States Consider Regulating Ride-Sharing Companies

Drivers for the ride-sharing company Lyft, which can be recognized by the pink mustaches attached to the grill of the cars, are creating a legislation and regulation stir across the United States.

Lyft is one of a few brands associated with the new market—dubbed transportation networking companies by the California Public Utilities Commission in 2013—but more commonly known as ride sharing. These companies hire local drivers and use a phone app to connect them with passengers in need of a ride.

While each company has its own procedure and standard for hiring drivers, they mostly have similar requirements. Drivers usually must be at least 21 years old and the owner of a car that is in good working condition, pass an in-person meeting as well as a background and DMV record checks.

The concept is still relatively new, so as transportation networking companies spread to different cities, state and local governments are unsure if or how to regulate them. In 2013, California was the first state to define and allow the operation of ride-sharing companies. California Public Utilities Commission regulations prohibit their operation at airports, but enforcement is an issue.

Policymakers in Minnesota, Pennsylvania, Tennessee and Texas consider ride-sharing companies similar to a taxi service, which require licensing. This requirement conflicts with the business model of ride-sharing companies, which brand themselves as having low fares due to the low overhead costs of hiring unlicensed drivers in the community. Ride-sharing drivers in these states have been ticketed and had their vehicles impounded. In Virginia, the Department of Motor Vehicles issued a $9,000 civil penalty against Lyft for the rides offered before April that occurred without a brokerage license to transport passengers.

Chicago Mayor Rahm Emanuel proposed regulations on ride-sharing companies, which were approved by the city council, designed to protect consumers by having ride-sharing companies better regulate drivers working more than 20 hours. Despite opposition by taxi companies who feel that the regulation will hinder their ability to compete due to the requirement to pay fees for licenses or medallions, the new regulations go into effect in late August. Drivers currently are getting ticketed and having their cars impounded for lacking the proper license to transport passengers.

In Missouri, St. Louis officials are working with ride-sharing company Uber Technologies to negotiate changes in regulations to accommodate the company and safety concerns. St. Louis’ taxi commission holds a temporary restraining order against Lyft, citing public safety concerns because the commission doesn’t vet the drivers.

State and local officials, however, are not the only entities at odds with ride-sharing companies. Currently, taxi drivers and taxi companies are protesting ride-sharing company usage in California because they feel that there is an unjust lack of regulation that is giving these companies an advantage.

Seattle is the most recent city trying to find common ground between ride-sharing and taxi companies. Seattle Mayor Ed Murray announced in June a plan that would allow unlimited ride-sharing company drivers on the road, add 200 additional taxi permits over the next four years and loosen other industry restrictions to help taxi services compete. The Seattle City Council currently limits the number of ride-sharing drivers that each service can have operating at once.

What seems to be the bigger issue than the number of drivers allowed is the safety of drivers and passengers. While ride-sharing companies require drivers to have car insurance, personal auto insurance does not cover losses that occur when the car is being used for commercial purposes, according to Kentucky Department of Transportation spokeswoman Ronda Sloan in an article by Government Technology.

While two ride-sharing companies say they offer $1 million liability insurance policies covering drivers and passengers, according to the article, those policies may not cover passengers’ medical bills. The article cites an example from September 2013, when two passengers suffered serious injuries after their driver collided with another vehicle in San Francisco. The ride-sharing company asserted the medical bills were the driver's responsibility.

Colorado addressed this insurance issue when policymakers passed legislation in June that requires insurance coverage while a driver is available. According to an opinion piece in the Los Angeles Daily News by Assistant Majority Leader Don Pabon of the Colorado House of Representatives, drivers can purchase a ridesharing endorsement from their personal auto insurance or the ridesharing company can provide primary insurance coverage at levels that are double the state required minimums. The legislation also requires drivers go through background checks, vehicle inspections and a driving record review.

While Seattle and Colorado are the most recent to act on regulating ride-sharing companies, media reports show that many states and cities have begun to discuss their options.

“As policymakers we all have a choice,” Pabon said in the Los Angeles Daily News article. “We can set the stage for the future and send a message that your state supports new technology, innovation in business, and a forward-thinking approach, or can cater to traditional industries who want to keep the status quo.”