From JDSupra, Tracey Diamond amd Dylan DeWitt* discuss a recent case in which the court said that an individual’s independent contractor status does not prevent the application of an exemption to antitrust laws that allows cooperation among competitors if the the issue is a labor or wage dispute. Tracey and Dylan write:
Q: Does federal antitrust law bar independent contractors from engaging in a group boycott to increase wages and alter conditions of employment?
A: No. The First Circuit Court of Appeals recently held that an individual’s independent contractor status does not bar application of the labor-dispute exemption to antitrust law, which exempts collusion among potential competitors for the purpose of increasing wages or improving conditions of employment.
What Are the Case Facts?
In Puerto Rico, horse-racing jockeys are hired on a race-by-race basis and receive a $20 “mount fee” for each race in which they participate. Jockeys have long complained that, among other things, the mount fee is too low as it is 80% less than that received by jockeys in the mainland United States.
In June 2016, labor organizations, including the defendant, objected to jockey compensation and attempted to negotiate with the plaintiff, an organization representing the horse owners. When the negotiations failed, the labor organization mounted a work stoppage that resulted in 37 jockeys refusing to race for three days. The horse owners and the owner of the racetrack sued, alleging that the defendants were independent contractors and therefore the labor-dispute exemption does not apply, and therefore, their group boycott violated federal antitrust law.
What Is the Labor-Dispute Exemption?
The labor-dispute exemption arose to settle a tension between labor law and antitrust law. Whereas labor law encourages concerted activity among workers to increase wages and improve conditions of employment, antitrust law forbids would-be competitors from colluding to increase prices. The “labor-dispute exemption” allows cooperation among would-be competitors to increase prices when the price in question is a wage. For the labor-dispute exemption to apply, four conditions must be met:
- The conduct must be undertaken by a bona fide labor organization;
- The conduct must actually arise from a labor dispute;
- The labor organization must act in its self-interest; and
- The labor organization must not combine with any nonlabor groups.
The Court’s Finding
The district court ruled in favor of the plaintiffs, holding that the jockeys acted in concert to restrain trade and could not benefit from the labor-dispute exemption to antitrust law because of their independent contractor status. The First Circuit Court of Appeals reversed, however, holding that the defendant’s activities met all four prongs of the labor-dispute exemption. That is, (1) it is a bona fide labor organization whose (2) conduct rose from a labor dispute, and (3) it acted in its self-interest and (4) not in combination with any nonlabor groups. The court found further that the fact that the jockeys were independent contractors did not bar the application of the labor-dispute exemption. According to the court, “[t]he key question is not whether the jockeys are independent contractors or laborers but whether what is at issue is compensation for their labor.” Here, since the jockeys organized to increase wages, they met the test, and their actions did not violate antitrust laws.
The decision makes clear that the labor-dispute exemption to antitrust law applies where the terms and conditions of employment are at issue, regardless of whether the workers in question are classified as employees or independent contractors. Thus, businesses cannot rely on antitrust law to prohibit independent contractors from organizing to increase compensation.
* Dylan J. DeWitt, a 2022 summer associate with Troutman Pepper, is a co-author of this blog post. Dylan is not admitted to practice law in any jurisdiction.