person that believes too much in regulation."

Linda McMahon, Trump's pick to lead the Small Business Administration, has also called for more certainty about regulations for entrepreneurs. Elaine Chao, who Trump has tapped as U.S. transportation secretary, was favorably received by Uber and Lyft.

Trump's campaign, as well as his opponents', used Uber to get around this year.

'There needs to be safety nets'

The new administration's comments are a departure from the views of current U.S. Labor Secretary Thomas Perez, who told CNBC last year that the gig economy presents "false choices" between regulation and innovation.

"I hear some people who say that, well, we either innovate or we regulate and the best way to help build the 'Ubers' of the world is to make sure that there's no regulation," Perez said. "That's just flat wrong. That's a false choice."

Under the Obama administration, "gig" work has spiked: Over the past decade, contingent workers have increased by roughly one-half and now make up 16 percent of the workforce, according to a study conducted by researchers Larry Katz and Alan Krueger and cited by the Federal Reserve.

But calls for more regulation have threatened to unravel the growth of the freelance economy.

Hundreds of Uber drivers in two dozen cities have campaigned for a hike in the minimum wage, for instance. Workers at Instacart have sued the company over their classification as independent contractors and alleged the company mishandles their tips. Other platforms have faced different regulatory hurdles: New York lawmakers, pressed by tenants' rights groups, have said that Airbnb is breaking the law with its services.

While many of these battles take place at the local level, there needs to be some federal involvement for contractors that work across state lines, said Rishon Blumberg, cofounder of 10x Management, which connects companies to freelance technologists.

"I do think there needs to be some legislation — that there needs to be safety nets," Blumberg said. "I don't want to call it 'benefits,' per se, but if a worker spends a fair chunk of time working for a company, then the company would have to contribute into a benefits pool."

Even without federal intervention, Blumberg said he expects that gig economy companies will begin to self-regulate. One example is Hello Alfred, an on-demand personal assistant platform that treats its workers like regular employees, and was visited this month by Labor Secretary Perez.

"This is a seismic force moving in one direction that transcends administration, that has to do with how successful these business models are," Hello Alfred CEO Marcela Sapone said. "I think the Trump administration will potentially not weigh in on the issue. When you have a growing share of the economy that doesn't have health care built into their employment choice, you have to build that support system yourself."

But battles over benefits also illustrate how "gigs" like driving shouldn't be overemphasized by the new labor secretary, said Zappacosta. Instead, he said, the freelance economy should focus on empowering small businesses or skills-based entrepreneurship, as tasks like driving are replaced by autonomous vehicles.

"It's an unfortunate reflection of the regulatory environment that they want to provide benefits and can't," Zappacosta said. "They want to retain their drivers, but they are worried about the exposure. It's a good example of why we need to evolve what we currently have."

In many cases, this does mean simplifying regulation, Zappacosta said. One such example is Obamacare, which has forced small businesses to battle with convoluted and burdensome regulations, even as it helped younger independent workers stay on their parents' plans and buy from exchanges.

Trump campaigned on repealing Obamacare, but has since softened on some parts of the law.

"As long as there is some form of easy to access, affordable health care, [the freelance economy] will continue to burgeon," Blumberg said. "But obviously the benefits of being at a W-2 position increase."

— Reuters and CNBC's John Harwood contributed to this report.