Federal Court Rules that Seattle’s “Uber Ordinance” Violates Federal Antitrust Law

Date: May 22, 2018

In 2015, Seattle enacted an ordinance that authorized independent contractors in the transportation industry to unionize. This ordinance – directed at gig economy leaders like Uber – turned labor law on its head since historically only employees had the right to unionize.

The U.S. Chamber of Commerce, representing members like Uber and other transportation companies that rely on independent contractor drivers, challenged the ordinance. In May 2018, the U.S. Court of Appeals for the Ninth Circuit held that Seattle’s ordinance violates federal antitrust laws. Unfortunately, however, the court rejected the plaintiffs’ and NFIB’s key argument that the National Labor Relations Act preempts state and local regulation thereby opening the door to independent contractors ultimately gaining collective bargaining rights.

When it enacted the NLRA, Congress intentionally chose to deny collective bargaining rights to independent contractors because they are engaged in their own business ventures. For this reason, NFIB filed an amicus brief in the Ninth Circuit arguing that the NLRA preempts state and local regulation purporting to authorize collective bargaining for independent contractors. In addition, we raised antitrust arguments because there can be nothing more anti-competitive than independent businesses working in concert to fix their prices. And the good news is that the Ninth Circuit embraced our arguments on that issue.

Seattle claimed exemption from antitrust liability under the so-called “state-action immunity doctrine.” But as NFIB Small Business Legal Center has argued consistently in the Supreme Court, that statutory exception should be narrowly construed to disallow anti-competitive regulation. Where a public entity purports to authorize anticompetitive conduct it must be acting pursuant to a very clear statement of state law and only then with strict oversight from the State. And in this case, Seattle’s ordinance ran afoul of this rule because there is nothing in Washington law authorizing municipalities to legalize price-fixing. Nor is there any active supervision at the state level for Seattle’s regime.

Unfortunately, the Ninth Circuit did not stop after concluding that Seattle’s ordinance was preempted by antitrust law. The Court went on to reject NFIB’s argument that the NLRA preempts state and local regulation conferring collective bargaining rights on independent contractors. This portion of the decision may invite state legislatures to follow Seattle’s model—while potentially avoiding the antitrust problems presented in this case. In sum, this may not be the last skirmish on this issue.

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