Seattle on Monday became the first U.S. city to pass a law giving drivers for Uber and Lyft the proper to unionize, a fresh challenge to the ride companies’ success because they confront mounting dissatisfaction over how drivers are treated.
Regulations approved unanimously by the Seattle City Council recognizes the proper of drivers for on-demand ride companies referred to as Transportation Network Companies, together with taxi and for-hire drivers, to collectively negotiate on pay and working conditions.
Uber and Lyft both opposed the measure and argue that federal law precludes such local legislation. Regulations marks a new method of addressing the heated debate over whether Uber and Lyft drivers must have some or all of the rights of employees, which would substantially increase companies’ costs.
Despite facing regulatory battles in Seattle, both companies have growth in popularity there, with a large number of drivers using the app.
"Unfortunately, the ordinance passed today threatens the privacy of drivers, imposes substantial costs on passengers and the town, and conflicts with longstanding federal law," said Chelsea Wilson, Lyft public policy communications manager.
Uber said about 50 % its drivers work less than 10 hours weekly, and there is such a higher turnover of drivers that designating them as employees or permitting them to unionize doesn’t seem sensible.
Uber is widely likely to sue, although Lyft said it didn’t have plans to sue.
Seattle Councilman Mike O’Brien, who proposed the measure, predicted Uber would sue and said the town had the resources to guard the ordinance.
"We’ve a $60 billion organization making big money although some drivers are making significantly less than $3 each hour," he said.
At least 1,000 drivers have previously organized within the App-Based Drivers Association.
The Seattle law will not rule on whether drivers are employees or contractors but reaches drivers rights usually reserved for employees.
"It’s a a reaction to the employment issue without solving that bigger problem," said Richard Reibstein, a labor lawyer who runs the independent contractor practice at Pepper Hamilton. "Until such time as their status is resolved in each state, those people who are unhappy will seek political action to advance their causes."
A huge selection of union supporters and drivers packed the town council chambers Monday afternoon.
"It’s just about making minimum wage" after deducting costs, said Sean Janaba, 34, of Seattle, who has been driving for Uber for 3 years. "Things are receiving worse."
The per-mile fare for Uber and Lyft rides in Seattle is $1.35, a bit more than half what it had been a couple years back. In other cities, Uber has regularly cut fares to attract passengers.
At least nine states have issued rulings that drivers are independent contractors, however in two separate cases in California, drivers were deemed employees and got unemployment benefits.
Other drivers have sued Uber for misclassifying them as contractors. Uber is facing a class-action suit in California that could include thousands of drivers.
Uber and other opponents to the Seattle ordinance argue that federal law prohibits independent contractors from collective bargaining, because the law only covers employees.
But farm workers and home healthcare workers, who are also not addressed by the federal law, have already been permitted to unionize under state law, that could give Seattle a defense because of its action.
To possess a city pass such a law, however, "is incredibly uncommon," Reibstein said. Some question whether cities have that legal authority.
Additionally, there are federal anti-trust statutes that may be triggered if driver unions are regarded as fixing prices and eroding free market competition.
(Additional reporting by Mike Rosenberg, Editing Peter Henderson & Shri Navaratnam)