How Seattle Uber bill exposes larger tensions, lack of data on sharing economy

On Monday, the Seattle City Council unanimously approved a bill allowing Uber, for-hire and taxi drivers to unionize, the latest step in a long-running battle between companies like Uber, which say they are technology providers, and workers who say the firms are denying them benefits by classifying them as contractors.

A long-simmering debate about workers’ rights in a growing freelance economy burst into the open on Monday, as the Seattle City Council voted unanimously to approve a proposal to allow drivers for Uber and other ride-sharing companies to unionize.

The council’s decision — which may face legal challenges — is the latest skirmish in a long-running battle over whether workers in the so-called sharing economy should be treated as full-time employees rather than independent contractors.

The bill would allow drivers for ride-sharing services, taxi companies and other for-hire companies to organize and collectively bargain on issues such as pay and worker protections, with many Seattle-area drivers hailing it as a milestone, though some have said they are satisfied with the flexible work.

“I’m so excited. I’m so happy,” Takele Gobena, 26, a Seattle Uber driver who was temporarily kicked off the ride-sharing company’s app in August after taking part in a news conference with the council member sponsoring the bill, told the Seattle Times. “This is a big change for us,” he said.

The council’s proposal would require companies like Uber and Lyft to provide a list of drivers to the city, which will then give the list to a non-profit organization — likely a union — to contact drivers directly, with the city given oversight over the resulting contract between unions and the companies.

“When it comes to the ability to unionize I think that’s actually very powerful and has the ability to make these freelancers and contractors a lot more secure in their jobs,” says Emily Hong, a program policy associate at the New America Foundation’s Open Technology Institute, in an interview.

So-called gig economy work, she says, “provides a lot of flexibility but doesn’t provide a lot of security. It will be very welcome in this space, especially if turns out that people are increasingly turning to Uber as full-time work.”

Technology companies or transportation providers?

It has also touched off thorny issues for the firms -- which have long argued they are technology companies, not simply providing transportation. They opposed the bill, saying it ran afoul of federal antitrust and labor laws, which have an exemption for contract workers.

“Unfortunately, the ordinance passed today threatens the privacy of drivers, imposes substantial costs on passengers and the city, and conflicts with longstanding federal law,” Lyft said in a statement.

David Plouffe, a former Obama administration official who now works for Uber, told NPR the federal law is “very clear” in exempting contract workers from unionizing under the National Labor Relations Board.

But observers point out that the issue is far from settled, noting that some prominent labor economists, such as former NLRB member Wilma Liebman, have disagreed, saying that state and local governments would be able to step in and allow contract workers to unionize.

“I do think Uber will probably have to raise wages and provide benefits at some point, whether to keep drivers around or in response to public pressure,” Brishen Rogers, a law professor at Temple University, says in an email.

“Though of course Uber will argue that it doesn’t pay ‘wages’ at all, but rather passes on passengers’ fare to drivers ... In the longer term, Uber’s best means of preventing worker unrest will be to treat workers well,” he adds.

Freelance work – traditionally the domain of professions like musicians, artists, domestic workers and increasingly adjunct professors at universities – has expanded dramatically into the general population thanks to online services such as Uber, odd-jobs site Taskrabbit and grocery delivery service InstaCart.

Data on just how many workers are participating in the gig economy is often fuzzy – one estimate is about 53 million, or about 1 in 3 Americans – leaving open questions about how many Americans are using contract work to patch together a full-time job, and what type of benefits should be available to such workers.

How much regulation is too much?

But some economists argue that further regulations would inhibit the benefits – convenience, a broader network of cars – customers get from Uber. They say companies should be free to experiment to create the best model for workers and customers.

“The major disruptive innovation of the sharing economy that has allowed it to create opportunities for consumers and for producers is that these firms don’t depend on the employer and employee relationship. They’re simply platforms that connect consumers with producers,” says Matt Mitchell, an economist at the market-focused Mercatus Center at George Mason University.

Professor Mitchell says companies like Uber also solve an issue economists call the asymmetric information problem, where one party in a transaction – such as a cab driver – has much better information than the other, through the company’s ratings system.

Uber’s rating system – which allows both customers and drivers to provide ratings – has proved controversial, with some drivers saying they have kicked off the app for unsubstantiated claims by customers.

Mitchell says regulation could stop companies from experimenting to creating the best model, noting that not all companies allow ratings, while some early examples of sharing economy-type firms, like eBay, allowing people to negotiate a price.

“There’s going to be all sorts of different tweaks, and this is nice because truly valuable competition isn’t just about having a large number of producers or sellers, it’s also about having a large number of business models ... that allows for experimentation and growth,” he says.

Legal challenges

In Seattle, the legal hurdles posed by the bill also alarmed Mayor Ed Murray, who expressed concerns in a letter to the council before their vote Monday about the costs involved in overseeing the bargaining process and defending the bill in the event of a lawsuit. Mr. Murray, a Democrat, has said he won’t sign the bill, but noted that his signature isn’t necessary to pass it.

In November, a group of leaders from labor, public policy and technology, including the heads of Lyft and food-delivery service Instacart, argued for an alternative “portable benefits” model in a letter to lawmakers posted on the site Medium.

Noting that many contract workers doing short term, temporary work lack a safety net if they get sick, injured or want to retire, the group said workers should be entitled to flexible benefits that they could carry from job to job.

The letter signers also made a veiled reference to several pending legal battles, including a closely-watched challenge to Uber’s classification of its workers as contractors in a California appeals court.

“We believe these issues are best pursued through policy development, not litigation, with an orientation toward action in the public, private and social sectors,” they wrote.

Ms. Hong, of the Open Technology Institute, argues that better data on how many gig-economy workers are full-time versus part-time is needed to help clarify policies on the industry.

“The one thing that I’m interested in is this split between sharing economy companies that are huge multinationals that operate in many many markets versus smaller sharing economy companies,” she says, noting that grassroots organizing, such as efforts by the Seattle drivers, who were backed by a local Teamsters affiliate, will likely happen before larger federal regulations on the sharing economy.

So far, Uber has proved resistant to sharing such data, suing a Seattle law firm that attempted to request the number of drivers in the city, while Airbnb recently began releasing information about people using the short-term rental service in New York, but it's only available in-person at the company's office.

Professor Rogers, of Temple Law School, says that while regulators and media coverage have increasingly focused on tensions in the gig economy, the issues those workers face aren’t unique.

“Many other workers face similar challenges. Wages have stagnated, many workers have part-time work but want full-time work, many workers want unions but can’t organize under current law, many workers have zero retirement savings,” he writes in an email.

“So while we’re talking about on-demand economy work, let’s not forget that income and wealth inequality are very big problems all over the economy.”