Chamber of Commerce sues Seattle for allowing Uber and Lyft drivers to unionize

The U.S. Chamber of Commerce sued the city of Seattle on Thursday over an ordinance that allows drivers of ride-hailing apps Uber and Lyft to unionize, saying it violates federal antitrust laws.

Seattle last year became the first U.S. city to pass a law giving drivers for companies such as Uber and Lyft, as well as taxi and for-hire drivers, the right to collectively negotiate on pay and working conditions.

City officials took action amid growing concerns about how drivers are compensated. Both Uber and Lyft vigorously opposed the measure, arguing that existing federal labor law trumps local legislation.

The chamber, a federation of more than 3 million businesses, is the newest entry into the growing legal battle being waged by numerous factions in courts across the United States over whether the drivers are independent contractors or employees, and what sort of benefits and rights they should have.

"Seattle and thousands of other municipalities would be free to adopt their own disparate regulatory regimes, which would ... inhibit the free flow of commerce among private service providers around the Nation," according to the lawsuit, filed in U.S. District Court in Seattle.

The chamber is seeking to have the law suspended.

Uber said in a statement that the lawsuit "raises serious questions not only about whether the city has run afoul of federal laws, but also about the impact on drivers who rely on ride-sharing to earn flexible income.”

Lyft, in a separate statement, said the ordinance "may undermine the flexibility that makes Lyft so attractive both to drivers and passengers."

The ordinance was approved unanimously by the city council but opposed by Seattle Mayor Ed Murray.

Representatives for Seattle's city council could not immediately be reached for comment on Thursday; officials said in December they were prepared for a lawsuit.

"We have millions of dollars set aside," Councilman Mike O'Brien, who proposed the measure, told Reuters.

Richard Reibstein, a labor lawyer who runs the independent contractor practice at Pepper Hamilton, said the law is a threat to all the businesses the chamber represents.

"If a municipality could pass an ordinance of this nature addressed to the ride-sharing industry, it could pass an ordinance of this nature against any industry and all industries," he said.

The chamber also argues that Seattle cannot make a determination about the employment status of drivers before the National Labor Relations Board makes a decision on the issue. The NLRB is reviewing at least four cases and is expected to make a blanket decision concerning their status.

(Reporting by Heather Somerville and Dan Levine in San Francisco; editing by Grant McCool)