While everyone was watching the Council try to decide whether to impost a head tax, the 9th Circuit Court of Appeals made its own news today by ruling against the city in a case regarding its ordinance granting Uber and Lyft drivers the right to collective bargaining. But buried in the ruling is a legal precedent with potentially far greater impact.
Last August, a U.S. District Court judge ruled in favor of the city, upholding the ordinance against challenges from the US chamber of Commerce and Uber that it violated the Sherman Antitrust Act and the National Labor Relations Act. The plaintiffs appealed, and in February a panel of 9th Circuit judges heard arguments in what was a tough day for both sides. The appeals court ruling handed down today is consistent with the judges’ remarks in the February hearing.
The appeals court reversed the district court’s findings on whether the ordinance violates the Sherman Act. The city has not disputed (yet) that price-fixing among Uber drivers is a prohibited act; instead, it argued that it was exempt under the “state-action immunity” doctrine which holds that as sovereign governments under the Constitution, state legislatures are not strictly subject to the Sherman Act. But to enjoy that immunity, the state must meet two criteria:
- the anticompetitive action must be “clearly articulated and affirmatively expressed as state policy;” and
- the state must actively supervise the regulation of the activity.
Case law further says that the state legislature can delegate its immunity to local governments within its jurisdiction, but the same two criteria are applied and the courts look even more critically at them.
The court found that the City of Seattle’s ordinance met neither of these criteria: it did not have explicit authorization for price-fixing, and the state did not actively supervise it. The existing case law was murky as to whether the state could delegate supervision to a local government, but the appeals court cleared that up by ruling that only the state could perform the supervision (and in this case it was completely uninvolved).
Having found that state-action immunity was not available to the City of Seattle, it remanded the case back to the district court for further proceedings. Since this was all based on a motion for summary judgment, the case is far from over; neither the district court nor the appeals court have looked at the merits of whether the collective-bargaining arrangement is itself a true violation of the Sherman Act, because the question of whether the city has immunity came first. Now that is off the table, the case moves on to the merits.
But the second part of the appeals court’s ruling is in many ways much more interesting, because it addresses one of several fundamental issues related to labor law in the “gig economy.”
The National Labor Relations Act sets out the rules and procedures by which employees can organize for the purposes of collective bargaining. But its carefully-worded definition of “employee” explicitly excludes several kinds of workers, including “independent contractors” and “supervisors.” In the House Report on the NLRA, Congress specifically called out supervisors as having chosen to remove themselves from the rank and file and thus should not have collective-bargaining rights.
The big legal question surrounding the NLRA in the “gig economy” is whether the exclusion of independent contractors from the definition of “employee” was an intent by Congress to preempt states from writing their own labor laws for contractors, or whether Congress simply didn’t care to legislate on the matter. This has been a major unsettled question in “gig economy” labor law, and today the 9th Circuit definitively answered it for cases within its jurisdiction. It ruled that Congress did not preempt states from writing labor laws for independent contractors, and thus the city’s collective-bargaining ordinance does not violate the National Labor Relations Act.
This may not be the final word in the 9th Circuit; if a different circuit court of appeals rules the opposite way on the same issue, the Supreme Court may take it up and make its own ruling. Also, if the Supreme Court decides in one of several pending cases that Uber drivers are de facto employees, then today’s ruling is largely moot. But for the moment, it is an important ruling with side implications for how states within the 9th Circuit approach regulating gig-economy companies.
In whole, today’s appeals court ruling doesn’t invalidate the city’s ordinance; it merely kicks it back to the district court, which must now proceed with a trial on the merits since the City of Seattle doesn’t have immunity to antitrust laws. The appeals court had placed an injunction on the ordinance until the appeal was resolved; now it will be up to the district court to decide whether to place its own injunction back on the ordinance until the trial is over.
And there’s also the possibility that either or both sides will appeal today’s ruling to the U.S. Supreme Court, since they each lost on a major issue.
Get comfortable; there’s still months, possibly years, until this is all resolved.