Jan 07, 2016 - 4:30pm

Seattle’s Christmas Gift to the Teamsters

Executive Director, Labor Policy

The Seattle City Council on December 14 unanimously passed an ordinance that would allow drivers for taxi, for-hire vehicle, and app-based ride-booking companies, such as Uber and Lyft, to form labor unions. The controversial move comes amid an ongoing tug-of-war over whether such drivers are independent contractors or employees of the companies in question, with Seattle’s new law trying to guarantee collective bargaining either way. 

For some time now, labor activists have bemoaned the development of what some call the “gig economy,” in which individuals eschew traditional employment with companies in favor of working on-demand.   Numerous technology companies have devised software solutions that help independent contractors by making it easier for them to connect with potential customers.

These arrangements have not found favor with one constituency. With union membership at a 60-year low, it comes as little surprise that organized labor and their political allies hope to resist the changing environment by re-writing the rules. 

In particular, unions have targeted app-based services like Uber and Lyft that typify the gig economy. These companies use technology to connect drivers and riders, but do not hire employees to provide the actual ride itself. Rather, the drivers are independent contractors in charge of their own hours and volume of business; there is no employee-employer relationship, which is a prerequisite for collective bargaining. 

Thus, Seattle’s new ordinance purports to create a right for independent contractors to have union representation under city, rather than federal, law. But that attempt runs squarely into federal law in two ways.

First, the National Labor Relations Act (NLRA) created a national labor system to govern collective bargaining for most private sector employees. As such, the NLRA forbids state and local governments from setting up their own local labor systems, which otherwise would create a patchwork of inconsistent regulations. Proponents of the Seattle measure contend that the NLRA does not preempt the ordinance because the NLRA exempts independent contractors from the collective bargaining process, leaving Seattle free to create a parallel system of collective bargaining. The flaw in that argument, however, is that when Congress excluded independent contractors from the NLRA, it was not simply indifferent as to whether they should be subject to collective bargaining. Rather, that exclusion reflects Congress’s decision that independent contractors should remain regulated by “the free play of economic forces,” not by city ordinances imposing collective-bargaining schemes. 

Second, the ordinance also conflicts with federal antitrust law, which prohibits separate businesses (like independent contractors) from colluding to fix prices.

Aside from legal infirmities, the ordinance suffers from other flaws. These include denying drivers a secret ballot vote on unionizing (the ordinance relies on submission of signature cards that unions will gather from drivers); the allowance of binding arbitration to force contracts on parties who have not reached an agreement, and the fact that businesses will have to hand out drivers’ personal information (names, home addresses, phone numbers, e-mail addresses) to any qualified party that says it wants to represent them.

The mayor of Seattle declined to sign the ordinance, not surprising since even drivers testified against it. However, he also did not veto it, which means that it becomes law whether he signs it or not.

The ordinance in Seattle will surely face legal challenges based on those and likely other grounds. Meanwhile, willing participants in the gig economy will have to wait and see whether courts will allow meddling by labor activists to undermine something that seems to be working just fine. 

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About the Author

About the Author

Sean P. Redmond
Executive Director, Labor Policy

Sean P. Redmond is Executive Director, Labor Policy at the U.S. Chamber of Commerce.