Uber union ordinance goes before the Ninth Circuit, and has a mixed day

This morning a panel of three judges from the Ninth Circuit Court of Appeals heard back-to-back arguments in two cases  challenging the City of Seattle’s ordinance authorizing collective bargaining for Uber and Lyft (and other TNC) drivers.

Both sides found the judges to be deeply skeptical of some of their arguments.

One of the cases was filed by the US Chamber of Commerce, representing its member organizations including Uber and Lyft. It argues (among other things) that the ordinance is preempted under federal antitrust law. The second case was brought by a group of Uber drivers and argues chiefly that the ordinance is illegal under the National Labor Relations Act.  At the District Court level, the judge ruled for the city in both cases and dismissed them, but both plaintiffs appealed to the 9th Circuit — leading to several months of legal briefs and today’s oral arguments.

The Chamber of Commerce case revolves around the issue of when governments are allowed to displace competition in a marketplace. In a landmark 1943 case, Parker vs. Brown, the Supreme Court ruled that federal antitrust law was intended to prevent private action to foreclose markets, but that states, as sovereign bodies under federalism principles, are not strictly bound by federal antitrust law.  This led to the question of whether cities (which are not sovereign) such as Seattle can do the same. In 1978, the Supreme Court ruled in Lafayette vs. Louisiana Power and Light that cities can be exempt from antitrust laws if the state “clearly articulated and affirmatively expressed” a delegation of its immunity to the city, including “that the legislature contemplated the kind of action complained of.” In 1985, in Hallie vs. Eau Claire, the Supreme Court further refined its guidance, slightly clarifying its earlier decision on what constitutes a “clearly articulated and affirmatively expressed” delegation, and ruling that the state government does not need to actively supervise the anticompetitive behavior itself but can delegate that to the city as well (but either way active supervision is required).

In the case of Seattle’s Uber law, the state legislature delegated authority to regulate for-hire transportation services like Uber and Lyft “without liability under federal antitrust laws.” The Chamber of Commerce, however, contends that the language is too broad and doesn’t actively contemplate Seattle regulating driver compensation — and that the state needs to explicitly authorize Seattle to displace competition in driver compensation in order for the city’s ordinance to be legal. During today’s hearing, the Appeals Court judges seemed sympathetic to this view and pushed Assistant City Attorney Michael Ryan hard to justify the city’s position. Ryan reiterated the city’s position that regulating compensation is a safety issue, since underpaid drivers are more likely to work longer hours without enough rest in order to make enough money to get by. The judges voiced their skepticism, but Ryan pointed to the findings written into the Seattle ordinance that specifically call out the safety benefits that other jurisdictions have gained through collective bargaining, including for compensation. Still, it was a tough session for Ryan.

The second case went much better for the city. There was some discussion of the main legal issue: interpreting what the National Labor Relations Act means for independent contractors. The NLRA sets out the rules for employees’ collective bargaining, and explicitly prohibits supervisors from collective bargaining. But it neither explicitly allows nor prohibits independent contractors from doing so, and there is no clear case law on the issue. The plaintiffs argue that silence means it’s prohibited; the city argues that silence means that it’s delegated to states under federalism principles. Assistant City Attorney Casey Pitts didn’t get serious pushback from the judges on this point.

But the bigger issue is the question of “ripeness,” or whether the judges can adjudicate the case at all. Cases are required to have a live, active dispute in order to be heard in court; judges may not rule on purely theoretical issues. But since no Exclusive Driver Representative has yet been certified– and it’s not clear that one will be if the injunction is lifted, since it requires a majority of qualified drivers to choose to be represented by one — there’s a strong argument that the case isn’t ripe. That’s how the district court judge ruled when he dismissed the case, and based on the questions the appeals court judges asked the plaintiffs’ attorney this morning, they seemed to be leaning the same way. However, if the Court of Appeals affirms that ruling, the drivers will most likely be free to refile their case in the future when the case is, in fact, ripe for adjudication. So the issue isn’t going away; it’s simply delayed.

The net result from today seems to be that the city is winning one case and losing the other, though it’s always difficult to handicap decisions based on oral arguments. And we won’t know definitively for several months, until the appeal court hands down its ruling. It’s widely acknowledged that this case will be appealed to the U.S. Supreme Court no matter how the Ninth Circuit rules, so they are likely to take their time writing their decision.

As for whether the Supreme Court will take the case, that’s another question. The justices will probably be very interested in the question of what the NLRA means for independent contractors, though they won’t take it up if the case isn’t ripe. They may or may not be interested in further refining the case law on when antitrust exemption applies to cities and what it means for a delegation to be “clearly articulated and affirmatively expressed.” The compensation issue seems to be unique to Seattle at this point, but several circuit courts are dealing with lawsuits over regulating Uber and Lyft, and that increases the chances that the Supreme Court will choose to get involved in order to ensure consistency.

But for now, we wait for the Ninth Circuit to rule.

You can watch video of this morning’s oral arguments here and here. Also, here’s a great law review article written by Seattle University law professor Charlotte Garden on the legal underpinnings of Seattle’s ordinance.

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