Ride-hailing apps and taxi companies provide a similar service: they’re a means of transformation from point A to point B. However, Uber and Lyft are able to bypass certain regulations due to their classification as transportation network companies (TNCs) rather than cab companies. How does Uber work around these regulations? Let’s examine.
How Uber Works to Bypass Transportation Industry Regulation
In the vast majority of the cities Uber and Lyft operate, they’re considered TNCs. The idea behind this is that Uber and Lyft provide a technological service (their apps) which allows for the connection of drivers and riders. They don’t own fleets of cars, they’re just the middlemen.
And while their app-based coordination of drivers and riders is certainly innovative, it’s delusional to argue that Uber and Lyft are not in the transportation industry. As the ECJ, Europe’s highest court, says “it is undoubtedly transport which is the main supply and which gives the service meaning in economic terms.”
The stance of the Nassau and Suffolk Taxi Owner’s Association is not that Uber and Lyft should be banned our outlawed, but regulated just like all other ground transportation companies. If they aren’t, the safety and economic integrity of our communities is at serious risk.
The Effects of Loophole Exploitation
The main issue with the deregulation of TNCs is how they vet their drivers, because it has direct consequences on the riding public. We’ve explained the process before in a previous blog post, but basically, it allows for ex-felons, sexual predators and drivers with track records of recklessness to get behind the wheel.
Some believe Uber’s surge pricing model is economically justified. Others believe it borders on price gouging. Regardless of how you feel, it ultimately gives riders the short end of the stick.
Surge pricing is based on a simple supply and demand model: when demand for rides is high, fare prices are multiplied. Since drivers are paid percentages of their fares, the inflated prices incentivize them to make pickups, because they make more money. This increases the supply of drivers to meet the increased demand for rides.
Uber argues that passengers benefit because surge pricing reduces waiting times, but at what cost? It’s possible for prices to balloon by several hundred percent during surge periods.
Not to mention, demand for rides increases during emergencies such as terror attacks. Charging riders extravagant prices as their city is in a state of panic is not the practice of a company that even remotely cares about the well-being of their customers.
How does Uber work on the driver end? Drivers are classified as independent contractors rather than employees. That means drivers aren’t eligible for overtime pay, minimum wage guarantees, unionization or unemployment despite racking up tens of thousands of miles on their own vehicles.
For drivers who are unwilling to put miles on their own cars, Uber offers leasing options that exploit drivers by extracting money directly from their “Uber earnings.” This effectively locks drivers into unfair deals they are often unable to fulfill financially. This may result in the repossession of their newly leased car, which also happens to be their source of income as a driver.
Also, a recent lawsuit alleges that Uber has shifted tens of millions of dollars of tax burden onto New York drivers by misrepresenting their compensation procedures in a way that essentially equates to wage theft.
We’ve answered the question “how does Uber work to exploit legal loopholes?” Next time you hail a ride with the app, remember you’re supporting a company that holds profit in higher regard than law and public safety.