The Case for Letting Uber Drivers Organize

(Bloomberg View) -- Ride-hailing apps are surging in popularity, but the legal status of drivers who earn a living from them remains unresolved. Companies like Uber and Lyft contend that, because drivers are independent contractors and not employees under the U.S.’s various labor and employment laws, any attempt to form unions or bargain collectively for higher wages violates antitrust laws.

Until now, that assumption has been widely shared — but it’s based on a failure to understand why concerted activity by workers is protected against antitrust liability. Labor’s antitrust shield was established by the 1914 Clayton Act, in which Congress determined that “the labor of a human being is not an article in commerce.” A two-year-old Seattle ordinance, now in federal litigation, provides an opportunity for courts to extend these century-old labor rights to workers in the digital economy.    

Conventionally, only workers defined as “employees” are viewed as having the right to organize without violating antitrust laws. Individuals are considered employees only if their boss can control when and how they do their work — what is called the common law’s “right to control” test.   

Under this view, people who provide their products or services directly to the public are prohibited from banding together with peers to try to raise wages and improve working conditions. For all intents and purposes, these independent contractors are considered business owners. They can form associations to share information and lobby for their interests — like the so-called Freelancers Union — but cannot form an organization that insists on collective bargaining. Allowing businesses to join together with competitors to fix prices or carve up markets, the argument goes, represents a combination against the welfare of consumers.

How should Uber and Lyft drivers be treated? Smartphone apps have enabled companies to enlist huge workforces without assuming the responsibility of controlling when and how the work is being done. Uber drivers receive no employee benefits, no right to form unions, no protection from employment discrimination, and no workers’ compensation or unemployment insurance — all because they are not statutory employees under the “right to control” test.

At the same time, Uber and Lyft collect fares and remit income to drivers, just as traditional companies do with their workers. Drivers are treated as independent businesspersons even though their only “business” is to sell their services at prices and conditions dictated by the platforms. They are “price takers,” not price setters.

The Seattle ordinance, passed by the city council in 2015, would protect drivers from being fired for engaging in joint action. (I authored a pro bono amicus brief with the Ninth Circuit Court of Appeals in support of the ordinance.) Given the prevailing “right to control” test, Uber and Lyft drivers may not be protected by all employment laws. But at the very least, they are entitled to engage in collective action without risk of antitrust liability.  This is because of the Clayton Act, which preceded by two decades the affirmative legislation of the 1930s. In 1941, the Supreme Court confirmed that the Clayton Act, coupled with a latter statute broadening the scope of a protected “labor dispute,” established the right of workers to organize in their own interests free of civil and criminal liability under the antitrust laws.

From the start, that antitrust exemption has applied to workers who sell only their services, without any significant capital investment. Individuals who are principally engaged in selling goods are not covered by the exemption. Neither are those whose services involve investments in an office space and equipment, hiring staff, and advertising themselves as a business. The only investment that Uber and Lyft drivers make to their “businesses” is to supply their own vehicles. By any reasonable standard, the antitrust exemption should apply to them, too.

If the Seattle ordinance survives challenge, more cities may pass similar laws. Even without them, workers can claim the Clayton Act exemption in seeking to improve their lot in a rapidly changing economy.     

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Samuel Estreicher is a law professor at New York University and director of its Center for Labor and Employment Law. 

To contact the author of this story: Samuel Estreicher at samuel.estreicher@nyu.edu.

To contact the editor responsible for this story: Romesh Ratnesar at rratnesar@bloomberg.net.

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