Antitrust Shield for Independent Worker Action Gains Momentum

Independent contractors’ drive to freely engage in collective action without violating antitrust laws is gaining allies following a recent appeals court win and a Federal Trade Commission that’s reversed course to support them.

Gig workers and other contractors are individually considered their own business entities. As a result, they have lacked statutory protections that allowed unions to form and employees to organize without worrying about being sued for illegal concerted action that otherwise would be in violation of the Sherman Act.

That hasn’t stopped hundreds of lawsuits that accused independent contractors of illegal collective action, such as strikes. But promising signs for gig workers are ahead even as the fight over how to classify them rages in statehouses and courtrooms.

Three Democratic FTC commissioners—in a 180-degree turn from decades of agency practice—said recently the FTC will no longer crack down on independent contractors’ collective action. The US Court of Appeals for the First Circuit held last year that a labor exemption to antitrust law protects independent contractors who organize for higher wages.

But gig workers’ campaign lacks staying power without sustained court wins or the passage of a federal law, labor and antitrust experts and FTC Commissioner Alvaro Bedoya told Bloomberg Law.

“The Commission can work within the bounds of its authority, individual commissioners can make clear what their guiding principles are, but ultimately, in an ideal world, Congress would step in and clarify this in statute,” Bedoya said in an interview. “Eventually, there will be a new administration. Eventually, that administration will be a different party. And so the only way to try and enshrine clear protections for workers is to do that in statute.”

So far, gig workers have been discouraged from organizing due to the threat of antitrust litigation, Bedoya said.

And relying on Congress to act could be a futile effort. The Protecting the Right to Organize Act, which sought to give greater organizing rights to independent contractors while reclassifying many of them, failed to pass the Senate in 2021.

Changing Perspectives

FTC Chair Lina Khan, seen as an aggressive enforcer of President Biden’s pro-labor antitrust agenda, wasted little time in conveying her views on the issue.

The commission should focus on monopolization and major mergers, rather than suing workers seeking to organize, Khan wrote in a September 2021 letter to Congress, three months after she was confirmed.

Khan’s Democrat-appointed allies at the agency—Commissioners Bedoya and Rebecca Kelly Slaughter—have independently made similar points.

The intent behind the laws that exempt workers from antitrust enforcement—the Clayton Act and Norris-LaGuardia Act—also has been to protect independent contractors, leaving enforcers to focus on the harm from major “trusts,” Bedoya said in a speech in Utah last month. Yet courts have repeatedly misapplied the law against gig workers, Bedoya said.

The FTC took a different stance as recently as 2017, when it weighed in to support a US Chamber of Commerce lawsuit to block a Seattle ordinance that would have allowed gig workers to collectively bargain with taxicab associations and ride-sharing companies, such as Uber Technologies Inc. and Lyft Inc.

The commission in 1999 investigated a group of port truckers attempting to negotiate a better contract with their employer.

But Congress—not the FTC—should be left to decide whether independent contractors are covered by the exemption, said Martin Edel, counsel at Goulston & Storrs.

“This seems like picking and choosing to favor workers where there’s no real need for it, because these workers have chosen to be independent contractors,” Edel said.

Jockeys’ Boycott

Contractors are also getting a helping hand from the First Circuit.

In Confederación Hípica de Puerto Rico Inc. v. Confederación de Jinetes Puertorriqueños, the court said the labor-dispute exemption shields a group of Puerto Rican jockeys from antitrust liability for staging a boycott and bargaining collectively.

That the jockeys’ dispute was purely about compensation and other labor issues—as opposed to separate economic activities that could raise antitrust issues—mattered to the US Court of Appeals for the First Circuit, said Herbert Hovenkamp, a professor at the University of Pennsylvania Law School.

“They didn’t own horses, and as a result, this was only a labor dispute,” Hovenkamp said.

The First Circuit’s order is inconsistent with previous court rulings, including the US Supreme Court’s decades-old Columbia River Packers Association v. Hinton, he said.

In Columbia River Packers, the justices withheld labor protections from a group of independent contractor fishermen who refused to sell fish to nonunion canneries. The contractors engaged in collusive activities to withhold selling commodities, and not just on issues related to compensation, the high court held.

That limits the exemption’s power to protect gig workers, Hovenkamp said.

“Uber drivers drive their own cars. What they’re selling is a combination of their labor and usage of their cars. It would be problematic to apply the First Circuit’s decision in this scenario,” Hovenkamp said.

“The import of the Puerto Rican jockeys case is not so much that it opens up a new line of legal claims, but that it removes, at least for those in the First Circuit, one legal argument that could be made against labor organization,” said Laura Alexander, the director of markets and competition policy at the Washington Center for Equitable Growth.

Classifiying Workers

In trying to get better compensation and other labor protections, independent contractors could find that the antitrust exemption provides a better shortcut than trying to get themselves reclassified as employees.

“The direction that these remarks are going is that the labor exemption to antitrust law is potentially broader than who is an employee under labor and employment law,” said Sanjukta Paul, a professor at the University of Michigan Law School. “There’s nothing in the law that says the exemption is only ‘limited to employees.’”

The Supreme Court recognized in Columbia River Packers that some independent contractors could be covered by the exemption if they are subjected to the level of employer control that an employee typically is, Bedoya said. That, in effect, means misclassification is secondary to the exemption.

“I very much think that there are cases where people have been classified as independent contractors, and on paper, they’re independent businessmen, but Columbia River Packers—properly understood—should allow them to still benefit from the labor exemption,” Bedoya said.

The legal risk from antitrust for gig worker collective bargaining has been significantly reduced in the last couple of years, noted Marshall Steinbaum, an economics professor at the University of Utah.

“That’s good news for workers,” Steinbaum said.