U.S. Chamber Files Lawsuit Challenging Seattle’s Drivers’ Union Ordinance

Thursday, March 3, 2016 - 6:45pm

Argues Unlawful Action will Stifle Economic Growth, Innovation

WASHINGTON, D.C.—The U.S. Chamber of Commerce today filed a lawsuit in the U.S. District Court for the Western District of Washington to challenge a Seattle ordinance that authorizes union organizing of for-hire drivers working as independent contractors, highlighting that the ordinance will burden innovation, increase prices, and reduce quality and services for consumers. 

The Chamber’s complaint notes that in addition to being in violation of federal law, implementation of the ordinance would result in a balkanized set of labor schemes that would negatively impact the sharing economy and jeopardize the flexible work schedules and earnings opportunities that economy provides to millions of people nationwide. 

“Technology continues to transform the way we do business. Seattle, as hub for innovation, has been at the forefront of that change and has benefited from the job creation, economic growth, and increased tax revenue the technology sector spurs,” said Amanda Eversole, president of the Chamber’s Center for Advanced Technology & Innovation. “This ordinance threatens the ability not just of Seattle, but of every community across the country, to grow with and benefit from our evolving economy. Technology companies are leading the charge when it comes to empowering people with the flexibility and choice that comes with being your own boss, and that is something to be championed, not stifled.”

The Teamsters-backed ordinance would require taxi, for-hire vehicle, and transportation network companies to collectively bargain with designated unions representing independent drivers, and impose contract terms on those drivers and companies who do not reach an agreement.

“It’s no coincidence that, in the 126 years since the passage of the Sherman Antitrust Act and the 81 years since the passage of the National Labor Relations Act, the unions are only now attempting to impose a local regulatory scheme to organize independent contractors,” said Lily Fu Claffee, chief legal officer of the U.S. Chamber. “This has never been tried before, because it is clearly inconsistent with federal antitrust and labor laws.”

The U.S. Chamber, which is being represented by Jones Day, argues in its complaint that:

  • The ability of individuals to go into business for themselves has long been an important engine of the American economy. And the power of that engine has only grown as technology has transformed the way Americans do business.  One of the most recent innovations creation of the so-called “on demand” economy, which uses technology to connect individual service providers with would-be customers. This innovation has dramatically increased the flexibility of independent contractors to conduct business where, when, and as much or as little as they choose in a variety of business enterprises—transporting passengers, performing delivery services, providing lodging, or other work—for as many different entities or customers as they wish. The City of Seattle’s Ordinance that would threaten the viability of the on demand economy and put at risk the freedom, flexibility, and choice inherent in independent contractor arrangements.
     
  • Collective bargaining by independent contractors over the price and terms of a service is per se illegal under § 1 of the Sherman Act. The Ordinance unlawfully authorizes for-hire drivers to engage in this per se illegal concerted action by forming a cartel, speaking as a single unit through an exclusive representative, and engaging in horizontal fixing of prices and contractual terms. 
     
  • Congress expressly left independent contractors unregulated and excluded them from collective-bargaining requirements. This provision reflects Congress’s intent to ensure that independent contractors remain regulated by “the free play of economic forces,” or market forces, rather than by city ordinances imposing collective-bargaining schemes. 
     
  • There are nearly 40,000 general purpose local governments in the United States. If Seattle is permitted to adopt its own set of regulations here, then 40,000 other municipalities may attempt to do so as well. But permitting literally thousands of separate and independent regulatory regimes would cripple the for-hire driver industry and, more broadly, the “on demand” economy writ large. Federal labor and antitrust laws were designed precisely to avoid this result, and to encourage the free flow of commerce among private service providers across the Nation. 

“In amendments to the National Labor Relations Act, Congress expressly excluded independent contractors from collective-bargaining requirements. The City of Seattle—or any state or other municipal government—cannot dictate otherwise,” said Randel Johnson, senior vice president of Labor, Immigration, and Employee Benefits for the U.S. Chamber.

The complaint can be viewed here