Supporters cheer during a December meeting when the Seattle City Council voted to approve a measure that would allow ride sharing drivers for Uber and Lyft to unionize in Seattle.(Reuters/Matt Mills McKnight)

When the members of the Seattle City Council passed a law in December allowing for-hire drivers to form unions — meaning those who drive for Uber and Lyft as well as traditional taxi companies — they knew it was untested legal territory. The mayor even declined to sign the measure, citing the "significant costs associated with defending this bill in the courts." The question wasn't whether someone would sue the city over it, the only question was when.

What the bill's proponents didn't necessarily expect was that the nation's premier business lobbying group — the U.S. Chamber of Commerce — would be the one filing the suit in federal court. As it turns out, a bill granting independent contractors the right to collectively bargain wasn't just a problem for Uber and Lyft.

"Seattle’s Ordinance reflects a broadside attack on the fundamental premises of independent contractor arrangements, as well as the nascent on-demand economy that relies on it," the chamber wrote, in a statement announcing the litigation Thursday. If the law stands, in other words, any municipality could make unions an option for all kinds of contract workers — direct salespeople, realtors, truck drivers, freelance copy writers, the list goes on. 

Some quick backstory: The Teamsters have been organizing for-hire drivers in Seattle for several years now. Taxi drivers have made some headway by pushing for higher standards at the state level, but since app-based driving platforms aren't regulated by the state, they're still at the mercy of price surges and cuts and other unpredictable changes in their conditions of employment.

In other industries, you might try to create more employment security by forming a union. But as independent contractors, who are not covered under the National Labor Relations Act, neither taxi drivers not Uber drivers can do that.

Putting a novel legal strategy to the test

Enter Seattle City Councilman Mike O'Brien. Working with the Teamsters, he came up with a bill that would essentially grant collective bargaining rights to drivers outside the National Labor Relations Act system entirely. Under the new law, transportation network companies would have to furnish lists of their drivers to "driver representative organizations" — such as labor unions — which could gather enough signatures to demonstrate that they had the support of a majority of people working on a given platform. Once that's done, the driver representative would have the right to negotiate pay and benefits with the company on behalf of all the contractors.

The U.S. Chamber's lawsuit contends that's illegal for a couple reasons. One, allowing drivers to bargain collectively violates the Sherman Antitrust Act, which prohibits collusion to raise prices among independent businesses. And two, federal law "pre-empts" localities from setting up their own mini labor relations systems. So who's right?

Seth Harris, a lawyer who served as interim secretary of labor and studied the on-demand workforce for a recent paper on how safety net programs should be extended to cover part of it, sees about even odds at this point.

"It's not an open and shut case," Harris says. "I’m not aware of any prior case that made it to the Supreme Court that purported to create a labor relations system for independent contractors."

On the antitrust front, Harris says that if it's clear that the state of Washington delegated the power to regulate the for-hire driving industry to the city of Seattle, the law might be protected by state sovereignty. On the preemption front, the city would have to prove that by carving independent contractors out of the National Labor Relations Act, Congress didn't intend to prohibit any other lower jurisdiction from setting up collective bargaining systems on their own.

In addition, the chamber is also saying that the National Labor Relations Board has to first decide whether for-hire drivers are employees or independent contractors. That creates an ironic conflict: Right now, unions in New York City are arguing that Uber drivers are employees, which would be the only way to organize them through conventional means, and which the chamber says is a possibility. But the Seattle ordinance only works if the NLRB finds that such workers are independent contractors, which Uber has argued all along.

"Both sides are on both sides of this issue," Harris says.

Can Uber drivers create a new kind of union?

For its part, Uber has mostly stayed on the sidelines, except to issue a set of principles it thinks the city should respect in crafting rules for the new ordinance. Meanwhile, it's been calling its drivers to tell them that unionizing isn't the best way to go.

“Collective bargaining and unionization do not fit the characteristics of how most partners use the Uber platform," reads a transcript obtained by the Seattle Times. "Collective bargaining usually takes place in situations with a workforce of individuals who work scheduled hours, usually full-time, and intend to make that job a career. That’s not how most Uber drivers use the platform.”

Uber apparently isn't the only one gearing up to fight labor organizing — according to the chamber's complaint, many of its members "have started and will continue to expend both time and money to educate their drivers about the disadvantages of choosing to be represented" by a union or other entity under the law.

The Teamsters, however, argue that there's no reason a union would have to impede that kind of flexibility — and that improvements to conditions for those who use the platform full-time would help moonlighters too.

"Unions represent part-time employees all over the place," says Leonard Smith, director of organizing for Teamsters Local 117. Unions in Hollywood and New York, for example, represent actors who tend to work sporadically. "Uber is promulgating this idea that there’s some pattern of how unions relate to their workers, and it’s just patently false. Each contract that’s negotiated is made possible by the workers and the needs of the business. The needs and concerns of people who do this on a very small occasional basis would be met as well."

The litigation could possibly go on for years, if the chamber — as seems likely — tries to take the question all the way to the Supreme Court. That puts Seattle's new independent contractor organizing regime under a cloud, even if a judge doesn't issue an injunction immediately. But the Teamsters say it won't affect their work either way.

"They’ve been organizing for the last four years," Smith said, of the drivers. "They’re not going to stop now."