Could a New California Law Finally Break WWE’s Labor Structure?
In a year of major news in the professional wrestling world, an intriguing story emerged last week from an unusual source: California’s state legislature. The body passed—and Governor Gavin Newsome signed into law Wednesday—a bill more strictly defining what makes a laborer an independent contractor rather than an employee. Aimed at providing employee protections to gig-economy workers like Uber and Lyft drivers, the bill enforces a straightforward “ABC test” in which a company must prove that any prospective independent contractor A) is “free from the control and direction” of the company in its performance of the work; B) that the work they do is “outside the usual course” of the company’s business; and C) that the worker maintains independent business in the same field outside of that company.
As most prominently detailed on an episode of John Oliver’s HBO show this past spring, WWE has long classified its performers as independent contractors despite exclusive contracts and other arrangements that would seem to indicate they are employees—a distinction that denies its wrestlers an array of legal benefits including health insurance, pensions, and other common labor protections. Thus after the California bill’s passage alarm bells soon started sounding among wrestling fans and industry observers. The question became whether WWE, which between 2017 and ’18 held 38 live events in California, and whose wrestlers very clearly do not appear to pass the ABC test, could continue to tour the most populous state in the U.S., and whether it could run into issues in other states should they pass similar bills.
(Similar questions exist to a lesser extent for the newly launched All Elite Wrestling, which thus far has not announced any shows in California and which classifies many of its most prominent wrestlers as employees due to their holding backstage positions with the company. Independent companies generally do not sign talent to exclusive contracts.)
But WWE did not conquer the wrestling industry without knowing how to protect itself. Its key to doing so in this case may lie in Section 13 of its standard booking contract, which contains the following two clauses (emphasis added):
- “This agreement is made in Connecticut and shall be governed by and interpreted in accordance with the laws of the State of Connecticut, exclusive of its provisions relating to conflicts of law.”
- "The parties agree to submit any and all disputes arising out of or relating in any way to this Agreement exclusively to the jurisdiction of the United States District Court of Connecticut. The provision to submit all claims, disputes or matters in question to the Federal court in the State of Connecticut shall be specifically enforceable; and each party, hereby waiving personal service of process and venue, consents to jurisdiction in Connecticut for purposes of any other party seeking or securing any legal and/or equitable relief."
It is this so-called “forum selection clause” that has in the past allowed WWE to maneuver legal disputes from courts in other states—including California—to that of the company’s home base, where rulings have generally been in its favor. (Notably, WWE failed to steer Owen Hart’s wrongful death suit out of Missouri courts.) A direct legal challenge to WWE’s independent contractor classification by a trio of former wrestlers was dismissed by a Connecticut court in 2009, which in its dismissal cited WWE contracts’ own definition of the workers’ status as part of its justification.
“You can see how Connecticut courts have treated this, so I wouldn’t be too optimistic on the prospects,” says Konstantine Kyros, a Massachusetts-based lawyer who represented the plaintiffs in that case and is currently leading a class-action suit against WWE over concussion damages.
The friendliness of Connecticut’s court rulings has been particularly important for WWE’s worker classification given that the case against its wrestlers’ independent contractor status otherwise appears straightforward and commonsensical. According to tax guidelines on the website of the Internal Revenue Service, “[t]he general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done” (emphasis added). One need look no further than WWE’s own self-produced documentaries or any number of interviews to see the great extent to which WWE indeed controls where, when, and how performances on its shows will be done. Dialogue on its television programs is generally tightly scripted, while in-ring action is planned by participants in accordance with company representatives, all subject to approval by WWE boss Vince McMahon.
Even further, WWE often exercises a right to control its performers’ actions outside of the WWE product. Ryback Reeves, who wrestled for WWE from 2010 to ‘16, said the company twice prevented him from appearing on a fitness magazine cover after he was approached independently by the outlet. Chavo Guerrero Jr., who wrestled for the company from ‘01 to ‘11, says that a friend who worked on the USA Network show Monk asked him about appearing on the show as a prisoner. “You have to run everything by WWE,” says Guerrero. Indeed, WWE’s standard contracts include a provision that performers looking "to participate in Other Appearances” in the entertainment industry “may do so only subject to and conditioned upon [WWE's] express, written approval.” When Guerrero asked, he says, he was told by the company not to film the part.
Punishments can vary widely. A performer who does not comply with a WWE mandate could find themselves featured less prominently on the television shows or not at all, or be portrayed in a hapless and embarrassing way that could impact their earning potential even after they leave the company. They may also be left off touring shows and thus excluded from live show earnings, earning instead only their base salary. And because WWE, like all wrestling companies, operates so arbitrarily by nature, there is generally a plausible deniability that any on-screen portrayal is a form of retaliation. More directly, performers can be fined for actions both in and out of the ring. To cite one well-known example, Dave Bautista has said that in 2008 he was fined $100,000 by McMahon for intentionally bleeding during a match. More recently Lars Sullivan was fined $100,000 for bigoted internet message board comments dating back to before he signed with WWE. (As offensive as Sullivan’s comments were, it is hard to imagine more traditional independent contractors, such as plumbers and carpenters, being legally fined by clients over what they once wrote on Bodybuilding.com.)
Wrestlers’ independent contractor status is a longstanding industry standard grown out of what had been, prior to WWE’s forceful national ascendance in the 1980s, a business in which performers essentially worked as freelancers across the country’s various regional promotions. As much as McMahon transformed the business, including signing wrestlers to exclusive agreements, worker classification was one relic he deliberately preserved. In the ’80s Jesse Ventura, who more than a decade later would serve as governor of Minnesota, famously tried to unionize his fellow wrestlers before WrestleMania II, in 1986, but had his efforts thwarted after plans were leaked to management. (McMahon later testified that his source was Hulk Hogan.) While there have been rumblings here and there since then, in an industry where one company can hold so much sway over workers’ earning power and history, the potential cost—losing one’s spot, burning a bridge—of organizing any push for more rights can be discouraging to the point of nonstarter.
Which is why among WWE’s various courses of action in California, there exists the possibility of simple noncompliance. Should the state not proactively enforce the law on wrestlers’ behalf, it may require an active WWE performer to mount a legal challenge to the company’s misclassification under California law, an unlikely proposition. (The previously dismissed challenge to WWE worker status failed in part, the court said, because the former wrestlers’ contracts were no longer enforceable.) Short of that, WWE could continue operating under its current worker classifications and essentially dare its current roster to take action against it.
In July the law firm Greenberg Traurig registered to lobby on WWE’s behalf in California, perhaps indicating a plan to fight for one of the bill’s exemptions. (Those currently include medical professionals, engineers, and commercial fishermen, among others.) WWE’s website lists three upcoming shows in the state, all in October, when the bill would not yet be in effect. Should these new rules prove insurmountable, a precedent exists of WWE previously skipping states like New Jersey and Oregon for years in response to local regulations. One California labor lawyer, Eric D. Anderson, has suggested that wrestlers might follow a Hollywood actors tactic by creating a production company that deals with WWE on their behalf, acting as a legal stand-in. There also exists the possibility that WWE may be protected by an upcoming California Supreme Court decision on a trio of cases regarding workers who do only part of their work in the state.
There exists, of course, another option: that WWE preemptively reclassify its wrestlers as employees, eliminating the need for any future battles regardless of what any state may do. But that is an option the company has fought back against whenever presented. It is unlikely WWE is interested in laying down now.