Seattle billed itself as a laboratory for the gig economy with a plan that would allow ride-hailing drivers who work for companies such as Uber and Lyft to unionize. That bold effort is set to be scrutinized Monday in a federal appeals court.

The city’s ordinance—the first such measure in the country—faced backlash from business advocates and was blocked by a federal judge last year. The U.S. Chamber of Commerce’s lawsuit will go before a panel of the U.S. Court of Appeals for the Ninth Circuit. The hearing is unrelated to the trial unfolding in San Francisco where Uber’s accused of stealing trade secrets from rival Waymo.

The outcome could have sweeping consequences for local governments and companies grappling with the growing sector. The federal government, several states and a host of advocates on both sides offered their perspective for how to harmonize modern technology and labor laws. The ordinance is considered a test for how far traditional protections should extend to the so-called gig economy. Here’s a snapshot of some of the big issues—and key players.

How we got here

Last April, a federal trial judge blocked the Seattle law and the city asked the Ninth Circuit to reverse the ruling. The ordinance, adopted in 2015, would allow drivers at tax-for-hire and transportation network companies to enter into collective bargaining agreements for pay and working conditions.

U.S. District Judge Robert Lasnik of the Western District of Washington said the issues raised “are novel, they are complex and they reside at the intersection of national policies that have been decades in the making.”

The gig economy’s rise, including the popularity of Uber and Lyft, creates a conundrum. The sector is built largely on the backs of workers designated as independent contractors who do not have the benefits of an employee. Food delivery company GrubHub faced these issues at trial last year in California. States and local governments have passed laws attempting to wrangle the growing sector.

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Meet the lawyers who will argue

Jones Day lawyer Michael Carvin is the lead attorney on the team for the U.S. Chamber, and he will argue for the group. A team from Davis Wright Tremaine, representing Uber in the case, was on the brief for the Chamber.

Attorneys from civil rights firm Altshuler Berzon were retained to help the city of Seattle’s attorney. Seattle city attorney Michael Ryan will argue.

The San Francisco-based firm previously helped Seattle in a case that upheld the city’s minimum wage increase to $15 an hour. The city, in that case, was the first to push for a steep pay increase. Many cities have since followed suit after the win.

The union case drew wide friend-of-the-court filings. Workers rights such as the National Employment Law Project and the Partnership for Working Families dove into the debate on the side of Seattle. A group of states, including New York, Illinois and Massachusetts, also threw their support to Seattle. The interest of local governments could signal the potential ripple effects if Seattle succeeds. The states said they want to “defend their right to regulate in the space.”

The U.S. Justice Department and the Federal Trade Commission and business groups, including a coalition led by attorneys from Morgan, Lewis & Bockius, lined up against Seattle’s law.

Ninth Circuit Judges Milan Smith, Mary Murguia and Eduardo Robreno will hear the arguments Monday in Seattle.

What the sides are saying in the case

The case hinges on two key arguments. First and possibly most significant is the argument from the Chamber that the law violates antitrust laws. The Chamber contends the ordinance would hurt the sharing economy and impose contract terms onto businesses and employees, violating antitrust laws. Lawyers for the group argue the law, if it survives, 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 million of people nationwide.”

The FTC and Justice Department contend that upholding the Seattle law would “open the antitrust exemption door for nearly any type of regulation.” Such an outcome “would effectively put a large swath of plainly anti-competitive conduct out of reach of the antitrust laws, seriously undermining the public interest in fostering competition,” the government wrote in a joint amicus filing. Lawyers for Seattle will argue, in part, that the city is immune from such federal laws.

The other argument is the claim that the ordinance violates the National Labor Relations Act. The Chamber’s argument essentially says local governments can’t regulate independent contractors in the way Congress intended. If that argument wins the day, advocates contend it will prevent states from passing other labor-related ordinances.

Rich Meneghello, a partner at Fisher Phillips in Portland, said he’ll be interested to see Monday how much deference the panel gives to the federal government’s argument. The Ninth Circuit, he said, is typically an “uphill battle” for employers.

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The wider landscape: ‘This economy is not going away.’

Lawmakers and gig-economy workers are pushing more rights in this space, and companies are trying to make accommodations—while avoiding categorizing any contractor as an employee. The stakes are high. A recent NPR/Marist poll shows contract work is booming, with 32 million Americans currently making their living that way.

Uber and a union are partnering to create a “portable benefits plan” for contract workers in Washington state, home to a closely watched case centered on the labor rights of contract workers.

Uber CEO Dara Khosrowshahi, joined by David Rolf, the president of SEIU 775, and Nick Hanauer, founder of Civic Ventures, said in an open letter: “We firmly believe that renewing the social contract is both urgent and important. We acknowledge that developing a first-of-its-kind scheme will involve business impacts, implications for worker and consumer protection, complexity in market design and regulatory framework and the need for prudential standards.”

Washington state legislators in January introduced a bill that would extend benefits coverage to contract workers. The bill would require companies to contribute funds to an outside benefits provider based on services rendered by contract workers. The providers would offer benefits such as health insurance, industrial insurance, paid time off, and retirement.

“We are finally seeing a lot of people pay attention,” Meneghello said.

Meneghello called the movement toward providing portable benefits or generating other solutions is positive. “This economy is not going away,” he said. “It’s beneficial to our national economy and will continue to grow. We as a community need some certainty around the application of these arrangements, to make life easier for the workforce without hamstringing the companies providing services.”

Instant Insights /

Seattle's push to let gig drivers unionize faces fresh test

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