Ninth Circuit Pauses Seattle Ride-Share Union Ordinance, But Uncertainty Remains

By Michael A. Warner, Jr. and Patrick M. DePoy - Franczek Radelet P.C.

September 26, 2017

Recently, the U.S. Circuit Court of Appeals for the Ninth Circuit blocked the implementation of Seattle Ordinance 124968, which would allow drivers for ride-sharing apps such as Uber and Lyft to form unions, while a suit over the new law is on appeal. The lengthy court dispute over the Ordinance is just the latest battle front facing companies in the “Gig Economy.”

In 2015, the Seattle City Council unanimously approved an ordinance permitting drivers for ride-sharing apps to unionize and bargain with Uber and Lyft. The Ordinance officially took effect on January 17, 2017. Teamsters Local 117 applied to be a “Qualified Driver Representative” after contacting and organizing interested drivers. Uber has campaigned against union efforts, emphasizing that a union would jeopardize the flexibility that many of its drivers appreciate.

Meanwhile, several lawsuits have challenged the Ordinance. The U.S. Chamber of Commerce filed suit in U.S. District Court, alleging that the Ordinance violated the National Labor Relations Act (“NLRA”), federal antitrust law, and various Washington state statutes. The Chamber emphasized that Congress, in enacting the NLRA, intended to preempt the field of labor market regulations. Therefore, state and local governments cannot pass their own statutes or ordinances giving drivers the right to unionize. The Chamber also noted that the NLRA explicitly excludes independent contractors from the NLRA’s protections. While the National Labor Relations Board (“NLRB”) has not yet resolved whether ride-share drivers are employees or independent contractors, the Ordinance impermissibly allows state actors to answer a question which must be resolved by the NLRB, according to the Chamber. The Chamber also argues that the Ordinance permits drivers, who are independent contractors and thus not protected by any labor exemption to antitrust scrutiny, to engage in unlawful price fixing in violation of federal antitrust law.

At the same time, a group of drivers filed a lawsuit in the same court seeking a temporary restraining order blocking the Ordinance. In their lawsuit, the drivers made similar NLRA preemption arguments. The drivers also argued that the Ordinance “empowers unions to coerce unwilling driver coordinators [Uber, Lyft, etc.] to turn over information about their drivers” and would coerce drivers to join unions, potentially against their will. Additionally, the drivers alleged that the Ordinance’s requirement that ride-share companies turn over driver information for union organizing purposes violated federal and state privacy and data protection laws.

In August 2017, U.S. District Court Judge Rober S. Lasnik dismissed the Chamber of Commerce’s claims. First, the court held that Washington state law delegates regulation of transportation such as ride-sharing to local governments, and the state’s decision to do so was subject to immunity from federal antitrust law. As for NLRA preemption, the court framed the issue as whether Congress’s exclusion of independent contractors from the NLRA reflected a deliberate policy to prohibit collective bargaining, or if the exclusion represented a willingness to permit state regulation. Reviewing the legislative history, Judge Lasnik determined that Congress’s decision to exclude independent contractors was not because it identified their ability to unionize as a threat to labor relations or commerce, as was the case when Congress prohibited supervisors from organizing. Instead, Judge Lasnik found Congress was “indifferent to the labor rights of independent contractors,” and therefore the NLRA does not preempt the Ordinance.

Shortly thereafter, Judge Lasnik held that the drivers’ lawsuit was not ripe, finding that the Ordinance has not led to any “union shop agreement” requiring drivers to be union members, and no union has coerced anyone into joining at the time. Additionally, the Ordinance’s provisions providing for exclusive representation of employees did not violate the drivers’ First Amendment rights. Therefore, on August 25, the court entered an order lifting an earlier injunction and allowing the Ordinance to take effect immediately.

However, earlier this month, the Ninth Circuit extended an emergency injunction, saying it would continue to block the Ordinance while the Chamber and the drivers appeal the lower court’s rulings. The temporary bar buys more time for the Chamber, and delays the ride-hailing companies’ obligation to quickly turn over lists of driver data to Teamsters Local 117. For now, the Ordinance will remain paused pending what could be a lengthy appeals process. The opening brief in the appeal is due October 27.

The battle over the Seattle Ordinance is just one example of complicated legal challenges facing similar start-up companies in the “Gig Economy.” For example, Uber drivers have filed multiple federal class-action lawsuits demanding to be treated as employees rather than independent contractors. Designating ride-sharing drivers as “employees” would carry major ramifications, including minimum wage requirements and unemployment insurance obligations to name just a few. Litigation over this is proceeding slowly, but a California federal court recently granted class certification to Uber drivers in their lawsuit under the Fair Labor Standards Act. We will continue to provide updates on these matters as they develop.