In 2015, Seattle became the first and only city to allow its ride-share drivers to unionize. But now the union may be broken up before it holds a single bargaining session, thanks to a legal alliance between Uber and the U.S. Chamber of Commerce — joined recently by the Trump administration.
The 9th Circuit of Appeals is currently deliberating Chamber of Commerce v. City of Seattle, a suit brought on Uber’s behalf by the pro-business organization. Uber and the chamber hope to label the Seattle ordinance, passed unanimously by the city council in 2015, an antitrust violation. The argument, in essence, is that the city’s coalition of largely working-class and immigrant drivers would violate antitrust rules if they were allowed to negotiate together with the ride-sharing companies that sign their paychecks. Since the drivers are classified as independent business operators, the logic goes, they would be illegally conspiring to set prices.
Recently, Uber’s side got a boost from lawyers from the U.S. Department of Justice, led by an outspoken Donald Trump supporter and former aide, and from the Federal Trade Commission. The agencies filed an amicus brief late last year, and an FTC lawyer presented oral arguments last month in front of a three-judge panel. The City of Seattle, for its part, maintains it should able to set its own labor rules, and that it wants to be a “laboratory’ for testing innovative policy responses to the problems created by new technologies and the changing economy.”
The appeals case, the culmination of a more than two years of legal battle, stands as an example of how Uber has cultivated support well over the heads of local officials, who are directly exposed to its operations and often most inclined to regulate it. Beyond the courts and sympathetic members of the executive branch, Uber also benefits from a sprawling army of lobbyists. Recruited from both parties, these lobbyists help enact industry-friendly transportation laws at the state level, which can make Seattle-style unionization efforts nearly impossible. Against this political backdrop, Chamber of Commerce v. City of Seattle takes on an added urgency: It underlines just how difficult it is for workers in the precarious gig economy, who generally cannot unionize, to gain any leverage over the well-capitalized platforms for which they work
Uber’s battle against municipal legislation has been long, grinding, and multifaceted. It has also tended to get lost in the news cycle, even as Uber’s scandals have become increasingly explosive. Allegations that the company fostered a top-to-bottom culture of sexual harassment, that it stole self-driving car technology from Google, that it built software to evade regulatory monitoring — these charges and others have been scrupulously documented and dissected, down to how much water ousted Uber CEO Travis Kalanick drank during recent court testimony. The company’s political and legal maneuvers, meanwhile, tend to rumble below the surface. But the outcome of the Seattle case, like other slogging regulatory Uber fights, could have far-reaching implications for countless workers trying to earn a living in the app-based labor market.
Seattle’s “Enterprising” Effort to Help Uber Drivers
The city ordinance aims to create a framework for the city’s drivers to vote and decide if they want to collectively bargain with ride-sharing companies like Uber and Lyft over working conditions. It didn’t define these drivers as official employees. But it would set up an alternative system that recognized the unique predicament of ride-sharing drivers, sitting somewhere in between traditional salaried employees, and independent contractors who completely control their work environment. “It was an enterprising proposal,” said Charlotte Garden, a professor and labor law expert at the Seattle University School of Law who supports the ordinance. Garden stressed that the legislation would empower drivers in the city to address a range of concerns, including low wages and opaque deactivation rules. If negotiations break down, the ordinance provides mechanisms to facilitate an agreement. Either party can request arbitration, under the supervision of the city.
Uber moved quickly to fight the Seattle law on multiple fronts. It created an anti-unionization podcast, offered free pizza to drivers who showed up to anti-union meetings, and bought local TV ads critical of the Teamsters, the union working to organize drivers on the ground.
One of its local subsidiaries in Seattle teamed up with the Chamber of Commerce and launched a suit shortly after the ordinance passed. The plaintiffs argued, among other things, that the city was violating antitrust rules. By allowing drivers to form an organization and bargain to set prices and working conditions, the chamber argued, the drivers were setting up what amounted to an illegal cartel. Although a district court ruled against Uber in 2015, the chamber appealed to the 9th Circuit, where it was eventually joined by the FTC and DOJ. (The FTC has not always been in Uber’s corner; last year, it fined the company $20 million for misleading drivers about pay).
While the Seattle law is tied up in court, Uber drivers have not been able to convene a bargaining unit as the ordinance allows.
The merits of the Seattle case hinge on a series of highly technical questions. Seattle argues that a Washington state transportation law from the 1990s, which empowers cities to regulate the for-hire vehicle industry, now authorizes the city to regulate the relationship between Uber drivers and the company. Uber and its allies say it doesn’t. The city argues that its law doesn’t interfere with federal antitrust regulations, because it falls under something known as the “state-action exemption,” a legal standard that allows elected governments, in some circumstances, to sanction anti-competitive behavior, such as price floors for drivers. This position is supported by a dozen state attorneys general, the AFL-CIO, and the National Employment Law Project. Uber and its allies disagree, and arguments by federal attorneys have focused on establishing that, between Seattle’s ordinance and the older state law on which it rests, this exemption has not been properly met.
Antitrust and labor experts have come down on both sides. Marshall Steinbaum, an economist who serves as research director at the left-leaning Roosevelt Institute, called the federal government’s decision to use antitrust law to block Uber drivers from negotiating better working conditions “galling.”
“Their job is to make the economy competitive,” he said. “That does not include siding with the Chamber of Commerce and Uber in a case against labor.” (When an Uber customer in New York filed a suit accusing Uber themselves of price-fixing, the FTC did not side with that customer, and the case was eventually sent to arbitration.)
The top DOJ lawyer on the case, Makan Delrahim, is a Trump supporter and the president’s former deputy assistant. He was accused of politicizing the recent enforcement of antitrust rules against a communications merger involving CNN, of which Trump has been critical. (The DOJ did not respond to a request for comment.)
Still, the Uber-Seattle spat is not so clear-cut. The federal antitrust concerns in the case bear some resemblance to past regulatory action, including a groundbreaking 2015 Supreme Court ruling that the FTC could enforce an antitrust order against North Carolina’s State Board of Dental Examiners, which the state had claimed was immune from antitrust law. The case went to the Supreme Court, which ruled in 2015 that the FTC had correctly identified the scheme as an antitrust violation.
Christopher Koopman, the director of the Technology Policy Program at the Mercatus Center at George Mason University, wrote in an email to The Intercept that the Seattle plan in unfair because only some drivers would be allowed to bargain; the ordinance only covers longtime drivers who drive close to full time. This is an argument Uber has been making as well. Boycotts or work stoppages, Koopman argued, would be a better way to pressure Uber to improve working conditions. “A much more powerful mechanism, and one that can be used by all drivers to voice concerns, is refusing to drive,” Koopman wrote.
For drivers on the ground organizing in Seattle, the lawsuit — and the federal government’s decision to side with Uber — feels like a gut punch: “To me, it looks like the government is sheltering the business class from us,” said Don Creery, an Uber driver in Seattle who is also on the leadership team of the App-Based Drivers Association, the organization leading that driver negotiating effort. Creery’s been waiting for two years for the law to go into effect, and he’s starting to despair. He’s been working longer hours to earn the same amount of money, his rent keeps creeping up too. Meanwhile, other drivers are less and less interested in getting organized. “I don’t blame them,” Creery said. “What do we have to show for it?”
How Uber Cancels Local Regulations
A recent report out from the National Employment Law Project and the Partnership for Working Families underlines just how significant the battle in Seattle is. It charts how Uber steadily built up one of the country’s most extensive lobbying juggernauts — in 2016, it had 370 active lobbyists working on its behalf, more than Amazon, Microsoft, and Walmart combined. The lobbying campaign helped enact statewide regulatory regimes that would preempt efforts by cities to craft their own rules governing safety issues, insurance, background checks, and, in Seattle’s case, collective bargaining arrangements.
Uber and its allies have not been able to pass such a law in Washington state, which is why Seattle was able to make some headway with its collective bargaining ordinance in the first place.
But Seattle is an outlier. According to the report, more than 40 states have enacted legislation that can block local transportation network regulations before they ever end up in a courtroom, by stripping cities of their regulatory power outright. The lobbying efforts were tightly focused on local politics: In Portland, Oregon, where Uber’s preferred legislation ultimately failed in the state legislature, the company’s lobbying activity in 2015 accounted for 30 percent of the city’s total lobbying that year.
“Uber took advantage of legislatures’ lack of familiarity with the industry,” said Miya Saika Chen, one of the report’s authors, and a lawyer with the Partnership for Working Families. What’s perhaps most striking about the lobbying effort, Saika Chen said, is just how bipartisan it is: In Pennsylvania, Uber hired Krystjan Callahan, the former chief of staff to the Republican House speaker; in Texas its PAC hired former Democratic mayor of Austin, Lee Leffingwell. Uber even deployed former Obama adviser David Plouffe to Seattle back in 2015, to squash the drivers’ collective bargaining campaign.
Sometimes, Uber has been a bit overzealous: Plouffe had to pay a $90,000 fine for violating lobbying rules in Chicago, and last month it was reported that a former member of the California Public Utilities Commission will pay a $32,500 fine for lobbying for Uber without proper registration.
And while they don’t always win, the influence of these Uber lobbyists is hard to overstate. Take Ohio, where Uber’s lobbying efforts are laid bare thanks to public documents obtained through the Freedom of Information Act and provided to The Intercept by the authors of the new report. In the spring of 2015, Robert Klaffky, a lobbyist working for Uber in Ohio, sent Mike Duffey, a state representative from the small affluent town of Worthington, an email to his private Gmail account. “Here is a draft bill for Ohio,” the lobbyist wrote. “Please review and let’s set a time we can chat to walk through it.”
At that time, a number of cities in Ohio had begun disseminating their own rules and regulations for how ride-sharing companies — including Uber and Lyft — would operate. In Columbus, for example, city leaders had worked for a year on a set of regulations for driver background checks and safety inspections. Uber protested that these rules were too onerous.
The file Klaffky sent to Duffey contained a new state law that would cancel out any local regulations. The records show that Klaffky even drafted responses for Duffey to send to other lawmakers skeptical of the bill. And just eight months after Klaffky emailed Duffey, the bill found itself on Ohio Gov. John Kasich’s desk. As Cleveland.com once reported, Klaffky was considered to be in Kasich’s inner circle and a member of his “kitchen cabinet.” And Kasich prompted sign a bill that closely resembled Uber’s original wording into law. It came over the objections from organizations like the Ohio Municipal League, which argued that the bill stripped cities of their ability to regulate their own transportation sector.
In an email to The Intercept, Duffey defended the bill as a necessary fix. As individual cities moved to regulate Uber, he says, the legislature needed to step in and provide a statewide standard. “Every bill involves input from the affected industries, including draft language for review,” Duffey wrote.
Uber Says It’s “Confusing” When Cities Have Their Own Laws
“Regulating ride-share at a city level creates barriers to entries and costs to drivers, confusion for riders, and unnecessary administrative costs for local governments — all without any increase in safety for riders and drivers or benefits for local jurisdictions,” an Uber spokesperson told The Intercept. “We will continue working with lawmakers and regulators to develop rules and policies that benefit riders and drivers while providing businesses like ours legal certainty.”
Critics of Uber’s strategy call this technique “preemption” or “state interference.” Pioneered by conservative pressure groups, this legislative strategy has been used to block city-level attempts to raise minimum wages and enact gun control by passing sweeping state laws that nullify local ordinances.
Klaffky, the lobbyist, told The Intercept that Uber’s efforts in Ohio are a “fairly ordinary” example of how industry shapes its regulatory environment. Though, he’s noticed that Uber’s government affairs team is a cut above the rest: “They are very sophisticated,” he said. “Most of them come out of government, there are Republicans and Democrats, and they know how government works.”
Uber is currently pushing a regulatory law in the Washington state legislature — although, the company says it is happy to let the courts decide the fate of Seattle’s collective bargaining scheme.
The Seattle case could set a strong precedent, either inviting a new wave of driver organizing or solidifying the labor model that Uber wants. “Other states and cities are waiting to see what happens,” said Garden, the labor lawyer. A similar effort by the California legislature has already stalled. Assembly Member Lorena Gonzalez, who had been pushing to unionize California ride-sharing drivers, pulled her bill in 2016 because, her office said at the time, it relied on “a number of untested legal theories.”
The 9th Circuit could throw the case back to district court, or it’s possible that the court could make a definitive ruling, provoking a potential Supreme Court appeal. The future of the law is still up in the air — though during oral arguments, the three-judge panel was reportedly unsympathetic to the city’s case (video is available here and here).
Meanwhile, Uber’s effort to smooth out its regulatory environment continued apace. An industry-backed bill passed the Alabama legislature last month with unanimous support. Uber’s lobbying team in the state includes a former deputy attorney general and a former chief of staff to the governor.
Back in Seattle, Greery, the driver and labor leader, is not at all optimistic that he’ll ever be allowed to sit across the table from the company he works for and bargain. “People say it could go to the Supreme Court” he said, sounding despondent. “That’s an anti-labor court — and I think we would lose.”
Correction: March 26, 2018
An earlier version of this story misidentified the plaintiff in a New York case accusing Uber of price fixing; the plaintiff was a customer, not a driver.
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