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Washington Lyft, Uber Driver Deal Not Safe from Court Challenge

April 4, 2022, 5:12 PM

A new Washington law touted as a grand bargain among Lyft Inc., Uber Technologies Inc., their drivers, and a union local could nevertheless be ripe for a legal challenge if the experience of past gig worker measures is any indication.

The law, which Gov. Jay Inslee (D) signed March 31, would ensure Lyft and Uber can keep classifying their Washington drivers as independent contractors but requires the companies to provide benefits, including minimum per-trip pay and paid sick time.

The deal is the latest development in a wide-reaching battle over the employment status of ride-hail drivers and other gig economy workers—a battle that frequently lands in court. The companies for years have resisted driver and worker advocate demands to be recognized as employees, gaining workplace protections such as minimum wage, overtime pay, unemployment insurance, and collective bargaining rights.

The Washington measure is “plainly a very carefully negotiated political compromise,” said Timothy O’Connell, a management-side labor attorney with Stoel Rives LLP in Seattle. “It’s very clear both sides gave up some things and got some things.”

Despite the law’s negotiated nature, opponents could challenge it on several fronts, O’Connell said.

In particular, a city such as Seattle could sue over language that preempts future efforts to regulate ride-hail companies locally. Drivers also could sue to challenge the minimum pay formula, which provides per-mile and per-minute pay rates while they’re transporting passengers but not while they’re waiting or driving to pick up passengers, O’Connell said.

The latter is a classic dispute over wage-and-hour law—whether and how workers are compensated for time spent on standby.

“I don’t see anything out of the ordinary about that kind of a compromise,” O’Connell said, but added it could still draw a challenge.

One of the Washington measure’s opponents is Sean O’Brien, the new head of the Teamsters International Union, who told Bloomberg News he was urging Inslee to veto the legislation hours before the governor signed it—even though a local affiliate of the union helped negotiate the legislation. O’Brien said the new law falls short of conferring the full rights and benefits of employment on drivers.

The Teamsters didn’t respond to an inquiry about potential litigation.

California, Seattle Measures Blocked

Washington is the first state to extend minimum pay and other benefits to ride-hail drivers via legislation.

An industry-backed attempt to do likewise via ballot initiative in California, Proposition 22, is a high-profile example of a gig worker measure getting challenged and at least temporarily blocked in court. A California state court found the Prop 22 initiative was unconstitutional and represented a limit of state power to determine which workers must be covered by workers’ compensation laws. The judge also struck the initiative down for its limits to collective bargaining.

An appeal of that decision is pending in California’s First District Court of Appeal, filed by the Protect App-based Drivers & Services Coalition, which is funded by the ride-hail and delivery companies. California Attorney General Rob Bonta also filed a brief asking the appeals court to overturn the lower court decision.

Drivers teamed up with the Service Employees International Union to bring that California lawsuit. An SEIU representative didn’t respond to a request for comment on the new Washington law.

“It is possible to imagine a claim similar to the one brought in California, arguing that the law violates the Washington Constitution’s single subject rule,” said Elizabeth Ford, a professor at the Seattle University School of Law. “A similar claim was brought against a Seattle law that provided a range of benefits to hotel workers, including pay protections, health insurance requirements, and safety protections.”

A state appeals court found that Seattle hotel workers law unconstitutional in 2018, after which the city revised the law to satisfy the court, Ford said.

Legislative efforts in the opposite direction—namely California’s AB 5, which sought to classify most drivers and other gig workers as employees—have been hotly litigated too. That law found itself largely tied up in court prior to passage of Prop 22, after which Uber and Postmates Inc. argued to federal courts that the ballot initiative made AB 5 largely moot.

Seattle, in 2016, passed a law that would have allowed gig workers to form unions, despite their status as independent contractors. The U.S. Chamber of Commerce successfully challenged that ordinance, in part arguing that only the state can carve out exceptions to antitrust law, which doesn’t allow contractors to organize.

More Compromise Ahead?

Massachusetts is poised for a similar battle over gig worker status, with a ballot initiative that mirrors Prop 22 headed to voters in November.

A legislative proposal in New York state, which would have allowed gig workers to organize, was scrapped earlier this year after worker advocates said it would strip workers of protections and not give them an equal seat at the bargaining table.

“A political consensus is emerging with voters and legislators respecting gig drivers’ preference for flexibility,” said Adam Kovacevich, founder and CEO of the Chamber of Progress, a tech industry coalition that includes Lyft and Uber.

“When voters and legislators are focused on this they increasingly want to forge compromise,” he added. “The Massachusetts ballot initiative this fall will be kind of the next test of that.”

Worker advocates such as Jennifer Sherer of the Economic Policy Institute disagree. She testified against the Washington measure in February while it was moving through the state Senate, arguing that it did not go far enough and that drivers need the full benefits of employee status and union-organizing rights.

“Platform companies have waged an aggressive campaign to exempt themselves from labor and employment laws,” she said in her written testimony, predicting the companies would pursue similar legislation in other states. “Meanwhile, efforts to establish a strong, protective legal test for determining employee status are under way in many states and at the federal level, but could be harmed if inadequately protective new forms of ‘non-employee’ status are prematurely codified in state laws.”

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com, Erin Mulvaney at emulvaney@bloomberglaw.com

To contact the editor responsible for this story: Andrew Harris at aharris@bloomberglaw.com, Melissa B. Robinson at mrobinson@bloomberglaw.com