Days after Uber began selling stock, the National Labor Relations Board’s top lawyer gave the company a huge gift. In an advice memo, the general counsel’s office determined that Uber’s drivers are independent contractors, not employees. If drivers are legally determined to be employees, it would throw Uber’s entire business model into question by giving drivers, among other rights, the ability to collectively bargain for pay and working conditions.
While the memo itself is not a court ruling with legal authority, it’s yet another influential voice weighing in on a vitally important legal distinction for Uber and other gig economy companies like it.
But a ruling in the company’s favor would paradoxically expose the ride-hailing giant to a separate legal challenge, one that has gotten far less attention. It poses an even greater existential threat not only to Uber, but most if not all the gig economy businesses: price fixing.
“Uber is effectively trying to have it both ways,” says Sanjukta Paul, a law professor at Wayne State University who has been writing about the gig economy’s vulnerability to price fixing regulation for several years. “They’re setting a price for a product they say they don’t sell.”
This legal argument is deceptively simple, but to understand it requires laying a lot of groundwork, not just to understand the argument itself but why the American legal system has largely stopped paying attention to these kinds of antitrust concerns. It’s also important to break down why price-fixing is central to the employee/contractor distinction on which so many companies depend in the first place.
A warning upfront: this stuff gets confusing, sometimes intentionally so on the parts of companies that want to muddle the distinctions between workers and contractors, customers versus vendors, and other distinctions very important in the legal realm but rarely of interest to ordinary people. But understanding all this is key to grasping the nature of work in the internet age and how the law lags woefully behind.
Nearly all the important distinctions in American labor law were determined before the internet. As such, one of the most important differences in American labor law is between who is and isn’t an employee. All workers are equal under the eyes of the American court system, you see, it’s just that some are more equal than others. Among other perks, American labor law grants a number of protections to workers who are “officially” employees, including—but hardly limited to—the right to organize and collectively bargain.
However, independent contractors, who can have limited liability corporations or other incorporated entities in their own right, do not have many of those rights, including the right to collectively bargain.
But if ride-hailing drivers are “independent contractors” and not “employees,” and thus they are all “different corporations” for the purpose of this legal argument, that brings up a big problem.
This is because we have a different label for when different corporations get together and determine the cost for their services. We call it price fixing. And price fixing, under the Sherman Antitrust Act, is illegal.Making this especially relevant:
In other words, by labeling drivers independent contractors, it prevents them from getting together and determining how much they should charge for their services, in the same way that every locksmith can’t get together and agree to a minimum price for getting you into your apartment when you lost your keys....MORE
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