Paul Marron

Co-authored by Ellery Sever

CHALLENGES PRESENTED BY THE TNC MODEL IN COURTS AND AT AIRPORTS

• Legal Challenges to TNC Business Model and to Traditional On-Demand Transportation Businesses

• Safety of TNCs Compared to Traditional On-Demand Transportation Businesses

• Regulation of TNCs at LAX and other airports nationally

TOPICS COVERED

• Misclassification in California is governed by "economic realities" test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989).

• In applying the economic realities test, the most significant factor to be considered is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed.

• Additional factors that may be considered depending on the issue involved are:

•Whether the person performing services is engaged in an occupation or business distinct from that of the principal

•Whether or not the work is a part of the regular business of the principal or alleged employer

•Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work

•The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers

“BORELLO FACTORS” GOVERN

MISCLASSIFICATION IN CA

• Whether the service rendered requires a special skill• The kind of occupation, with reference to whether, in the

locality, the work is usually done under the direction of the principal or by a specialist without supervision

• The alleged employee’s opportunity for profit or loss depending on his or her managerial skill

• The length of time for which the services are to be performed• The degree of permanence of the working relationship• The method of payment, whether by time or by the job• Whether or not the parties believe they are creating an

employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests

BORELLO FACTORS

• Question: Misclassification of Employee/Independent Contractor Status• Holding: Federal Court found that genuine issue of material fact existed as to

whether the carrier retained right to control drivers.• Lyft instructed the plaintiffs to both do and not do a number of things such as:

•Not to talk on the phone with a passenger present•Not to pick up non-Lyft passengers•Not to have anyone else in the car•To wash and vacuum the car once a week•To ask passengers what type of music they’d like to hear•To offer passengers a cell phone charge

• The court states that these do not seem like a list of suggestions, but appear like orders

• Lyft can also terminate drivers that reject too many dispatch request or accept and then cancel too many requests

• The record suggests these orders are mandatory because Lyft reserves the right to penalize (or even terminate) drivers who don’t follow them

COTTER V. LYFT

• The Terms of Service not only give Lyft a broad right to terminate drivers for cause, but also the right to bar drivers from the platform “for any or no reason”

• “The power of the principal to terminate the services of the agent gives him the means of controlling the agent’s activities”

• The court feels that it would be difficult to allow summary judgment when the most important factor, the right of control, tends to cut the other way

• Additionally, secondary factors cut in both directions•Lyft could not exist without its drivers•The riders are Lyft’s customers not the drivers•Driving for Lyft requires no special skill

COTTER V. LYFT

• Question: Misclassification of Employee/Independent Contractor Status

• Holding: The question whether Uber’s drivers are employees or independent contractors is an issue to be decided by a jury

• Uber tried to rebut the presumption by stating that it is not a “transportation company,” but a technology company that connects drivers with their customers

• Uber does not simply sell its software, it sells its ride• Court: Uber would simply not be a viable business entity without

its drivers• Uber exercises significant control over the drivers• The record also shows that Uber claims a “propriety interest” in

its riders, which demonstrates that Uber acts as more than a mere passive intermediary between riders and drivers

O’CONNOR V. UBER

• Uber prohibits its drivers from answering rider queries about booking future rides outside the Uber app, or otherwise “soliciting” rides from Uber riders

•In the Uber Handbook, actively soliciting business from a current Uber client is categorized as a “Zero Tolerance” event that “may result in immediate suspension from the Uber network”

•In contrast, passive client solicitation (e.g. business cards or branded equipment in the backseat) is categorized as a “Major” issue that Uber “takes very seriously and will take action if you receive more than one in every 180 trips”

• The Uber Driver Handbook states that Uber will follow up with drivers who have been rejecting trips, and after too many rejected trips a driver might be terminated

O’CONNOR V. UBER

• Uber cited two cases to contend that it receives no services from its drivers, but the court distinguished those two cases from the present circumstances

• Kubinec v. Top Cab Dispatch, Inc.•Taxi drivers paid a weekly fee of $25 for the use of radio dispatch

services•The court notes that Uber does not receive a flat fee from its drivers

in exchange for an unlimited number of “leads” or dispatches•Uber receives a percentage of each and every fare its drivers labor

to earn, which makes it clear that Uber depends on its drivers’ performance of services for its revenue

• Callahan v. City of Chicago•A Chicago taxi driver sued the City of Chicago arguing that the city

was her employer•The court notes the Uber derives profits from providing

transportation services, whereas the City does not

O’CONNOR V. UBER

• Question: Misclassification of Employee/Independent Contractor Status

• Holding: The plaintiffs performed his services for RPM as an independent contractor, and not as a common law employee

• The Plaintiffs exercised control over the manner and means of the work

• Although RPM set some standards of dress, implemented to an extent a demerit system, and utilized a central dispatch system, many aspects of the dress code and dispatch system were required by the City of Los Angeles and the PUC in order for the defendant to operate at Los Angeles International Airport

• Evidence also fails to show that the demerit system went beyond the right to ensure satisfactory performance to the public.

• Additionally, the plaintiff Rabanal testified that the “points” system actually carried no punishment

RABANAL V. RPM

• Plaintiff Rabanal held a permit from the PUC to operate as a charter party carrier

• He could provide services to other companies or to clients he cultivated himself

• Before commencing work with RPM, Rabanal spent his own money on: a down payment on the lease of a van and on automobile insure, maps, a GPS system, a Blackberry telephone for dispatch communication, and other items required for the work

• Rabanal could use his GPS, telephone, and van for any purpose when not driving for RPM

• Rabanal signed an employment agreement describing his business relationship with RPM as “non-exclusive” and Rabanal as an “independent owner-operator/driver” who was “under no obligation to accept any dispatch requests

RABANAL V. RPM

• The plaintiffs independently determined how to perform their jobs• They decided when they wanted to work and whether they

obtained fares from RPM’s dispatch, or drive loops, or solicit fares from other transportation networks such as Expedia, Go Airport, and Shuttle Fare

• Plaintiffs could also determine the order and routes of their pick ups and drop offs and need never to communicate these decisions to RPM

• The Borello secondary factors further support that the plaintiffs were independent contractors

• Plaintiffs provided their own tools and instrumentalities necessary for their transportation services

• Plaintiffs were paid by the fare, not hourly• Plaintiffs were also entitled to hire employees to assist them

RABANAL V. RPM

• Question: Misclassification of Employee/Independent Contractor Status• Holding: The driver performed his services for South Bay Yellow Cab as

an independent contractor, and not as a common law employee• South Bay Yellow Cab did not have the right to control the driver outside

of compliance with city ordinances and regulation• Neither South Bay Yellow Cab nor its dispatch service ever told the

claimant that he was required to take any passenger, and there was no penalty for rejecting trips

• The claimant set his own schedule without any supervision of South Bay Yellow Cab

• The driver was engaged in his own distinct business as a taxi driver and was free to cultivate his own clientele and business

• Additionally, the driver was not required to state South Bay Yellow Cab’s name on any business cards or promotional materials created by the driver in order to cultivate his own business

GHANI V. SOUTH BAY YELLOW CAB

• The driver paid a fixed weekly lease fee for the taxicab he operated

• The driver was also required to pay for his own gas and oil in order to maintain the taxicab

• The driver kept all fares paid by customers, unless the fare was paid through the taxicabs credit card system in which place in went towards the monthly lease payment until it was paid in full

• Both the driver and South Bay Yellow Cab clearly and unequivocally considered their relationship to be one of independent contractor rather than employer-employee

GHANI V. SOUTH BAY YELLOW CAB

Case Name: Control of the worker

Additional Borello Factors

Result

Cotter v. Lyft Drivers needed to follow a list of orders, violation of which could result in termination; drivers could also be terminated for rejecting too many rides

Lyft could not exists without its drivers; the riders are Lyft’s customers not the driver’s; driving for Lyft requires no special skill

Court did not allow summary judgment for Lyft

O’connor v. Uber

Drivers could not solicit business outside of Uber, violation of this could result in termination; drivers could also be terminated for rejecting too many rides

Uber provided drivers with a smartphone with the Uber app; driving for Uber requires no special skills; Uber could not exists without its drivers

Court did not allow summary judgment for Uber

Rabanal v. RPM Drivers could solicit business as they pleased, and they could do whatever they wished with their vans and tools

Drivers owned or leased both their own tools and instrumentalities; drivers were required to have TCP licenses

Plaintiffs are properly classified as Independent Contractors

CASE COMPARISON

• Question: Misclassification of Employee/Independent Contractor Status• Holding: Berwick was Uber’s employee• Uber retained all necessary control over the operation as a whole by

obtaining clients in need of transportation services and providing the workers to conduct it

• Berwick’s work was integral to Uber’s business• Uber is in the business to provide transportation services to passengers, and

Berwick did the actually transporting• Without Berwick and other drivers, Uber could not exist• Uber is involved in every aspect of the operation:

•Vetting prospective drivers•Controlling the tools the drivers use (e.g. registering their car with

Uber)•Uber refers to industry standards in justifying this involvement;

however, the industry they are referring to is the taxi industry which they claim not to be a part of

UBER V. BERWICK(LABOR COMMISSION

APPEAL)

• The plaintiffs allege the Uber has violated the Americans with Disabilities Act, “by denying blind individuals with service animals full and equal access to Defendants’ UberX transportation service”

• “In response to complaints lodged with Uber about these allegations, Uber allegedly fails to respond, does not take steps to address the discrimination, and frequently denies responsibility for the discrimination”

• Uber defines themselves as a technology company and their drivers as independent contractors and uses this to distance itself from the need for compliance with the ADA

• Loose requirements regarding the ADA leaves Uber open for further disability lawsuits

• Strict requirements regarding the ADA puts in question Uber’s control of its drivers and their status as independent contractors v. employees

• Disability lawsuits against Uber have also been filed in Arizona and Texas

NATIONAL FEDERATION OF THE BLIND OF CALIFORNIA

V. UBER

• Uber and Lyft are both facing lawsuits in California under the Fair Credit reporting act

• They are alleged to have hidden the authorization for background checks in a larger application

• Authorization for background checks must be in a clear stand-alone document

• The U.S. Federal Trade Commission has stated that background-check disclosures “may not be part of an employment application because the language [is] intended to ensure that it appears conspicuously in a document not encumbered by any other information. The reason for requiring that the disclosure be in a stand-alone document is to prevent consumers from being distracted by other information side-by-side within the disclosure.”   

NOKCHAN V. UBER & NOKCHAN V. LYFT

SAFETY OF TNCs and

PUC Requirements

Service Background Testing

Drug Testing Liability Insurance

Uber and Lyft Required Not Required $1 million

Taxi Services Required Required $1 million

TNC Requirements• Disqualified if within the last 7

years:• DUI, Drug Offenses, Fraud,

Reckless Driving, Hit and Run, Violent Crimes, Acts of Terror, Sexual Offenses, Crimes involving property damage, felony or misdemeanor theft, fatal accidents, resisting arrest, or any other felony

Taxi Service Requirements• Disqualified for if ever

applicable:• Convicted of a felony in or

out of state, Fatal Hit and Run or one causing injury, Fatal Hit and Run and not reporting to CHP, Reckless Driving resulting in injury or death, DUI resulting in injury or death,

• Uber uses the services Accurate and Checkr to run background checks

• Fingerprints are not required for either service• Lyft uses Sterling Backcheck• Sterling Backcheck does not required fingerprints• Taxi Services use Live Scan which uses fingerprints to

search through State and FBI records as well as the State and National Sex Offender Registries

• In New York City, all background checks are conducted by the NYC Taxi Licensing Commission

BACKGROUND CHECKS

• Ridesharing services are not required to drug test their drivers

• They are required to implement a zero-tolerance policy for substance or alcohol, and complaints of drivers doing either can be cause for termination

• Taxi Services are required by the California Public Utilities Commission to drug test their drivers

• Livery Services are also required to be drug tested by the CPUC

• The NYC Taxi Licensing Commission requires annual drug tests for taxi drivers

DRUG TESTING

• TNC’s will be required to hold an active permit from the

California Public Utilities Commission

• TNC’s will also be required to have minimum liability

insurance coverage

• TNC’s will only be allowed to operate on the upper deck of

the Central Terminal Area

• A Geo-Fence will be used in order to determine the location

of drivers within the airport

PROPOSED LAX REGULATIONS

• TNC’s will be given an Airport Assignment Area

•The area exclusively available from which the TNC mobile app is permitted

to receive an assignment from an Airport passenger inside the Geo -Fence Area.

• Additionally, there will be a designated TNC staging area similar to those

already existing for other ground transportation services

• No shared rides can originate from within the Geo-Fencing area

•This means that Uber Pool and Lyft Line rides would not be allowed to

originate from within the LAX Geo-Fence

• Drivers and Cars need to display Trade Dress distinguishable from up to 50ft

away

• Drivers will also have to renew a monthly license with the airport

PROPOSED LAX REGULATION

• TNC’s will be required to pay a faithful performance

guarantee to the airport

•TNC shall maintain an FPG in the amount of $100,000

or three times the estimated monthly payment, whichever is

greater.

• TNC’s and Drivers will also be required to track records and

allow for audits of those records

• Drivers will be required to create waybills to show trips to

and from the airport

PROPOSED LAX REGULATION

• Dual Authority - Drivers with vehicles who operate under TNC

authority and who also have a separate CPUC authority and a

separate LAWA NELA, shall abide by the terms pursuant to the non -

TNC NELA Agreement. (Operator with both TNC authority and TCP

NELA must abide by terms of TCP NELA).

• LAX expects each TNC’s Non-Exclusive Licensing Agreement to be

worth $300,000 annually

•NELA’s are a concession agreement which allow ground

transportation services to operate at the airport

• Additionally, there will be mandatory training for all drivers

PROPOSED LAX REGULATION

• From the Denver Airport Rules and Regulations, 100.02-7(12) Transportation Network

Company "Transportation network company" means a Corporation, partnership, sole

proprietorship, or other entity, Operating in Colorado, that uses a digital network to

connect Riders to drivers for the purpose of providing transportation. A Transportation

network company does not provide taxi service, Transportation service arranged

through a transportation broker, ridesharing arrangements, as defined in section 39-

22-509 (1) (a) (ii), C.R.S., or any transportation service over fixed routes at regular

intervals. A transportation network company is not deemed to own, control, operate, or

manage the personal vehicles used by transportation network company drivers.

• TNC’s and TNC drivers are defined as Commercial Operators. The regulations

regarding commercial operators are the same for all including cabs and livery vehicles

REGULATION FOR DENVER AIRPORT

• TNC Definition: A company or organization, duly licensed as a TNC by the

MTLC and the Authority, which uses a digital platform to connect

passengers with prearranged transportation services for hire provided by

drivers using their personal vehicles.

• Drivers must be under contract with the TNC and be qualified for a driver’s

permit by the MTLC and the airport authority

• TNC’s will also issue drivers digital ID’s which will provide driver

information as well as waybills to the airport authority

• “The Authority's "Rules and Regulations for the Use of Airport Facilities"

(revised July 2003) and as may be revised from time to time), shall apply to

all Commercial Ground Transportation Operators.”

REGULATION FOR NASHVILLE AIRPORT

• The NYC TLC has a pilot program in place that has been operating

since 2013 to allow E-Hail services such as Uber and Lyft to

operate within New York City

• E-Hail accounted for only 0.37% of all daily taxi trips

• Unsafe Driving complaints dropped by 10.5% during the pilot, and

3.7 % of E-Hail drivers were involved in collisions compared to

5.2% by drivers not participating in the pilot

• Pilot service refusal complaints were also at similar levels to the

previous year suggesting no increase based on the activity of

TNC’s

RESULTS OF THE NYC TLC E-HAIL PILOT

• “Commensurate with the management of the airports coming under the

jurisdiction of the Port Authority of New York and New Jersey, the Air

Terminal Rules and Regulations as set forth herein have been adopted in

the interest of safe, efficient, and environmentally sensitive operation, and

apply to John F. Kennedy International, LaGuardia, Newark Liberty

International, Stewart International and Teterboro Airports”

• TNC drivers must be licensed with the New York City Taxi and Limousine

Commission as well as hold the minimum insurance in order to operate at

Airports

•Requiring TNC drivers to be licensed taxicab drivers is not seen in

the regulations at Denver or LAX

REGULATION FOR PANYNJ AIRPORTS

• The TNC business model is threatened by misclassification litigation that would transform its drivers into employees of the TNC—lobbying efforts to combat this are ongoing

• TNCs have less stringent regulations for background checks in that they do not require fingerprints and drug testing whereas taxi services do

• The LAX TNC Regulations provide a framework for allowing TNCs at airports and this framework may be followed by airports across the country

• However, LAX Regulations leave public vulnerable to criminal or intoxicated drivers.

TAKE-AWAYS