Senior legal analyst Daniel Hanley publishes a piece regarding appalling working conditions for laborers and which states are considering changes to transform each industry.

For years, journalists have reported numerous instances of worker exploitation, hazardous working conditions, and poverty wages in the nail salon and fast food industries. In a blockbuster 2015 New York Times investigation, for example, journalists found that New York nail salonists were “paid below minimum wage; sometimes they are not even paid…[and] endure all manner of humiliation, including having their tips docked as punishment for minor transgressions, constant video monitoring by owners, even physical abuse.” For Californian fast food workers, other investigations have revealed they endure routine wage theft, verbal abuse, and unsafe working conditions, including frequent assaults and robberies.

To combat these appalling conditions, in their recent sessions, the New York and California legislatures considered enacting new laws that would transform each industry. Among other obligations, both proposals create state regulatory councils, sometimes referred to as “wage boards” or “labor boards,” overseeing the respective industries that are staffed with lawmakers, industry workers, and experts endowed with the power to enhance wages, benefits, and working conditions. Such bold legislative actions are sensible given the abhorrent environment in each industry. They also underscore the idea that a well-functioning democracy requires that the people should be able to structure markets – through their political institutions – to meet their economic needs and agree upon a minimum set of fair working conditions for all workers in any industry.

New York’s bill is effectively stalled in the legislative labor committee. A version of California’s bill was signed in September. When both proposals become formally enacted and enforced, workers will undoubtedly benefit, and such policies should unquestionably be replicated across other industries.

Such praiseworthy reforms carry significant legal risk, however. Parties opposed to such measures have historically used the antitrust laws, the laws designed to protect the public against corporate power and ensure businesses use fair strategies to compete, to challenge these reforms – and could do so again. The antitrust laws, like the landmark Sherman Act of 1890, are sweeping in their application. Congress included provisions restraining all monopolistic practices by dominant corporate actors and restrictions on a host of unfair conduct. The restrictions imposed by the Sherman Act incentivized all firms in the economy to use fair methods of competition that enhance the public’s welfare to succeed in the marketplace. Most applicable here is the first section of the Sherman Act, which prohibits “every contract, combination, or conspiracy … in restraint of trade.” At first glance, such broad wording appears to set limits on the kinds of regulations enacted by state governments since they could ostensibly authorize conduct that a judge could be convinced to classify as a “restraint of trade” and, therefore, be prohibited by the Sherman Act.

However, to prevent the Sherman Act from becoming a law that empowers the federal judiciary to inhibit any conduct it solely deems as a “restraint of trade” – including regulations mandated from states legislatures – during the New Deal in the 1940s, the Supreme Court created a legal doctrine that facilitated Congress’s legislative intent with the Sherman Act by exempting certain conduct classified as “state action” from the antitrust laws. The state action doctrine, also known as Parker Immunity after the 1943 Supreme Court decision where the idea was formally codified, is profoundly important because how it is applied implicates who should control local economies – the federal judiciary misusing the Sherman Act or state governments working in conjunction with federal statutory law.

When Parker Immunity is interpreted in line with Congress’s intent with the Sherman Act, the doctrine encourages states to liberally use their regulatory power alongside the Sherman Act to structure markets to protect small businesses, enhance standards and wages for workers, and restrain unfair business practices – all while preventing powerful corporations from controlling the national economy. In effect, both Parker Immunity and the Sherman Act operate as two sides of the same coin on regulating corporate conduct to strengthen worker power and the vitality of independent businesses and local communities. Parker Immunity ultimately encompasses what is politically possible when governments are empowered to solve problems afflicting the public and is what will allow states like New York and California to be able to enact their respective policies.

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