Should collective action be protected by the law (as labor law would suggest), or prosecuted by it (as antitrust law would suggest)?

by Sanjukta Paul

As questions of economic justice and fairness have moved toward center stage in recent years, a seemingly technical legal issue that turns out to be a kind of microcosm of many of those questions has also emerged from obscurity. Economic activity that exists in the hazy space where labor regulation and market regulation intersect presents a stark question: when the people engaging in that activity act collectively to better their circumstances, should such collective action be protected by the law (as labor law would suggest), or prosecuted by it (as competition or antitrust law would suggest)? The problem of precarious or contingent work, which is generally on the rise the world over,[i] has brought renewed relevance to that question.

One of the most visible manifestations of precarious work is in the so-called on-demand or gig economy, exemplified by companies such as Uber. Companies in this sector generally argue that their growth is due to technological innovation, while many labor and community advocates argue that is largely due to the avoidance of socially beneficial regulation, which in turn enables them to undercut existing businesses. These companies also take the position that people providing the services in which they deal (such as cab rides) are not employees, but independent businesspeople, and thus that labor regulation does not apply to them. One response has been to argue, in the courts and the legislatures, that such workers are legally employees, and have been misclassified by the companies engaging their services. The City of Seattle recently took a different and more direct approach, enacting an ordinance granting collective bargaining rights to drivers for taxicab, limo, and “transportation network companies” (encompassing Uber, Lyft and other companies in the on-demand sector) who are classified as independent contractors rather than employees. The approach of the policy-makers and advocates who passed the Seattle ordinance is novel in that it guarantees these rights to workers directly, rather than endeavoring to first establish their employee status, whether by legislation or by litigation. As expected, an industry group (the United States Chamber of Commerce, no less) has now filed a lawsuit challenging the ordinance on grounds that it is barred by antitrust law and by the National Labor Relations Act.

In this case, antitrust is the leading edge of the challenge.[ii] The first sentence announces the plaintiff's main complaint: that the ordinance “purports to enable … distinct economic actors … to collude on the prices and terms for their services,” which is to say, to engage in price-fixing.[iii] In other words, for drivers to bargain collectively over wages and working conditions is to engage in business collusion. The remaining introductory paragraphs expand on this theme, embellishing the central point with warm salutes to America's “entrepreneurial spirit,” “entrepreneurial tradition,” and “backdrop of market freedom” — an “exceptional feature” that “distinguishes our economy from much of the rest of the world,” and which benefits workers in the on-demand sector, according to the plaintiff.[iv] (One cannot help but wonder whether these unfolding events supply one explanation for this theme of American exceptionalism.) Of course, this narrative has been widely challenged by worker and community advocates as “valoriz[ing] insecure conditions as a good thing for workers and communities.”

The complaint then characterizes the ordinance as “governmental interference.”[v] Yet antitrust itself is, by definition, government interference in economic activity, and the plaintiff expressly invokes a body of case-law that consists in “governmental interference” in the actions of private parties. In fact, the underlying theory of the suit is that the government ought to constrain working people's collective action. It is thus an especially stark inversion of the conventional wisdom that industry endeavors to avoid state interference in economic activity, while labor and other social interests seek it.

Indeed, this lawsuit is a bold reincarnation of an earlier, pre-New Deal style of legal attack on workers for acting collectively to improve their circumstances. Of that earlier family of legal theories, antitrust is the only real surviving species.[vi] Previous recent rumblings, though significant in their effects,[vii] have not forced courts or policy-makers to directly confront their underlying logic. There is nothing in the Sherman Act to prevent courts and other policy-makers from now fashioning an approach that would permit these drivers to act collectively in their economic interest; and there is everything about the strange history by which the statute was turned into a weapon against worker collective action in the first place, to recommend such a project. The legal systems of similarly situated economies in Europe and Australia have already seen starker confrontations than we have, but nowhere have the fundamental problems posed by this confrontation been definitively resolved. The time is ripe to address them.[viii]

The Sherman Act itself, passed in 1890, was a legislative response to the rise of corporate power in the economy and the polity, and was not intended to prevent workers' or farmers' collective action. Attorney General Richard Olney, hardly a rabble-rousing radical, called the application of the Act to “the combination of laborers known as a strike” a “perversion of a law from the real purpose of its authors.”[ix] Contemporary scholars surveying the legislative history have concluded that “one of the clearest themes in the legislative history was the notable reluctance, even opposition, to including labor unions within the act's scope.”[x] Senator Sherman himself, addressing those concerns, declared: “combinations of workingmen to promote their interests, promote their welfare, and increase their pay . . . are not affected in the slightest degree, nor can they be included in the words or intent of the bill.”

I have argued that Gilded Age courts' subsequent extension of the Act to workers, notwithstanding legislative intent, relied upon a fundamental equivocation in the use of the label ‘free trade,' between two distinct concepts: freedom of contract, and the free flow of trade. One is an abstract, normative ideal; the other, a tangible policy project. While the equivocation exists elsewhere, the body of law extending the Sherman Act to workers cleaves the two senses of the phrase “free trade” apart especially clearly. These pivotal cases protected the free flow of trade—necessary to the constitution of new markets, particularly the national market—against workers' liberty interests in collective economic and political action. Thus the courts actually subordinated workers' freedom of contract to the project of building the national market. That same equivocation lives in various forms today, and can be glimpsed in the Seattle lawsuit, which complains that the ordinance would “balkanize the market for independent contractor services and inhibit the free flow of commerce among private service providers around the Nation.”[xi] Protecting that market for “independent contractor” labor, i.e., labor stripped of its New Deal social and economic context, does not follow inexorably from the ideal that ultimately drives modern antitrust law, economic efficiency. No more than the Gilded Age project of market-building could be derived from the then-reigning ideal of freedom of contract. Defining and protecting such a market is instead a very specific policy choice; its very existence is not some natural fact, but in part a creature of the laws and regulations upon which market actors such as Uber rely. In fact, it's very likely that the plaintiff in this case will argue that the court should not even inquire whether the Uber business model, or the collective bargaining scheme permitted by the ordinance, promotes overall economic efficiency or not. Instead, plaintiff will argue that the “per se” rule by definition condemns such collective action. The central, unstated assumption is that the purported benefits (profits for the owners; convenience and lower prices for consumers) automatically trump workers' interests in living wages and in a voice in their workplace … without so much as taking a measure of those considerations.

The very fact that exclusion from antitrust prosecution hinges on the category “employment” is a much more contingent development than one might assume. In fact, the common law category of employment extant at the time the Sherman Act's passage was much narrower, and encompassed a much smaller proportion of working people, than the modern category does. Sherman's and other legislators' statements about excluding workers' (and farmers') collective action from its ambit cast a broader net, and seem to be rooted in a more basic notion of economic power.

This lawsuit invites contemporary policy-makers to again broaden the set of considerations that will determine whether an instance of collective action by workers will violate antitrust laws. While employee status determinations do include some considerations of economic power, these alone are not legally sufficient to establish an employment relationship. For example, monopsony power tends to characterize labor markets, but is not sufficient to establish an employment relationship. (Moreover, those actors with relative economic power, “power buyers” of services such as Uber, are precisely in a position to control many of the other factors that then determine employee status.) Yet monopsony and other measures of relative economic power better help us identify the sorts of actors whose collective action we might want to exclude from antitrust constraints, than do the somewhat idiosyncratic markers of a legal relationship (employment) that is neither necessary nor universal. In fact, we see these considerations better represented in strains of the price-fixing case-law than in labor law. Applied to the market for for-hire drivers, this broader analysis of economic power would almost certainly permit the collective action contemplated by the Seattle ordinance. While that analysis fell into disfavor as the per se rule and with it neoclassical antitrust analysis reached its apex, we are past the apex now. The time may be ripe to move away from it definitively, and to acknowledge the inherent social, economic, and moral value of decent wages and working conditions, and of acting collectively to secure them for oneself and one's fellows.