The Front Lines of Sharing Economy Legal Debates

By: Diane Ring

Last month I blogged about new proposed legislation in Congress that sought to provide a safe harbor for gig worker classification for tax purposes. However, as I noted, the proposal implicitly favored one side of the debate by making the safe harbor one that would ensure the “easy” ability to classify a worker as an independent contractor (rather than an employee). In that post, I suggested that having tax lead the charge in this sharing economy worker classification debate perhaps allowed the tax “tail” to lead the employment relations “dog”. There are pressing nontax issues in the sharing economy that are driving litigation and dominating worker concerns – particularly employment law issues. Just last week, we saw further evidence of serious tensions in the landscape of sharing economy labor law.

On Tuesday, July 31, 207, in Chamber of Commerce of the United States, et al.,  v. The City of Seattle, a U.S. federal judge dismissed a challenge to legislation approved by the Seattle City Council in fall 2015. Pursuant to the Seattle law, businesses that hire or contract with taxi-drivers, for-hire transportation companies and “transportation network companies” must bargain with drivers if a majority want to be represented. That is, Seattle effectively allows Uber and Lyft drivers to unionize. Not surprisingly, Uber and Lyft objected to the law . . .

The U.S. District Court for the Western District of Washington concluded, in the face of the Chamber of Commerce challenge, that the ordinance was in fact an appropriate exercise of the city’s authority and that the city did not violate the Sherman Act or Washington state antitrust law. Despite this decision, the Seattle ordinance remains subject to an April 2017 preliminary injunction, awaiting resolution of related issues in the case. Seattle has been at the forefront of efforts to promote worker rights, having, for example, ultimately raised the minimum wage to $15 and having required many employers provide paid sick leave. Thus, this recent round of action in Seattle attracted attention across the country.

Neither the Seattle law nor the court’s decision takes a position on the legal status of sharing economy workers as employees or independent contractors. But the law and the decision are part of the high stakes battle over the role and power of workers in the sharing economy. On the litigation side, we have seen class actions over worker classification stymied by mandatory arbitration clauses. Some settlement efforts have produced piecemeal successes for those seeking more worker protections. But the slow progress has led to city and state-level initiatives like the one in Seattle. If antitrust claims ultimately prove a barrier here, this may spell trouble for state and local government attempts to allow collective worker bargaining. The combination of mandatory arbitration and antitrust arguments potentially creates a “heads-I-win-tails-you-lose” situation for workers.  For the moment, the U.S. District Court for the Western District of Washington is not buying the antitrust claim.

Although tax is a relevant part of the worker classification debate, it has not been the dominant driver. In making prescriptions about the appropriate tax treatment of sharing economy workers, it’s important for scholars and policymakers to be attentive to the labor law and worker relations backdrop against which the narrower tax debate is occurring. Tax ought not become an unknowing pawn in that broader and more intricate game.

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