The Reminger Report: Emerging Technologies

Ridesharing Regulation: Passenger Safety First

June 10, 2021 Reminger Co., LPA
The Reminger Report: Emerging Technologies
Ridesharing Regulation: Passenger Safety First
Show Notes Transcript

In the conclusion of our Ridesharing Regulation series, Zachary Pyers and Kenton Steele review developing requirements to ensure rideshare passenger safety including enhanced driver background checks and appropriate vehicle signage. They wrap up the series with a discussion on potential problems arising from competing regulations between states and cities.

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Zachary B. Pyers, Esq.

            On today’s podcast, we are going continue our discussion on passenger safety regulations in ridesharing platforms.  Now, Kenton, I have noticed occasionally we see these lighted signs, whether they are on the top of the car or located inside the car, on Ubers and Lyfts, that are being used for ridesharing.  Are the ridesharing drivers required to have these signs due to regulations or is this something that is more of a marketing tactic?

 

Kenton H. Steele, Esq.

            In general, these are typically required in a lot of jurisdictions, and the laws or regulations that have required drivers to put this lighted signage in their vehicles is a recent development.  In addition to the lighted sign requirement, some jurisdictions have also added a requirement that vehicles used for ridesharing have a scannable QR code on the outside of the vehicle, and both the sign requirement and the QR code requirement are really aimed at the same thing, which is allowing passengers to verify that the vehicle belongs to their specific driver before they get into that vehicle.   Now, these requirements are a fairly recent development in terms of ridesharing regulations, and they came about after a string of abductions by people pretending to be ridesharing drivers.  In one of the more famous tragic cases that occurred in 2019, a college student in South Carolina, Samantha Josephson, was abducted and murdered after using Uber to book a ride and then getting into a so-called imposter vehicle which was driven by someone who was misrepresenting themselves to Samantha as her Uber driver.  A few weeks later, two additional women were abducted under similar circumstances but were able to escape by calling 911 after the driver turned down an unfamiliar dirt road.  In a response to these incidents, a lot of jurisdictions passed versions of what has been called “Sami’s Law” in honor of Samantha Josephson.  So, Sami’s Laws typically require that vehicles used for ridesharing have multiple prominent signs on the outside of the vehicle, and as I mentioned, that scannable QR code.  A version of Sami’s Law was passed by the U.S. House of Representatives in July 2020.  That version of Sami’s Law has very extensive implications for regulations directed at passenger safety in the ridesharing space.  For instance, this law would make it a federal crime for a person to misrepresent themselves as being a ridesharing driver. This legislation would also create a federal advisory panel that would create recommended minimum background checks and other minimum standards that states would be required to adopt or face the penalty of having their federal highway funding reduced by a set percentage.

 

Zach

            Kenton, you mentioned the legislation would create a minimum standard for background checks on drivers.  What are the current requirements for drivers’ background checks?

 

Kenton

            Currently Uber and Lyft both use relatively similar standards for background checks, and those are the industry standard for what background checks are required for new drivers.  These checks include a review of the applicant’s driving record, and a background check that is based on the name and birthdate of the person applying to be a driver.  Now what will disqualify a person from becoming a driver can vary slightly from jurisdiction to jurisdiction, but this is a good baseline for what the requirements are, and these are the requirements that Uber has in place, and it’s that in the last three years, the person has no more than three minor moving violations.  That are things like speeding tickets, failure to obey traffic laws, failure to control vehicle.  Also, it’s required that in the last seven years, the applicant has no major moving violations. Those are things like DUIs, reckless driving, really excessive speeding, and there’s also a requirement that in the last seven years, the criminal record of the person does not include a conviction for a felony, a violent crime or a sexual offense, and also a pretty common sense requirement that’s widespread in its adoption is that if a person is on the Department of Justice National Sex Offender Registry, they are not capable of being qualified to be a driver.  As I mentioned, these requirements are fairly consistent with what’s required in most jurisdictions; however, there have been some efforts to put in place more stringent background requirements for ridesharing drivers.  One of the best examples of this is in Massachusetts and a few other jurisdictions where they use a two-step background check system.  The first step is the driver going through the background check that’s performed by the ridesharing company.  In a lot of states, that’s really the only background check that’s performed before the person becomes a driver, but in states like Massachusetts and a few others, once an applicant has passed that first background check, the driver then has to pass an additional background check that’s run by the state.  Now the interesting thing here is that state background checks disqualify far more drivers than the background checks performed by the ridesharing companies.  It’s likely because ridesharing companies use this name-based background search that only checks for the past seven years.  It is only looking at criminal records for that preceding seven years.  By contrast, the state-based background checks don’t have that same time limitation, and as a result of that difference, in Massachusetts, in 2018, about 15% of the ridesharing driver applications in Massachusetts, they passed the initial background check but then failed the state-based background check, so there were about 200,000 applications in Massachusetts that year, and of that 200,000, 30,000 failed the state background check after passing the check run by the ridesharing company.  You can see how differences in the type of screening that’s being done can have a big impact on the way these companies operate.

 

 

Zach

            Now are there other regulatory issues related to driver safety or driver qualifications that you have seen come up?

 

Kenton

            Absolutely.  One of the most notable sorts of hotly contested points of contention between state and local regulators and ridesharing companies has to do with whether the background checks must include fingerprinting and a fingerprint-based criminal background check.  Some jurisdictions have pushed ridesharing companies to adopt this fingerprint-based background check model before a person is qualified to become a driver, but ridesharing companies have been very outspoken in their opposition to this additional requirement, and for an example of how this fight has played out, we can look at what happened in Austin, Texas back in 2016.  At that time, the City of Austin passed a local ordinance that required ridesharing drivers to pass a fingerprint-based background check which was going to be conducted by the City of Austin before an applicant could be qualified as a ridesharing driver.  At the time that this requirement was being considered, Uber and Lyft spent about $8,000,000 just in the City of Austin campaigning against this requirement, but despite that, this fingerprint-based background check requirement ultimately was passed into law.  Shortly after that law became effective, Uber and Lyft simply shut down their operations in the City of Austin, and at that time, if a person in Austin tried to use a ridesharing company’s app, either Uber or Lyft, to book a ride, the app would display a message that said “Sorry, we were forced to shut down our operations in your city because of an ordinance passed by local government,” and it would instruct the person on how they could reach out to their elected officials to have that ordinance repealed.  The following year, Uber and Lyft changed their strategy for how to respond to this type of legislation, and what they did was fairly interesting.  Rather than try to have that ordinance in Austin repealed, they escalated things up to the next level and took their argument directly to the state legislature.  At that point, Uber and Lyft were successful in their lobbying efforts to the State of Texas, and that resulted in the passage of statewide ridesharing regulations or ridesharing industry standards, and as part of that legislation, individual cities in Texas were prohibited from adopting their own regulations or their own qualifications for drivers.  That set of statewide rules adopted in Texas did not include a requirement for fingerprint-based background checks, and at that time, Uber and Lyft resumed their operations in the City of Austin.

 

Zach

            Kenton, it seems like regulations aimed at increasing passenger safety would be something that both the ridesharing companies and the regulators would be in favor of.  Why has there been such resistance from the ridesharing companies for the enhanced background checks?

 

Kenton

            That’s a great question, Zach, and there’s actually a couple of different reasons for why the opposition to increased background checks and increased safety regulations has occurred.  The first is that increased regulations aimed at safety, like a fingerprint-based background check, would be detrimental to the way that the ridesharing business model operates.  Something we have talked about in the past is that part of the ridesharing business model is that it’s very easy to sign up to become a driver, and that helps with addressing supply and demand issues that come up.  If there is a big demand for ridesharing services in a given location, it’s very quick and easy to respond to that demand by people signing up to become new drivers.  If more extensive hurdles are put in the way of a person who wants to become a driver, then that supply of, the pool of available drivers goes down, and there may not be enough ridesharing drivers to meet an increase in demand, and when that happens, it can obviously have a very, a cascading detrimental effect on the business if people are trying to use this service and simply can’t get rides because drivers aren’t available.  They may not come back to that same platform in the future the next time that they need a ride.  Second, there is also a cost component that is related to this which is not at all unique to ridesharing.  Every business must give consideration to controlling cost, and we take the example of fingerprint-based background checks.  This is a requirement that could really increase administrative costs on ridesharing companies, and the reason for this is that fingerprint-based background checks will show all arrest records associated with that set of fingerprints, but it won’t necessarily show what the outcome of that specific case was, so if a person is arrested and charged with let’s say a violent crime but they’re later acquitted of that charge or the charge is dismissed for some reason, that may not show up in the records that are returned from a fingerprint-based background check.  When that occurs, it puts the company in the position of needing to verify the outcome of what happened with each charge that appears in the person’s record.  That, of course, imposes a big administrative task on these companies, and the cost of that task is going to be borne by the ridesharing company.  The same is true of other regulations that would require more frequent continuous background checks for people who are already qualified as drivers, and again, this runs the risk of potentially decreasing the pool of available drivers.  Finally, ridesharing companies are likely justifiably concerned that if regulatory requirements are put in place that force the companies to exercise greater oversight of the drivers, that could be used against the ridesharing companies in the event a lawsuit based on an injury caused by a driver is filed.  As we talked about in a prior episode, the issue of whether a ridesharing company will be liable for the injuries caused in a crash by a ridesharing driver is determined by how much control the company has over the driver.  The more control, the more likely it is that the ridesharing company will be liable for that crash.  The closer the relationship between the driver and the company, the more likely it is that liability will be extended to the company.  If regulations are put in place that force companies to exercise greater oversight over drivers, that fact could then be used against the ridesharing company if there is a question of whether the driver should be considered an employee for the purposes of a tort claim.  Some of the other safety requirements that have been discussed are things like putting cameras in cars so that there is a constant record of what is happening when a passenger is in the vehicle.  Now, if those videos were to exist, there is obviously an obligation created by that that these companies will be charged with knowledge of what was happening with that driver, that they are then on notice if there is some repeated problem with a specific driver, and that again can create potential liability for these companies in a way that’s not really an anticipated outcome of these regulations.

 

Zach

            Let’s talk about state vs. local regulations.  One of the other issues you just mentioned was that some of these states have passed statewide regulations for ridesharing companies, while at other times, we see that some of the cities implementing regulations, too.  If you could, can you tell us a little bit more about the distinctions or the issues or friction we see between the cities and the states trying to regulate the same industry.

 

 

 

Kenton

            Absolutely. One of the things we have talked about in the past is that in some ways, ridesharing companies took the approach that it was better to ask forgiveness then to ask permission when it came to entering new markets, so the ridesharing company would go to a city or a state, start their operation before there was any specific regulation in place.  Now because of that, there was this patchwork that formed of the different regulations, and sometimes cities, as a smaller government body, are a little more nimble than a state or a federal government, so the cities were really the first jurisdictions that put regulations in place to dictate what ridesharing companies were required to do in order to operate legally.  This is especially common in very large cities, so we talked about some regulations and ordinances that were passed by the City of Austin in 2016.  Those regulations came on the heels of similar restrictions and guidelines that were put in place by the City of Houston in 2015.  Both of those are some of the ten largest cities in the United States.  Well, there’s certainly a benefit to a community being able to set its own standards that a company has to comply with in order to operate, but there are also downsides to that approach as well.  Complying with a patchwork of different regulations really puts a very big burden on ridesharing companies, so if we look at, we are located in Ohio.  If things were regulated on a city-by-city basis, you may have one set of regulations here in Columbus where we’re located and a different set of regulations and rules that apply in Cincinnati or in Cleveland.  Well, that can create a big problem because you could have a driver that let’s say they’re qualified to be a driver in Columbus, but if they get a very long ride that someone wants to be taken to Cincinnati or let’s say taken from Cleveland to Columbus, it could create a big problem for the company if that driver is qualified in one city but would not be qualified in a different city.  It would be very difficult for the company to exercise oversight and enforce all these different regulations just to operate in one larger jurisdiction of the State of Ohio. For that reason, implementing a statewide system is much, much easier for a company to navigate.  When you only have one set of rules that you must work with and comply with, it really lowers the risk of being out of compliance or running into problems when you are complying with one set of rules and out of compliance with a different set of rules.  Moving this regulation up the ladder from the local county level to the statewide level offers a lot of benefits, and the question really becomes whether those statewide regulations are adequate.  The other benefit to regulating things at the state level is that there is a greater interest for the ridesharing company to comply with those regulations.  If we look again at the example of the City of Austin passing its own regulations, it may be relatively easy for a large ridesharing company like Uber or Lyft to exert its influence and say, well we will not operate in your specific city anymore.  By contrast, if the State of Texas passes its own comprehensive regulatory scheme, there is much more incentive for Uber or Lyft to get on board with those regulations so that they can operate and derive profit from the entire state.  It’s really in a lot of ways in everyone’s best interest to make sure that these regulations are set at the state level rather than the local level, and as I said, it’s really a question of the adequacy of the overarching regulations that are put in place.

 

Zach

            Thank you for joining us today on the Reminger Report Podcast on Emerging Technologies.  Our next series of episodes is going to explore the gig economy worker.  Are they an employee?  Are they an independent contractor?  We will see you next time.