Uber Complicated? State and Local Labor Law May Fill in Federal Gaps

Last week, Seattle passed a historic law that would allow Uber drivers – whom Uber has steadfastly maintained are independent contractors despite legal challenges – to organize, form a union, and bargain over the terms and conditions of their work. If you were a labor attorney representing Uber, which doesn’t want to deal with a union, you would probably take comfort in an inescapable fact of federal law: independent contractors are not employees” under the National Labor Relations Act (“NLRA”) (nor any other employment law, for that matter), so they can’t organize.

Not so fast.

The Seattle City Council voted unanimously to pass an ordinance, the first of its kind in the country, to allow Uber, Lyft and other ride-hailing apps to organize. The law is likely to face challenges on several fronts. For example, independent contractors bargaining together over prices and compensation could run up against anti-price-fixing laws. Seattle’s mayor has also held off on implementing the law, citing the city’s need to study the unknown costs of administering a collective bargaining process. And finally, we can expect the law to be challenged as running afoul of federal preemption” principles. In Machinists and Aerospace Workers v. Wisconsin Employment Relations Commission, 427 U.S. 132 (1976), the U.S. Supreme Court held that federal labor law prohibits state law regulation of an area of labor activity or management-union relations that Congress has left intentionally unregulated. In the case of the Seattle ordinance, it would not be surprising to see opponents challenge the law on that ground – the theory being that Congress put independent contractors beyond the reach of federal labor law and therefore intentionally left that area of labor relations open to the play of free market forces (rather than collective bargaining). This doctrine has come to be known as Machinists preemption.”

David Plouffe, now at Uber and formerly President Obama’s campaign advisor, anticipated the Machinists argument when Seattle’s City Council approved the new law. Well,” he said, there’s very clear federal law on this, that independent contractors cannot be organized.” The problem, however, is that it may not be so clear. In fact, said Wilma Liebman, who served on the National Labor Relations Board (“NLRB”) during the Clinton, George W. Bush and Obama administrations, my view is the opposite.” Why? Because, the argument goes, the fact that Congress excluded independent contractors from the coverage of the NLRB doesn’t necessarily mean that Congress further intended that they have no bargaining rights at all – just no bargaining rights specifically under the NLRA. That leaves a theoretical door open to state and local law creating labor rights for independent contractors that don’t exist under federal law. That’s exactly the theoretical door that Seattle has now actually opened with the new ordinance.

The idea that state and local governments can fill gaps in workers’ rights left open under federal law isn’t new. California did it in the 1970s for farm workers, who are also specifically excluded from the coverage of the NLRA. I don’t think anyone has ever said that California can’t do that,” Liebman observed.

In the past two years, we have seen aggressive pro-employee legislation taking root across the country in both states and municipalities. Take, for example, the large number of cities and states that have significantly raised the minimum wage for all workers from 2013-2015, and the 11 or so cities contemplating similar increases now. State and federal agencies charged with implementing and enforcing employment and labor laws have also taken a tougher, more aggressive stance in their interpretation and enforcement of the law; the NLRB itself, for example, vastly expanded its view of what a joint employer” is in a series of McDonald’s-related cases in an effort to assist large-scale union organizing efforts that have been limited in the past by the fast-food franchise model.

State and local law extending bargaining rights to workers who previously had none – or facilitating renewed organizing efforts in industries with lower union membership – may be the next wave in the general trend. In 2016, employers should remain alert of legislative efforts to do just that. As the Seattle law demonstrates, old, dependable assumptions about the way labor law works may need to be discarded (or at least carefully reviewed) in light of creative state and local efforts to expand worker protections and tilt the labor balance to workers, who are perceived by the labor movement as having lost ground to companies’ unilateral power over the years.