Seattle Picks a Fight With Uber

Seattle Picks a Fight With Uber

Under federal labor law, drivers for transportation-network companies (TNCs) like Uber and Lyft are currently considered contractors, not employees — and thus they don't have a right to bargain collectively. But that may cease to be the case in Seattle, under a first-of-its-kind bill approved last night by the city council.

Introduced by council member Mike O'Brien, the measure passed by an 8-0 margin amid a lively meeting filled with slogan-emblazoned signs and shouted profanity. In a change that could set a precedent for cities across the United States, the ordinance would permit qualifying TNC drivers to file for collective representation. The mayor is expected to sign the measure into law.

Under the bill, organizations seeking to represent the drivers would need to apply to the city for certification. Once certified, an organization would be entitled to receive lists from the TNCs of all qualifying drivers. If a majority of a TNC's drivers signed cards agreeing to let the organization represent them, collective bargaining would commence, and the process would reach completion once final negotiations were approved by the city.

The ability to bargain collectively is more typically associated with a traditional employer-employee relationship, and it is a poor fit for companies like Uber and Lyft. If Seattle's bill finds traction elsewhere, the specter of widespread collective bargaining almost certainly will put a damper on TNCs' massive valuations.

Indeed, for the council, that would appear to be part of the appeal. "Any council member who votes against this measure cares more about multi-billion dollar corporations than Seattle workers," council member Kshama Sawant, who identifies as a member of the Trotskyist political party Socialist Alternative, said just before the vote.

The ramifications don't end there, however. In fact, the bill would also apply to many traditional taxi drivers, who are similarly considered contractors under federal law. And there's a chance the bill's precedent could reach further still. It could trigger a fundamental change in the ways contract workers interact with their employers.

Unionized contractors would have more bargaining power than their non-unionized counterparts. Their ability to set wages and demand concessions would be greater. But there's also the risk that unions could erect barriers to entry that would doom the very flexibility that has made contract work, and TNC services in particular, attractive to workers and consumers.

Alternatively, Seattle's measure could prove more symbolic than substantive. In the short term, there will be at least a year before any collectively bargained terms could come into effect. Further, it is a virtual certainty that Uber and Lyft — and perhaps even some taxi firms — will challenge the ordinance in court.

There's a reasonable case to be made that the bill runs afoul of federal labor law. Moreover, the firms could argue that collective bargaining by independent contractors amounts to price fixing. And to complicate matters further, courts are considering litigation that seeks to classify TNC drivers as employees under federal law — which would essentially make Seattle's bill national policy. How courts will weigh these questions is anybody's guess, but they certainly will take some time to resolve.

Later this week, the R Street Institute (my employer) will release its annual evaluation of municipal transportation-for-hire policy across 50 of the largest U.S. cities. After being an early leader in TNC legalization, Seattle sees its grade in this year's report, RideScore 2015, fall from a solid B to a below-average C, thanks to a series of missteps.

Notably, the city earlier this year had a cap on the number of vehicles that could operate within city limits. Though the cap has since been lifted, the council subsequently passed problematic rules requiring a knowledge test of drivers.

Whether O'Brien's bill results in a national trend or merely local frustration, it is going to make things worse in the city's backsliding transportation-for-hire market.

Ian Adams is the western region director of the R Street Institute, a free-market think tank in Washington, D.C.

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