It is nothing short of amazing what can happen in less than a decade. Ten years ago, if you told someone they would use their cell phone to get a ride from a stranger, in a stranger’s car, and pay with a cell phone, I doubt many people would have believed you! But alas, this is the digital age that we live in, and now 33 states have ride sharing, ride sourcing, or TNC (Transportation Network Company) laws or regulations. A TNC, by definition, is a company that uses an online-enabled platform (such as a website or mobile app) to connect passengers with drivers using their personal, non-commercial vehicles. Uber and Lyft are the two largest and most successful ride sharing companies in the US, with an estimated combined worth of $68 billion.
However, with industry disruption comes regulatory legislation, and ride sharing is getting a fair share of the limelight lately. Traditional taxicab industry groups have never been too fond of TNCs and their special treatment, arguing that TNCs operate as nothing more than illegal taxicab companies, bypassing burdensome (and often outdated) registration, administration, and management by larger taxi groups.
Here’s a look at the major TNC headlines, regulations, and changes taking place across the country:
California and Massachusetts
In late April, Uber agreed to pay up to $100 million to drivers in California and Massachusetts in two class action lawsuits. One of the lawsuits claimed Uber was not remitting tips to respective drivers. As a result, Uber drivers will now be permitted to display a sign that says: “Tips are not included, they are not required, but they would be appreciated.”
Uber also agreed to the following concessions in the settlement (some would argue they did so in order to avoid taking the case to a jury):
- Uber cannot deactivate drivers for refusing rides to particular passengers, but drivers may be deactivated for other “sufficient cause” (to be determined)
- Uber will have to make “quality courses” available to deactivated drivers (presumably to help them improve their shortcomings and reactivate as drivers upon successful completion)
- A new internal appeals process must be created for deactivated drivers in California and Massachusetts
- A new arbitration clause must be created to hear and arbitrate disputes
- Uber must establish a Drivers’ Association to hear and discuss important matters for drivers and hold quarterly meetings of the same
The other big question surrounding TNCs comes down to the classification of employment status: are drivers independent contractors or employees? TNC drivers currently operate as independent contractors, giving them the benefit of setting their own schedule to work as often as they desire.
To reclassify drivers as employees would be a huge cost and logistical undertaking for TNCs to implement; just some of the potential costs (in some, not all, states) include:
- Subject drivers and TNC companies to federal and state minimum wage requirements
- Entitle drivers to overtime pay
- Require drivers to take meal and rest periods between shifts
- Require TNC companies to offer paid sick leave
- Require TNC companies to offer workers’ compensation insurance
Illinois
Only days after the settlement in California and Massachusetts, Uber drivers in Illinois started a national collective action seeking Fair Labor Standards Acts rulings that they are employees. Classifying TNC drivers as employees would entitle them to full time employee benefits, put the employer on the hook to cover payroll taxes, and also force the company to offer workers’ compensation insurance.
Austin, Texas
The Austin City Council approved new TNC rules in December 2015, but Uber and Lyft challenged the decision and spent upwards of $8 million to campaign against the new rules by putting it to a vote in the Central Texas community. Just last weekend, Austin voters (56%) rejected Proposition 1, which would have repealed the new laws. Under the new rules:
- Drivers must undergo fingerprint-based background checks by Feb. 1, 2017.
- Uber and Lyft prefer name-based checks and contend that their background checks are sufficient, fingerprint databases can be outdated, and fingerprinting slows down the process of on-boarding new drivers to meet the demand of riders.
- Proponents of fingerprinting claim it’s the most effective way to keep out drivers with criminal records.
- Houston implemented fingerprinting background checks 18 months ago, which caused Lyft to leave, and Uber is threatening to leave if the requirement is not overturned.
- Drivers are prohibited from stopping in traffic lanes for passenger drop-offs and pickups.
- TNCs must identify vehicles for hire with “trade dress” – currently Lyft cars identify with a bright pink mustache or sticker of the same on their dash; Uber drivers also display the company logo with an adhesive sticker located on their dash.
- TNCs will have to collect and share a variety of data that meets specific reporting requirements.
Iowa
Just last Monday, Iowa Governor Terry Branstad effectively created new statewide rules for ride sharing companies operating in the state. TNCs must now adhere to the following in Iowa:
- Drivers must undergo name-based background checks
- Vehicles must adhere to liability insurance requirements via a newly created regulatory system
- Iowa state regulators have authority to ensure compliance
- Licensing expectations for drivers will undergo changes
It is safe to say legislative momentum for TNCs is gaining traction and headlines across the country. A seemingly simple solution to transportation woes has questions to answer regarding labor and employment, insurance, regulatory, and so many more industry complexities – which is arguably what ride sharing and ride sourcing developers sought to avoid. We all want simple, safe, and affordable transportation solutions; hopefully our country’s lawmakers can find a way to keep working with TNCs and support multiple opportunities for companies to create and drive a fair market in this space.