David Otunga Explains Why WWE’s Independent Contractor Clause Is a ‘Lose-Lose’ Situation

David Otunga took aim at WWE’s independent contractor clause for talent, explaining why it’s a legal liability for the company in a new video. The former WWE star and lawyer posted a new video to his YouTube channel where he tackles WWE’s famed contract clause. WWE classifies its talent as independent contractors but maintains control over their professional lives to a degree. Otunga talked about why the contractor clause puts WWE in a bad situation.

The video comes after Otunga recently broke down the situation with Andrade El Idolo and his non-compete clause. Otunga explained in that video why holding Andrade to a one-year compete was not likely to hold up if challenged.

David Otunga was with WWE from 2009 through 2019. He was part of the Nexus stable and held the WWE Tag Team Championship twice. You can see highlights from the new video below:

On Apologizing To WWE For the Video:

“I always knew the time would come where I’d have to make this video. So, let me apologize in advance to WWE. Because I’m now going to completely dismantle your independent contractor clause in the contract. Look WWE, I don’t want any smoke with you. I don’t want any problems, but I promised on my channel I would try to be objective. And just with everything going on, I have to cover this. I really do. Look, I’d be more than happy to help you guys rewrite this. I’d be happy to rewrite it for you, but I have to go through it as it is. So, I just want to say that beforehand. Please don’t be mad.

On WWE’s Independent Contractor Clause

“Here’s the thing. For decades, WWE has called wrestlers independent contractors in order to avoid paying employee benefits, taxes, health coverage. But here’s the ironic thing. That same label could be the reason that their non-compete clauses aren’t even enforceable. So, let’s break this down and I’ll tell you how this could backfire legally and Legal Contradictions in badly.”

On the Problems With the Clause:

“WWE’s entire system rests upon a contradiction. They call wrestlers independent contractors, but they treat them like employees when it comes to control and restrictions. And this matters because under contract law, the right to enforce non-compete comes from employment law, not independent contractor relationships.

“So, this seems like common sense to me. If you’re truly independent, the company shouldn’t be able to control where, when, or for whom you work after you leave, right? Because what an independent contractor really means is, an independent contractor controls how and when they perform services. They bear their own business risks, but they can work for multiple clients. And they’re not bound by loyalty or exclusivity unless they’re paid for it. If WWE truly believes talent are independent, they can’t restrict your outside work. They can’t impose a year-long non-compete or stop you from earning an income elsewhere. This defeats the whole point of being independent. I mean, it’s in the name. But all right, here we are. But WWE’s own contract contradicts itself.”

On How the Independent Contractor Clause Reads:

“So pulling from my 2017 WWE contract, it literally says, and I quote, ‘Talent represents and warrants that his relationship to WWE shall be that of an independent contractor and not an employee for any purpose whatsoever.’ Then in the same contract, it says WWE can approve or reject your performances, dictate your creative and travel schedule, terminate you for any reason whatsoever, and block you from working for anyone else for a year. Now, that’s not independence; clearly that’s control. And in the eyes of the law, control equals employment.”

On the Potential Legal Backfire

“If someone like Andrade ever challenged this in court, WWE would have a real problem. Because you can’t enforce an employment-style restriction on someone you claim isn’t an employee. Employees can have non-competes if they’re compensated. Independent contractors are supposed to be free. So that contradiction alone could make the clause void as against public policy.

“Now, there’s something else. So, here’s where it gets worse for WWE. If they exercised this much control, then wrestlers weren’t truly independent. They were misclassified employees. Now, that means WWE could owe back taxes, benefits, workers comp, and unemployment coverage. So, either the non-compete is invalid because we’re independent contractors, or WWE’s been misclassifying the entire roster. Either way, it’s a lose-lose. “

On the Arbitration Clause:

“And now this is the knockout punch. So the Federal Trade Commission’s 2024 rule banning non-competes doesn’t just cover employees. It also covers independent contractors. So even if WWE argues they’re not employees… the FTC says it doesn’t matter. Non-competes for independent contractors are unfair methods of competition. So I mean, basically that’s checkmate. Also, there’s more that most people don’t know. So, even if a wrestler wanted to challenge WWE’s contract, they can’t just go to court. Why, you ask? Because buried deep in every WWE contract is a binding arbitration clause. And it basically says that any dispute, claim, or controversy has to be settled privately in Stanford, Connecticut through arbitration, not in open court.

“So this means there’s no jury, no public trial, and no class actions. The arbitrator’s decision is final and confidential. So, if a wrestler ever challenged their non-compete or contractor status, it would happen behind closed doors. But this in and of itself is another contradiction. Think about it. WWE calls wrestlers independent contractors, but forces them into arbitration like employees. Independent contractors normally have the right to choose how and where to resolve disputes, but WWE removes that choice entirely in the contract. So, that’s another layer of control, and another reason the independent contractor label just doesn’t hold up.”

On WWE’s Predicament:

“This is kind of a legal catch-22. WWE really boxed themselves in here. So if wrestlers are truly independent, and the company has no legal right to control them with a non-compete, or to force them into arbitration. But if WWE exercises that level of control, then wrestlers are really employees. And WWE could owe years of back pay and benefits.

“So either way, it backfires. WWE just can’t have it both ways. You can’t call wrestlers independent to save money, then treat them like employees when it’s convenient. I mean, that’s — it’s not independence. That’s clearly control. And in contract law, control is the key test for an employer.”

If you use any of the quotes in this article, please credit david Otunga with a h/t to 411mania.com for the transcription.