Labor’s Antitrust Problem: A Case for Worker Welfare

abstract. The common-law definition of “employee” has been subject to increased scrutiny after accusations that companies, notably Uber and Lyft, deprive workers of benefits by classifying them as independent contractors. States have responded by broadening the definition of “employee,” but these workers remain subject to antitrust liability for organizing. This Note demonstrates that such worker liability is economically suboptimal and inconsistent with legislative history, and that antitrust law must preserve worker welfare. Returning to the liability currently faced by independent contractors, this Note proposes a two-pronged approach, based in federal agency guidance and state legislation, for importing a broader definition of “employee” into the antitrust context.

author. Yale Law School, J.D. 2020; Yale College, B.A. 2016. I am deeply grateful to Professor Zachary Liscow for his guidance and encouragement, as well as my peers in his Spring 2019 class, “Inequality: Economic and Tax Policy,” and Fall 2019 workshop for their feedback on earlier drafts. I would also like to thank Professors Max Huffman, Christine Jolls, George Priest, and Fiona Scott Morton for their helpful comments. Finally, I am indebted to Adam Kinkley and the staff of the Yale Law Journal for their careful edits and thoughtful suggestions.

Introduction

In 2016, an Ethiopian immigrant Uber driver filed for bankruptcy after Uber decided that his Lincoln Town Car no longer qualified for its premium Uber Black service.1 Despite driving sixteen hours per day for Uber’s standard service, he was unable to make payments on his Uber-provided car and phone. In an interview, he explained:

The thing is, we don’t have [a] union, and nobody [is] going to listen to us, and we just accept[] whatever they say. So we don’t have any choice to fight with these people. They’re millionaires, they have the money, so they can do what they want, and there’s no competition.2

According to an estimate by McKinsey, up to twenty to thirty percent of the working-age population in Europe and the United States engage in “independent work” of the sort engaged in by Uber drivers.3 While many forms of independent work pay well, anecdotes from for-hire drivers reveal that many independent contractors fear for their personal safety and work long hours for little pay, while having limited leverage to demand better.4

The same year, Seattle tested the boundaries of antitrust law by passing Ordinance 124968, which allows for-hire vehicle drivers to bargain collectively with their managers.5 Many for-hire drivers, like Uber and Lyft drivers, are not formally employed by their managers and do not fall under the collective bargaining protections of the National Labor Relations Act (NLRA), which applies only to employees.6 By granting independent contractors the right to bargain collectively, Seattle’s ordinance sits at the boundary of antitrust law’s labor exemption. While unions of employees are exempt from antitrust liability under express provisions in the antitrust statutes,7 courts have long held that associations of independent contractors are not exempt.8 Therefore, contractor organizations enabled by the Seattle ordinance may violate the antitrust laws.9

The ordinance is one response to growing concern over the rights of independent contractors in the gig economy, where workers have autonomy over some aspects of their work (e.g., hours) but also often lack control over their wages and are subject to stringent conditions regulating use of the gig platform.10 States have passed legislation to expand the legal definition of employment used in minimum-wage orders, benefits requirements, and unemployment insurance statutes11—but what remains notably absent from the discussion, and this resulting legislation, is whether independent contractors should be protected from antitrust scrutiny. The Seattle ordinance brings this question to the fore and poses a larger question about the broader goals of antitrust: how should the law balance its concern for deconcentrating power against the recognized right of labor to organize, and under what guiding principle?

To maximize social welfare and give force to the original purpose of the federal antitrust laws, antitrust law must preserve worker welfare. This Note develops and applies a worker welfare standard to the specific case of independent contractors to show that such contractors should be allowed to organize under certain conditions. While the question of independent-contractor organizing is not new12—nor is the notion that antitrust law should protect laborers13—this Note contributes to the literature by (1) outlining a worker welfare standard for antitrust law, drawn from legislative history and welfare economics and (2) proposing that agency guidance and state action are two potential mechanisms for promoting independent-contractor welfare.

As a policy matter, the objectives of antitrust law in the United States remain hotly contested.14 While the proximate goals of antitrust are generally clear—to prevent the accumulation and exercise of market power—case-by-case analysis reveals subtleties and competing concerns that can only be resolved by appealing to some larger guiding principle. Perhaps the most familiar guiding principle is consumer welfare: one understanding of consumer welfare, pioneered by economists of the Chicago School, suggests that antitrust enforcers should be primarily concerned with maximizing output and minimizing price, because both are good for consumers.15 Under this view of consumer welfare, a merger between two large companies is viewed as generally harmless from an antitrust perspective if it results in lower prices. But many have critiqued this formulation for excluding important factors like quality and innovation.16 And more recently, scholars in the neo-Brandeisian tradition argue that antitrust enforcers should prioritize competition—that is, they should ensure that companies must fight for business to prevent the undue concentration of economic and political power in any single entity.17 Following this latter approach, a large company that reduces prices may still be harmful if it excludes competitors.

But these principles alone cannot justify antitrust law’s labor exception. From the consumer welfare perspective, labor organizing may be detrimental because it can lead to increased consumer good prices and restricted output. Likewise, if the goal of antitrust is to better society by limiting consolidation among economic actors, one would expect antitrust law to limit union activity.18 But the antitrust statutes do the opposite: labor organizations are exempted from antitrust liability under section 6 of the Clayton Act,19 and federal courts no longer have jurisdiction to enjoin lawful labor actions, even for antitrust reasons, under the Norris-LaGuardia Act.20 To an observer who believes antitrust exists to reduce consumer prices and increase output, these provisions may seem like anomalies. But we can resolve these anomalies in at least a couple of ways—modify our normative assumption about the aims of antitrust law or regard the union exemption as the product of interest-group politics. Even if we take the latter path, interest-group politics can reflect the democratic will and provide important insights into the purpose of antitrust.

In this Note, I show that the union exemption should be read to encompass a broader concern for the welfare of workers. In other words, antitrust law should be seen not merely as protecting consumers from producers, but also labor from capital. My primary justification is drawn from welfare economics and the “theory of the second best,” which suggests that when a certain market distortion cannot be removed, it may be economically optimal (i.e., the next best option) to introduce a countervailing distortion.21 An ideal competitive labor market would have no market power on either the supply side or demand side, but some degree of rent-extracting market power on the demand side (i.e., firms) is inevitable due to the limited resources of enforcement agencies and labor-market frictions. If concentration is inevitable among employers, permitting concentration among workers is the next best way to (1) counteract abuse and rent-extractive behavior from employers and (2) move income from capitalists to workers, who by virtue of their relatively low income may receive higher marginal utility from income.22 Further justification can be found in the legislative history of the major antitrust statutes. During congressional debate over the antitrust laws, key legislators expressed their intent not only to preserve the organizing power of labor, but also to support affirmatively the accumulation of labor power to contest concentrations of capital.23 Thus, legislative intent provides justification for worker welfare beyond a strictly economic reading of the antitrust laws. Even when labor organizing may not be the most “efficient” economic choice,24 it may still comport with the drafters’ goal of protecting individuals from the economic power of corporations.

Worker rights under the antitrust laws have received more attention recently,25 particularly within the context of labor monopsony, or concentration in labor demand;26 but there is no judicial, political, or scholarly consensus around how or whether regulators should consider the welfare of workers when conducting antitrust analysis.27 This Note proposes a conceptual framework of worker welfare and then applies it to the case study of independent contractors’ organizations—an issue of concentration in labor supply. While independent-contractor liability under antitrust law for organizing has been well documented and criticized,28 this Note contributes to the literature by assessing that liability under a broader worker welfare standard and setting forth a policy proposal to remedy that liability.

In Part I of this Note, I present a normative framework, drawing on welfare economics and legislative history, to demonstrate that the goals of unions and workers are generally consistent with antitrust law. In Part II, I propose a doctrinal definition of worker welfare, drawing from the existing consumer welfare standard and labor economics. In Part III, I apply the standard to the case study of independent-contractor organizations, and present a two-pronged proposal for promoting worker welfare through those organizations, focusing on agency guidance and state action. Part IV concludes.