MANCHESTER, NH — The controversial ride-sharing company Uber has brought its confrontational management style to Manchester. Buoyed by a lobbying effort marshaled nationally by former Obama presidential campaign major domo David Plouffe, Uber is trying to justify its Ayn Rand Atlas Shrugged management philosophy as a harbinger of 21st Century High Tech new millennialism rather than a throwback to the dog-eat-dog, the public-be-damned social Darwinism of the Gilded Age.
Manchester is home to the Manchester-Boston Regional Airport (MHT), New England’s fourth busiest airport. Approximately 2.5 million passengers used MHT in 2013, making it a major market for the livery services that a ride-sharing company like Uber can provide.
App or Transportation Company?
The major question being asked in Manchester, as well across the nation: Is Uber a tech company selling an app, or a transportation company?
During a December 19th, 2014 appearance on the Girard at Large radio show, Ward 6 Alderman Garth Corriveau — Uber’s paladin on the Queen City Board of Mayor and Alderman (BOMA) — made the argument that Uber was a tech company peddling an app, though under questioning, he did concede that it was a transportation services company.
The crux of Corriveau’s argument was that Uber drivers were independent contractors and, unlike taxi cab companies, Uber did not own the fleet. Ride-share drivers provide their own vehicles. The Democrat Corriveau agreed with ultra-conservative Republican radio show host Rich Girard that the market should regulate Uber.
While Uber’s stance that its drivers are independent contactors isn’t questioned by Corriveau, it has been by some of the company’s drivers and by federal judges.
Independent Contractors or Employees?
In California, Uber drivers disenchanted with the company have sued the company on the grounds that they’re employees entitled to minimum wage, reimbursement for expenses and other benefits. Skeptical that Uber’s drivers are independent contractors, a federal judge in the 9th Circuit declared while adjudicating a lawsuit pitting Uber against its so-called “independent contractors” that they may, indeed, have to be treated as employees.
Uber’s contention that is is merely an app (software program), a view shared by Alderman Corriveau, has not been embraced by U.S. District Judge Edward Chen.
“The idea that Uber is simply a software platform,” Chen said, “ I don’t find that a very persuasive argument.”
It is important for the members of Manchester’s BOMA (aside from Corriveau) to note that Uber uses the “independent contractor” argument to deflect liability for accidents and corporate responsibility for discrimination practiced by its drivers.
When a national group representing the disabled attacked Uber over complaints that its drivers discriminated against the blind, the company dismissed the allegations on the grounds that it can’t control what its drivers do because they’re independent contractors. Uber rejected a request by the group to negotiate a solution to the problem of its drivers refusing to service the blind and, in one instance, mistreating a blind-person’s guide dog.
Taxi cab operators are forbidden by federal law from discriminating against the disabled, regardless of whether cabbies legally are considered independent contractors.
Uber has had problems with its background checks of drivers. Without a regulation requiring the use of a sophisticated background checking system, Uber and other ride-sharing companies can eschew more thorough (and thus more expensive) background checks in favor of cheaper, less thorough checks, such as those services that glean info from online government databases. The updating of those databases often is spotty.
Uber failed to perform background checks on at least one of its drivers in Chicago.
Uber, Lyft and Sidecar — two other ride-sharing companies in the Chicago market – use different background check services, raising the specter of “gaps” in the researching of the criminal backgrounds of potential ride-share drivers. Without a regulation on background checks mandating the scope of the coverage, no one can be sure how thorough or up-to-date the search is.
Background checks can be cursory and create a static picture in time, i.e., one that is not updated after the initial check. Taxi cab companies in California use “Live Scan”, a dynamic service that combs databases and updates information about new offenses, informing the cab company when a driver has incurred a violation.
Incidentally, Live Scan was NOT mandated by California’s state regulatory authority for Uber or other ride-sharing companies. Uber had launched an intense lobbying effort on the California Public Utilities Commission, and the lack of a mandate for Live Scan may be a result. The background checks for Uber drivers in California likely will be less stringent than that of cab drivers.
In response to problems with Uber and the other ride-sharing companies, Chicago regulators proposed the standardization of regulations on background checks and a mandate requiring the name and photo of drivers on ride-share company’s apps and web sites, akin to the “licenses” posted in taxis.
Safety and the Insurance Gap
The Uber app poses a safety issue, akin to the problem of texting by drivers. Uber drivers use a dashboard mounted app akin to a GPS that – along with the cutthroat nature of the taxi business – might distract them.
The app is always on and Uber drivers, competing against each other and traditional “hail” taxis, are constantly monitoring it in the fierce competition for fares. There is concern that the distraction of driver monitoring of the Uber app may cause accidents and that accidents that occur before or after a driver ferries a passenger will not be covered by insurance.
Compounding the problem is Uber’s use of a donut hole defense to deny responsibility for accidents that occur when the driver is not actually transporting a fare, most notably in the death of a San Francisco girl killed by one of its drivers. Unlike a traditional, regulated taxi company, Uber claims that its insurance only kicks in when the driver picks up a fare; while a driver is waiting for passengers, driving to a passenger, and after discharging a passenger, Uber claims it bearsd no liability for the actions of its drivers. In contrast, cabbies working for traditional taxi services are covered at all times.)
Uber’s insurance coverage paradigm has created a “gap” in coverage. This gap may provide a ride-share driver’s auto insurer with the grounds to deny coverage for those accidents Uber refuses to cover, as the insurer may consider them actually working for Uber at the time of the accident.
Because of the uniqueness of the ride-sharing model, insurance companies increasingly are refusing coverage to drivers.
To Regulate or Not to Regulate
That Uber drivers not ferrying a passenger, and thus not covered by Uber’s commercial general liability insurance, likely are distracted by the pressure of monitoring Uber’s app, raises questions over safety and an “insurance gap” that only regulators like Manchester’s BOMA can answer.
In response to these problems, Uber was classified as a a transportation company by the California Public Utilities Commission (CPUC) in September 2013 because it performs like a telephone dispatch taxi service. Creating a new category of livery service called “Transportation Network Company” (TNC) for Uber and its ride-sharing kin that provide online apps to book rides, the CPUC became the first state regulator to recognize ride-sharing as an official transportation service.
The new regs were akin to those governing the provision of limousine services. They covered background checks, drug testing, liability insurance and driver training.
In November 2014, the CPUC issued more stringent regulations on insurance coverage, tackling the issue of the gap in insurance coverage. The CPUC mandated that there were three “periods” in the provision of ride-sharing services: Period One, when the TNC’s app is open and the TNC driver is waiting for a fare, called a “match” of the driver and the passenger; Period Two, when the match has been accepted but the driver has not yet picked up the passenger; and Period Three, when the driver transports the passenger on a trip, from the time the client enters the vehicle and until they exit it.
For the first period, the regs mandate a minimum of coverage of $100,000 for one person and $300,000 for two or more people, plus $50,000 for property damage. For the second and third periods, a minimum of $1 million in primary commercial liability insurance coverage is required. The coverage can be provided by the TNC in whole or in partnership with the driver.
The CPUC regulations, which also cover such areas as licensing, vehicle inspection, and providing service at airports, provide a template for the BOMA for regulating TNCs in Manchester.
Jon’s article was originally published in the Examiner, we use it here in full with his permission.