Antitrust Division Urges NLRB to Protect Competition in the Gig Economy by Redefining “Employee”
By Sarah Bayer, Janice Johnson, and Margaux Poueymirou
The rise of the “gig worker” is creating novel and significant issues that are not going to be resolved without a lot of heavy lifting by both antitrust enforcers and labor regulators.
The Antitrust Division of the United States Department of Justice (“DOJ”) recently dealt with one of these issues—how to protect competition in the “gig economy”—when it took the unusual step of filing an amicus brief in The Atlanta Opera, a National Labor Relations Board (“NLRB”) case considering the definition of “employee” under labor law.
The definition of “employee” is extremely important because it can determine whether a worker will be protected or prosecuted by the law. Because gig workers are generally classified as independent contractors rather than employees, they do not enjoy one of the most basic protections under federal labor law: the right to form a labor union and collectively bargain. And because the statutory and non-statutory labor exemptions under federal antitrust law have traditionally been read to apply only to labor organizations and employees[1], gig workers are vulnerable to antitrust enforcement for engaging in classic labor-related conduct that seeks to improve their lives and working conditions.
The Antitrust Division’s prudent decision to file an amicus brief in The Atlanta Opera no doubt reflects the increasing prevalence of “gig workers” and “gig economies” in the American landscape.
The last 15 years have seen a significant increase in the number of “gig workers,” loosely defined as individuals hired on a limited-engagement basis and paid by the task or project. The exponential rise of gig work has been driven by the growth of platform-based systems—such as Uber, Instacart, and Task Rabbit—that serve as intermediaries directly connecting gig workers to consumers. At the same time, there has been a notable rise in employers misclassifying traditional employees as independent contractors in order to avoid the associated costs of unemployment insurance, health insurance, and the like.
Current NLRB case law holds that gig workers, as well as workers in other flexible and nontraditional working arrangements, are independent contractors.
Although The Atlanta Opera pertains to unionization rights for hair and makeup professionals, it is expected to have implications for gig workers and other putative independent contractors more generally. Citing an interest in the matter based on the intersection of antitrust law and labor, the Antitrust Division argues in favor of modernizing the NLRB’s definition of “employee,” without taking a position on the substance of that definition. The Division outlines the potential risks of antitrust liability imposed by an ambiguous definition of employee. It notes that, even though the DOJ may exercise its discretion not to prosecute workers whose status as employees is unclear, firms and other interested parties could still bring private suits against those workers if they seek to organize. Furthermore, firms themselves are at risk of liability to the extent that they set the prices at which these disputed workers offer services to consumers, as is true of many gig platforms.
The Antitrust Division highlights three ways that an ambiguous definition of employee may create competitive harm. If workers are wrongly classified as independent contractors, employers may take advantage of workers’ lack of bargaining power to illegally coordinate the terms of their employment. Firms may also take advantage of the ambiguity in worker classification to impose one-sided contract provisions like non-competes that themselves are anticompetitive. Moreover, firms may gain an unfair advantage over competitors who are fully compliant with worker classification law. The Division cites economic evidence showing that a growing number of workers—disproportionately low-wage workers—have been classified as independent contractors in recent years, implying that workers are being so classified not as a matter of “entrepreneurial initiative,” but as an exercise of unequal bargaining power by employers.
As DOJ’s brief calls out, the NLRB has revised its definition of employee in each of the past two presidential administrations, and now is poised to do so again. Many states have wrestled with similar issues. California passed a law in 2019 codifying an employment test that categorized rideshare drivers and similar gig workers as employees. The following year, gig economy companies—including Uber and Lyft—subsidized a successful referendum campaign to exclude these drivers from the definition of employees. A California court, in turn, has deemed the referendum invalid and blocked it from going into effect. A similar ballot initiative may soon be before voters in Massachusetts. Meanwhile, a new Washington law classifies Uber and Lyft drivers as independent contractors while requiring the firms to provide certain benefits to workers. As a result, workers and firms are left in a state of limbo or even whiplash.
The pro-labor Biden administration is unlikely to prosecute gig workers for engaging in collective action. The administration has shown that it is thinking critically and positioning itself to act against firms that misclassify workers to gain an unfair competitive advantage. Tim Wu, Special Assistant for Technology and Competition Policy in the Biden White House, commented that worker misclassification should be “carefully examined for legality under the antitrust laws.” The first of its kind Memorandum of Understanding between the Antitrust Division and Department of Labor, executed in March 2022, raises the prospect that the Labor Department could share information regarding worker misclassification with the DOJ to aid in its investigations.
FTC Commissioners Chopra and Slaughter, as well as Chair Khan, have all suggested antitrust reforms to address these issues, including expanding or clarifying the antitrust labor exemptions to protect gig economy workers and independent contractors, and ensuring that antitrust enforcement focus on market abuses by dominant firms—not collective bargaining efforts by so-called non-employees.
The United States will not have effective—and just—labor and antitrust policies unless both bodies of law acknowledge that workers come in all sorts of shapes and sizes: employees, independent contractors, and even quasi-employee/gig workers. All workers should be protected from antitrust scrutiny when they engage in collective bargaining and other classic labor-related conduct. Firms also need to be able to rely on stable rules of competition in formulating their employment policies.
The Antitrust Division is taking a step in the right direction by recognizing that labor laws need to change with the times.
[1] FTC v. Superior Court Trial Lawyers Association, 493 U.S. 411, 1110 S. Ct. 768 (1990).
By Sarah Bayer, Janice Johnson, and Margaux Poueymirou
Edited by Gary J. Malone