By Naazaneen Hodjat

The Seattle City Council voted unanimously last month to approve a bill that allows drivers of ride-sharing companies such as Uber and Lyft to unionize. Seattle is the first U.S. city to pass such legislation. The legality of the ordinance, however, is uncertain; Uber and Lyft are expected to challenge its legality in court under both federal labor and antitrust laws.

The National Labor Relations Act gives employees the right to collective bargaining. Ride-sharing drivers, however, are considered independent contractors, which are specifically excluded from the Act. Drivers organized under the App-Based Drivers Association (ABDA) allege that ride-sharing drivers have no say over their working conditions or rates and are “routinely and arbitrarily disconnected from their apps [by Uber or Lyft] without warning or explanation.” The ABDA also asserts that driver pay has decreased significantly as a result of the major ride-sharing companies consistent attempts to undercut one another. Under this new ordinance, the city of Seattle will give certified nonprofit organizations a list of eligible drivers at each ride-sharing company. Ride-sharing companies will be required to bargain with their drivers, if they can demonstrate that a majority wants to be represented. Uber and Lyft both argue that federal labor law preempts cities from regulating collective bargaining. Federal labor law, however, governs organizing when the workers are employees; it does not apply to independent contractors. This legal argument may become more relevant if drivers are able to establish themselves as employees under the federal labor laws. This would require ride-sharing drivers to earn at least minimum wage, which recently increased to $15 an hour in Seattle.

Uber and Lyft also argue that unionized independent contractors trigger antitrust scrutiny because of their potential to fix prices—a per se violation of federal antitrust law. Moreover, ride-sharing drivers could only legally organize under the state action doctrine. The state action doctrine exempts a private actor if she acts pursuant to a clearly articulated and affirmatively expressed state policy to displace competition, and there is active state supervision. It is unclear whether the new ordinance meets these requirements. In particular, the ordinance must provide for active supervision of the collective bargaining. Although the ordinance includes language regarding the bargaining process, it does not provide any oversight into its outcomes. This is likely to be a fatal flaw.

A member of the Seattle City Council called the ordinance “history-setting in what we’re attempting to do here in terms of rights of drivers.” Ride-sharing companies, however, allege that this ordinance will threaten the privacy of drivers, hurt consumers and innovation, and violate federal law. Furthermore, ride-sharing prices are likely to increase. Ride-sharing drivers all around the country will be watching the validity of the ordinance; if it can survive review by the court, other cities will likely consider similar measures.

Image source: techcrunch.com.