And you were thinking about moving west…
Seattle’s City Council prides itself on being an early adopter of new business mandates. Seattle was the first major U.S. city to adopt a $15 minimum wage and one of the first to require businesses to provide paid sick leave. The City Council achieved another first last week, when it unanimously enacted an ordinance requiring food-delivery app companies to provide gig workers “premium pay” for deliveries in the city, on top of their usual compensation, and prohibiting the companies from raising fees or leaving the city in response, even if the new rule causes them to lose money.
Instead of erecting a wall to keep people out, Seattle is attempting to create a legal wall to keep businesses in.
The ordinance was first suggested by Working Washington, a Seattle labor organization backed by the Service Employees International Union. On-demand delivery workers in the city—think Instacart shoppers and DoorDash couriers—must be paid a premium of $2.50 a stop in the city for the duration of the Covid-19 emergency declared by Mayor Jenny Durkan.
With thousands of homebound Seattle residents in need of grocery deliveries, the costs add up. The City Council expects the companies to eat it: The ordinance states that gig companies may not “reduce or otherwise modify the areas in the City that are served,” “reduce a gig worker’s compensation,” or “add customer charges to online orders for delivery of groceries” in response to the new premium. If a company violates the ordinance, the city can pursue it with penalties beyond the city limits.
To understand how unprecedented this is, imagine if Seattle’s $15 minimum-wage law restricted restaurants from closing their doors or adjusting their prices in response, effectively forcing them to continue operating at a loss.
If that sounds illegal, it probably is. In a detailed memo sent in May to Mayor Durkan, the trade group TechNet described how the ordinance would violate the Takings Clause of the Fifth Amendment. By “forcing a business to continue unprofitable operations, the City would be extracting payments from an unwilling person and thus taking private property without any—let alone just—compensation.”
That isn’t the only problem. The ordinance may also thwart the will of Washington state voters, who in 2018 approved an initiative under which “a local governmental entity may not impose or collect any tax, fee, or other assessment on groceries.” Charges and exactions on the transportation of groceries were specifically precluded.
Seattle’s City Council has a history of legally questionable legislation. In 2017 it passed a “wealth tax” on the income of wealthy households, even though the city attorney had advised that it would be illegal under state law. The courts agreed, and in April the state Supreme Court denied the city’s bid to review the decision. The city also recently walked away from a long legal dispute over a 2015 law that gave Uber and Lyft drivers, who use apps provided by the companies to work as independent contractors, the right to bargain collectively.
Seattle may believe it has the budget to back another costly legal fight, but other municipalities—whose budgets are strained as a consequence of the coronavirus crisis—will think twice before imitating the ordinance.
Even without mandates, gig companies are providing Covid-related benefits to workers who contract with them. Shipt is providing up to two weeks of financial assistance to its shoppers if they get Covid. DoorDash is offering financial assistance to “Dashers” who test positive or are told by a medical professional to self-isolate.
There may be merit to offering additional pay during the current crisis, but it’s a policy best handled voluntarily, in cooperation with gig companies, not in opposition to them.
Mr. Vernuccio is a senior fellow at the Mackinac Center for Public Policy. Mr. Saltsman is managing director at the Employment Policies Institute