Uber sticker on a parked car on Capitol Hill in Washington, D.C. Diego M. Radzinschi

Seattle is urging a federal appeals court to revive the city’s effort to serve as a gig economy “laboratory” in which drivers who work for Uber, Lyft and other ridesharing companies are allowed to unionize. The case will test how far traditional protections for workers extend in the rapidly growing sharing economy.

A federal trial judge in April blocked the Seattle law that would have permitted drivers for ride-hailing companies there to collectively bargain. The city recently asked the U.S. Court of Appeals for the Ninth Circuit to reverse that decision.

The Seattle ordinance marked the first attempt in the country to ensure collective bargaining rights for the workers in the growing and contentious area of the law. Business advocates, led by the U.S. Chamber of Commerce, sued to stop the law from taking effect. Some Uber drivers brought a related suit that also challenged Seattle’s ordinance.

Labor advocates, companies and local governments are closely following the Seattle case, one of the strongest examples in the country of the growing court fights in the transportation sector of the gig economy.

The success of the Seattle law could help shape the scope of labor protections at companies such as Uber and Lyft, which contend that traditional labor and employment schemes will hamper an innovative business model that relies on independent contractors. Workers rights groups meanwhile hope the case will crystallize the need of these businesses to offer fair and safe conditions.

“Policy implications of the growth of the gig economy is a big issue. Everything is figuring out what to do,” said Paul Oyer, economics professor and senior fellow at the Stanford Institute for Economic Policy Research. “We have a gig economy that is growing and the policy needs to catch up. There will be policy reactions to gig economy. I hope they are measured and taken with a lot of thoughts and care, that don’t ruin a vibrant part of the economy that is useful to a lot of workers.”

Seattle’s ordinance faced nearly immediate pushback from multiple lawsuits filed this year from Uber drivers bolstered by the anti-union National Right to Work Legal Defense Fund and the U.S. Chamber of Commerce on behalf of the ride-hailing companies.

The U.S. Chamber of Commerce warned the Seattle ordinance would likely influence tens of thousands of local governments and have widespread effect. Lawyers for Seattle likewise acknowledged the broad implications of the law, saying the city wants to test “innovative policy responses to the problems created by new technologies and the changing economy.”

Veteran Jones Day lawyers in Washington, including Michael Carvin and Christian Vergonis, are on the team for the U.S. Chamber. The Uber drivers in a separate suit are represented by William Messenger and Amanda Freeman of The National Right to Work Legal Defense Foundation, Inc. and David M.S. Dewhirst and James G. Abernathy of the Freedom Foundation.

In his decision to grant an injunction, U.S. District Judge Robert Lasnik in Seattle acknowledged the case has raised “serious questions.”

“The issues raised in this litigation are novel, they are complex, and they reside at the intersection of national policies that have been decades in the making,” Lasnik wrote in April. “The public will be well-served by maintaining the status quo while the issues are given careful judicial consideration as to whether the city’s well-meaning ordinance can survive the scrutiny our laws require.”

Lasnik said the decision to block Seattle’s law should not be a harbinger of how the dispute ultimately will be resolved.

The Seattle city attorney’s office is working with private San Francisco-based firm Altshuler Berzon, which previously helped Seattle in a case that upheld the city’s minimum wage increase to $15 an hour. It was the first to push for a steep minimum wage push and many cities subsequently followed suit following that win.

“We say it’s the first-of-its-kind law,” said Michael Ryan, an assistant city attorney for Seattle. “In a lot of ways, we are on the cutting edge in this regard. It’s important with the growth of these industries in any for-hire industry.”

Union Law Stifles Innovation: Chamber

The ordinance, passed by Seattle City Council in December 2015, allows drivers at taxi-for-hire and transportation network companies to enter into collective bargaining agreements for pay and working conditions. While it’s an open question that has sparked court battles around the country, these workers are typically considered independent contractors by the companies, rather than employees who would receive more protections.

The U.S. Chamber successfully blocked the law, arguing it would hurt the sharing economy and impose contract terms onto businesses and employees, violating antitrust laws. Ryan of the Seattle city attorney’s office disputed that the ordinance violates antitrust laws. Regardless, he said, a city is immune from antitrust laws because of sovereignty doctrine.

Seattle has asked the Ninth Circuit to reverse the injunction on the ordinance and address antitrust issues raised by the U.S. Chamber. The trial court judge said the U.S. Chamber was unlikely to succeed on its claims the Seattle law did not meet standards of the National Labor Relations Act.

The U.S. Chamber’s complaint argued that the ordinance, if it’s implemented, 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,” said Amanda Eversole, president of the Chamber’s Center for Advanced Technology & Innovation, in a statement. “[T]his 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.”

Some Uber Drivers Resist Union Push

The Uber drivers who filed a separate suit against the city of Seattle are principally arguing they should not be forced to join a union, said Patrick Semmens, vice president of the National Right to Work Legal Defense Foundation. He said unions have been pushing state legislatures to address ride-hailing workers and now many states are watching the Seattle case closely.

“These are serious and significant issues. This is a test case,” Semmens said. “We have seen so much growth. Consumers want it. Drivers want to be a part of it. Federal labor law has barely changed in 75 years. That model is not what a booming new technology is not compatible with this old model. The idea that a single contract is going to work for all these drivers. It doesn’t.”

The key in this case is that the workers sparked the call for change, said Nayantara Mehta, senior staff attorney at the National Employment Law Project.

Mehta argued that drivers for ride-sharing companies should be considered employees rather than contractors.

“Certainly this case is going to be followed by any advocates and policymakers and certainly the outcome of this case will affect how various parties might decide to move forward,” Mehta said. “This wasn’t something that we think this is the only path forward in the gig economy. It’s what works for them and hopefully what will bring them better working conditions.”

Stanford’s Oyer said measured policy approaches need to be taken to address the gig economy workforce and the ability to collectively bargain may not be necessary yet. He noted other local government and federal legislation proposals to offer portable benefits to these drivers as a positive step. He called the unionizing effort possibly a square peg in a round hole.

“Collective bargaining is a good thing when there is potential for someone to exploit workers,” he said. “It becomes problematic to employers and customers when it becomes anti-competitive behavior.”

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