The Seattle City Council recently decided to address a distinctly 21st century dilemma with a distinctly 14th century solution.
In a unanimous vote earlier this month, Seattle became the first U.S. city to allow drivers working for ride-hailing companies like Uber and Lyft to unionize so they can bargain collectively over compensation and working conditions. The legislation requires that companies bargain with their drivers if the majority of them demonstrate they want to be represented by nonprofit organizations, which the city will certify.
Uber and Lyft, which strongly opposed the measure, contend that federal law prohibits independent contractors from bargaining. But as Reuel Schiller, a professor at the University of California Hastings College of the Law, observed in The Wall Street Journal, these companies may find that choosing to engage their drivers as independent contractors may be the very thing that makes it difficult to oppose Seattle’s new measure. Schiller explained that, while federal labor law prohibits states and cities from overriding federal employee protections, there is no restriction on creating unionization rules for independent contractors. On the other hand, antitrust laws and other restrictions on price-fixing generally prevent independent business operators from colluding, even if the collusion is cast as collective bargaining.
It is not as if ride-hailing companies could reasonably argue their drivers are anything but independent contractors, even if they wanted to. Uber and Lyft drivers are clearly not employees in any conventional sense of the word. They set their own hours. They decide how many hours to work. They provide their own equipment, and they can accept or reject any particular assignment they receive. (If you are an employee, try that out and see how it works.)
Though in today’s parlance these drivers are independent contractors, in older terminology, they might be called tradesmen. So when the city of Seattle decided it wants these tradesmen to organize, it is not really offering them a union. It is offering them a guild.
How would it work? Must a driver reside in Seattle to join? What about a suburb, like Bellevue? Or a city arguably in driving range, like Bellingham, Washington or Portland, Oregon? What about farther afield - could a driver from San Francisco join? How about one from Manhattan? How does the city of Seattle gain jurisdiction over a driver from New Jersey carrying a fare in the Bronx?
What happens when a driver not in the guild wants to pick up an Uber fare? Will the city of Seattle step in and say “no can do?” Will a driver carrying a fare from Tacoma be required to drop off her passenger at the Seattle city line to allow a guild-authorized driver to carry him the rest of the way to his destination?
When there is a dispute between the guild and the ride-sharing service, will it go before a local version of the National Labor Relations Board? Or maybe the parties will just hash things out at a coffee shop, which seems like the Seattle way to handle it.
For that matter, why stop at Uber drivers? Why not let self-employed lawyers or accountants band together to decide on fairer prices and working conditions to impose on Seattle customers? After all, most accountants feel badly overworked and underpaid around April 15 every year. Or, perhaps more relevant to the tech-oriented city, what about freelance software developers? Should they be encouraged to band together to negotiate with major Seattle employers, like Boeing, or startups, like Uber?
Seattle’s mayor, Ed Murray, has said he opposes the legislation in its current form, though his signature is not necessary for it to become law under the City Charter. And even his objections seem to have more to do with logistical questions than with the idea itself. While the law will almost certainly face immediate and vigorous legal challenges, that won’t prevent it from creating major headaches in the meantime.
Seattle officials may think they are just sticking it to a company valued at $62.5 billion. But in fact they are really shafting their city’s riders and those drivers who just want to pick up some extra money as and when they can without having to tithe to the guild. (Labor unions, in fact, are tax-exempt not-for-profit organizations under Sec. 501(c)(5) of the Internal Revenue Code. But “not for profit” does not mean “free of cost.”) Without mandated guild membership, this so-called unionization could not possibly work with Uber’s “come as you are” business model.
In left-leaning Seattle, this law certainly must sound like a progressive idea. It is just progressive in a very medieval sense.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book
The High Achiever’s Guide To Wealth.
Posted by Larry M. Elkin, CPA, CFP®
photo by Sergio Ruiz, courtesy SPUR on Flickr
The Seattle City Council recently decided to address a distinctly 21st century dilemma with a distinctly 14th century solution.
In a unanimous vote earlier this month, Seattle became the first U.S. city to allow drivers working for ride-hailing companies like Uber and Lyft to unionize so they can bargain collectively over compensation and working conditions. The legislation requires that companies bargain with their drivers if the majority of them demonstrate they want to be represented by nonprofit organizations, which the city will certify.
Uber and Lyft, which strongly opposed the measure, contend that federal law prohibits independent contractors from bargaining. But as Reuel Schiller, a professor at the University of California Hastings College of the Law, observed in The Wall Street Journal, these companies may find that choosing to engage their drivers as independent contractors may be the very thing that makes it difficult to oppose Seattle’s new measure. Schiller explained that, while federal labor law prohibits states and cities from overriding federal employee protections, there is no restriction on creating unionization rules for independent contractors. On the other hand, antitrust laws and other restrictions on price-fixing generally prevent independent business operators from colluding, even if the collusion is cast as collective bargaining.
It is not as if ride-hailing companies could reasonably argue their drivers are anything but independent contractors, even if they wanted to. Uber and Lyft drivers are clearly not employees in any conventional sense of the word. They set their own hours. They decide how many hours to work. They provide their own equipment, and they can accept or reject any particular assignment they receive. (If you are an employee, try that out and see how it works.)
Though in today’s parlance these drivers are independent contractors, in older terminology, they might be called tradesmen. So when the city of Seattle decided it wants these tradesmen to organize, it is not really offering them a union. It is offering them a guild.
How would it work? Must a driver reside in Seattle to join? What about a suburb, like Bellevue? Or a city arguably in driving range, like Bellingham, Washington or Portland, Oregon? What about farther afield - could a driver from San Francisco join? How about one from Manhattan? How does the city of Seattle gain jurisdiction over a driver from New Jersey carrying a fare in the Bronx?
What happens when a driver not in the guild wants to pick up an Uber fare? Will the city of Seattle step in and say “no can do?” Will a driver carrying a fare from Tacoma be required to drop off her passenger at the Seattle city line to allow a guild-authorized driver to carry him the rest of the way to his destination?
When there is a dispute between the guild and the ride-sharing service, will it go before a local version of the National Labor Relations Board? Or maybe the parties will just hash things out at a coffee shop, which seems like the Seattle way to handle it.
For that matter, why stop at Uber drivers? Why not let self-employed lawyers or accountants band together to decide on fairer prices and working conditions to impose on Seattle customers? After all, most accountants feel badly overworked and underpaid around April 15 every year. Or, perhaps more relevant to the tech-oriented city, what about freelance software developers? Should they be encouraged to band together to negotiate with major Seattle employers, like Boeing, or startups, like Uber?
Seattle’s mayor, Ed Murray, has said he opposes the legislation in its current form, though his signature is not necessary for it to become law under the City Charter. And even his objections seem to have more to do with logistical questions than with the idea itself. While the law will almost certainly face immediate and vigorous legal challenges, that won’t prevent it from creating major headaches in the meantime.
Seattle officials may think they are just sticking it to a company valued at $62.5 billion. But in fact they are really shafting their city’s riders and those drivers who just want to pick up some extra money as and when they can without having to tithe to the guild. (Labor unions, in fact, are tax-exempt not-for-profit organizations under Sec. 501(c)(5) of the Internal Revenue Code. But “not for profit” does not mean “free of cost.”) Without mandated guild membership, this so-called unionization could not possibly work with Uber’s “come as you are” business model.
In left-leaning Seattle, this law certainly must sound like a progressive idea. It is just progressive in a very medieval sense.
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