Labor & Employment Law Daily Wrap Up, EXPERT INSIGHTS—Parting Shots: The FTC’s Outgoing Leadership Expands Antitrust Exemptions for Labor Activity to Independent Contractors, (Feb 10, 2025)

Law Firms Mentioned:Littler Mendelson

Organizations Mentioned:Littler Mendelson, PC

By Alexander T. MacDonald of Littler Mendelson

Earlier this week, the Federal Trade Commission issued new enforcement guidance on “protected labor activity” by independent contractors. In effect, the guidance claims that an exemption to federal antitrust law for labor activity applies to some individual service providers—regardless of whether those providers are classified as contractors or employees. That theory contradicts about a hundred years of caselaw, not to mention the relevant statutes. But in practice, the theory will probably be hard to challenge. The new guidance creates no legal rules; it binds neither private parties nor the FTC itself. In effect, it's a glorified opinion letter. That means it can't be challenged under the Administrative Procedure Act, which allows challenges only to “final agency action.” So instead of being reviewed in court, the guidance will probably stay on the books until the FTC’s new leadership pulls it down. And given the theory's potential consequences, one hopes the leadership does that sooner rather than later.

The labor exemptions. The labor antitrust exemptions stem from three statutes: the Clayton Act of 1914, the Norris-LaGuardia Act of 1929, and the Wagner Act of 1935. The first two statutes were designed to minimize so-called labor injunctions. In the early 20th century, courts effectively regulated labor activity through antitrust law. They often used antitrust law to enjoin strikes, picketing, and other union activity. The Clayton and Norris-LaGuardia Acts effectively stripped them of the jurisdiction to do that. Then the third statute, the Wagner Act, replaced antitrust regulation with a bargaining scheme. The Wagner Act funneled labor disputes into what was supposed to be a system built on peaceful collective bargaining.

Together, the statutes essentially carved labor activity out of antitrust regulation and dropped it into a new regulatory zone. And to protect that zone, they cast a protective bubble around bargaining, union organizing, and labor disputes.

The FTC’s theory. Now, the FTC says that this bubble also covers certain independent contractors. Re-reading the history, the FTC says that the dividing line between independent contractors and employees wasn’t well defined in the early 20th century. When Congress was writing the labor statutes, it wasn’t thinking about strict worker classification. It was instead thinking about working people writ large. So, the FTC concludes, the labor statutes should be read to protect not just union activity by employees, but also union activity by any individual service providers. As long as these individuals are trying to improve their own working conditions, the statutes should insulate them from antitrust law.

But there are a few problems with that theory, starting with the statutes themselves. The Clayton Act, Norris-LaGuardia Act, and Wagner Act all refer to “employers,” “employees,” and “employment.” To be sure, the Norris-LaGuardia Act also protects “labor disputes” when the disputants do not “stand in the proximate relation of employer and employee.” The FTC emphasizes that language in its guidance. But the language was never intended to cover non-employees. Instead, it was meant to protect employees when they protested or boycotted someone who wasn’t their direct employer. In other words, it was meant to protect “secondary” activity by employees. It wasn’t designed to protect true independent contractors.

The FTC’s theory also contradicts about a century of caselaw. The U.S. Supreme Court has said repeatedly that the labor exemptions do not apply to independent contractors. In Columbia River Packers Association v. Hinton, it said that the exemptions did not apply to a group of independent fishermen. In United States v. Women’s Sportswear Manufacturing Association, it said that the exemption did not apply to an association of independent stitching workers. And in FTC v. Superior Court Trial Lawyers Association, it held that antitrust law applied to a group of independent trial lawyers. None of those cases can be squared with the FTC’s theory, which would exempt any individual service provider. So to make any sense, the theory has to look past decades of Supreme Court precedent.

The FTC’s theory would also create practical problems. If upheld, it would exempt individual contractors from antitrust liability for collective bargaining. But those individuals would still be contractors, and they would still be excluded from coverage under the NLRA. That means they would have no right to demand bargaining, no protection from retaliation, and no guardrails on their tactics. They could, for example, stage unlimited secondary boycotts. They could also fix prices, divide up territories, or do anything else otherwise banned by antitrust law. In effect, they would operate in a legal no-man’s land.

Possible challenges. Given the consequences, someone may want to challenge the FTC's view. But a direct challenge would be difficult. The guidance is not a binding legal document. It creates no rights for private people and no obligations for the FTC. In effect, it's a glorified opinion letter. That means it’s not “final agency action” and probably can't be challenged under the APA.

It might still be possible for someone to challenge the FTC’s theory indirectly. For example, the Sherman Antitrust Act includes a private right of action. People injured by anticompetitive activity can sue for damages. So if a group of contractors were to organize, someone could sue them for forming an anticompetitive cartel. That lawsuit would tee the issue up for a court. The court would then decide whether the labor exemptions really apply to independent contractors. Under the Supreme Court's recent decision in Loper Bright Enterprises v. Raimondo, the court would give the FTC’s view no deference. It would decide the issue by considering the statutory text and judicial precedent. And again, both of those authorities go against the FTC’s theory.

But more likely, the guidance will just be pulled down in the next administration. Because it’s not a formal rule, it can be revoked without formal rulemaking procedures. And the FTC's incoming leadership has already signaled it will do just that. Commissioner Andrew Ferguson dissented from the decision to issue the guidance. He said that the FTC shouldn’t be issuing sweeping new guidance at the tail end of an administration. He has also been tapped to be the FTC’s new chair. So as soon as the FTC’s balance flips, he's likely to toss this guidance in the dustbin.

That doesn't mean the guidance is meaningless. If nothing else, it illustrates the FTC’s recent disregard for congressional authority and judicial precedent. It also shows that the outgoing FTC leadership is determined to leave its mark on labor law. But given the agency’s track record in that space, one can only hope its mark is short lived.

Originally Published by The Federalist Society

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Alexander T. MacDonald

Littler Mendelson

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Los Angeles, California 90071 United States

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E-mail: JKlein@littler.com

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Attorneys: Alexander T. MacDonald (Littler Mendelson).

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