Its been more than two years since Seattle passed a law to allow Uber and Lyft drivers to unionize.
It's been more than two years since Seattle passed a law to allow Uber and Lyft drivers to unionize. NYCSHOOTER/GETTY

In a decision issued Friday, a panel of Ninth Circuit Court of Appeals judges struck a significant blow to Seattle's effort to allow drivers for services like Uber and Lyft to unionize.

Seattle passed the first-of-its kind unionization law in 2015, outlining a process by which drivers for services like Uber and Lyft could unionize and bargain with the companies over issues like pay. The law has faced a flurry of legal challenges, including from the U.S. Chamber of Commerce. The Chamber argues Uber and Lyft drivers don't have the right to unionize under federal law because they are independent contractors and that Seattle's law violates federal antitrust regulations. Last year, a U.S. District Court judge dismissed the Chamber's case. The Chamber appealed.

Now, a panel of three U.S. Court of Appeals judges has upheld one of the Chamber's central arguments and rejected another.

Unlike the U.S. District Court, the Court of Appeals judges found the ordinance violates federal antitrust law because it allows "price fixing" of ride hailing prices "by private cartels of independent-contractor drivers." The District Court judge found that Seattle’s law is allowed under standards that allow state immunity from antitrust laws in certain cases. The Court of Appeals panel rejected that analysis because Washington state law does not expressly allow private parties to set the fees drivers pay to Uber and Lyft.

State law does allow for the regulation of ride-hailing services, including "safety and equipment requirements." In arguments before the 9th Circuit of the Court of Appeals, the City of Seattle argued that allowing drivers to negotiate with companies like Uber and Lyft is in fact a safety issue. In an interview after those arguments, Seattle City Attorney Pete Holmes told The Stranger, "Paying starvation wages to drivers, there's an impact on public safety." (Uber drivers on different sides of this issue tell vastly different stories about how much they're making.)

But in their ruling, the panel of judges wrote that the state law "lends no support to the city's position."

The panel of judges rejected the Chamber's other argument: that the ordinance is preempted by the National Labor Relations Act. The mixed decision sends the case back to District Court for more proceedings on the anti-trust claims.

The decision is a setback for Seattle's novel law, hailed by labor advocates as a way of granting rights to workers at the whims of the so-called gig economy. In a statement, Don Creery, an Uber and Lyft driver and member of the App-Based Drivers Association, said drivers were "deeply disappointed" with the decision. “Anti-trust laws were put in place to protect the little guy from monopolistic practices from large corporations, not to shield a company like Uber—valued at over $70 billion—from negotiating with its workers over fair pay and working conditions.” Uber spokesperson Caleb Weaver called the decision "a win for rideshare drivers, riders, and the entire Seattle community."

Holmes spun the decision the city's way. In a statement, Holmes said the city is "obviously disappointed" with the anti-trust ruling, but "very pleased with the court’s unequivocal holding that a city law allowing independent contractors to engage in collective negotiations is not preempted by federal labor law." Holmes' office is now "evaluating its next steps."

And some legal experts say the ruling doesn't foreclose on similar efforts in other states. By rejecting the preemption argument and focusing mostly the lack of clarity in Washington State law, the court left the door open for unionization efforts in other states—or clarity from the Washington State Legislature.

States like California and New York could "pass a statute tomorrow" regulating Uber and Lyft drivers," Stanford law professor emeritus William Gould told Bloomberg. "All they have to do is be more explicit and provide for some level of state supervision as well as municipal supervision."