A ridesharing company (also known as a transportation network company, ride-hailing service, app-taxi or e-taxi) is a company that, via websites and mobile apps, matches passengers with drivers of vehicles for hire that, unlike taxicabs, cannot legally be hailed from the street.
The legality of ridesharing companies by jurisdiction varies; in some areas they have been banned and are considered to be illegal taxicab operations. Regulations can include requirements for driver background checks, fares, caps on the number of drivers in an area, insurance, licensing, and minimum wage.
Ridesharing vs. ridehailing
The term "ridesharing" has been used by many international news sources, including The Washington Post, CNN, BBC News, The New York Times, the Associated Press, and the Los Angeles Times. Groups representing drivers, including Rideshare Drivers United and The Rideshare Guy (Harry Campbell), also use the term "rideshare", since "hailing" rideshare cars from the street is illegal. Usage is inconsistent, with the same publication or the same article sometimes using both "ridesharing" and "ridehailing".
In January 2015, the Associated Press Stylebook, the collective that sets many of the news industry's grammar and word use standards, officially adopted the term "ride-hailing" to describe the services offered by Lyft and Uber, claiming that "ridesharing" doesn't accurately describe the services since not all rides are shared, and "ride-sourcing" only is accurate when drivers provide rides for income. While the Associated Press recommended the use of "ride-hailing" as a term, it noted that, unlike taxicabs, ridesharing companies cannot pick up street hails.
Service is generally accessed via mobile app. Users set up a personal profile with a name, phone number, other information, and payment preference, which could be a credit card, e-commerce payment system or, in some cases, cash. After the service is complete, the customer may be given the option to provide a gratuity to the driver, which is also billed to the customer's payment method.
The status of drivers as independent contractors is an unresolved issue. Drivers provide a vehicle, which could be owned, rented, or leased. Drivers must meet requirements for age, health, car age and type, have a driver's license and a smartphone or tablet, and may be required to pass a background check. In many cities, vehicles must pass annual safety inspections and/or must have an emblem posted in the passenger window. Some cities also require drivers to have a business license. There may be accommodations for hearing-impaired drivers. Drivers may be notified before accepting a trip if it will be longer than 45 minutes. After each transaction, drivers and customers may rate each other and users with low ratings may be deactivated.
A 2006 report by the Federal Transit Administration of the United States Department of Transportation stated that "next day" responsiveness has been achieved but that "dynamic" ridematching has not yet been successfully implemented.
Service in poorer areas and downward pressure on fares
Possible reduction in drunk driving
Studies are inconclusive on whether drunk driving rates have declined, with some studies showing that it depends on the city.
Decline in value of taxi medallions
Values of taxi medallions, transferable permits or licenses authorizing the holder to pick up passengers for hire, have declined in value significantly. A couple of credit unions that lent money secured by medallions suffered from bank failure.
Treatment of drivers
Classification as independent contractors
Unless otherwise required by law, drivers are generally independent contractors and not employees. This designation affects taxation, work hours, and overtime benefits. Lawsuits have been filed by drivers alleging that they are entitled to the rights and remedies of being considered "employees" under employment law. However, drivers do receive certain flexibilities that are not common among employees.
In O'Connor v. Uber Technologies, a lawsuit filed in the United States District Court for the Northern District of California on August 16, 2013, Uber drivers pleaded that according to the California Labor Code they should be classified as employees and receive reimbursement of business expenses such as gas and vehicle maintenance costs. In March 2019, Uber agreed to pay $20 million to settle the case.
On October 28, 2016, in the case of Aslam v Uber BV, the Central London Employment tribunal ruled that Uber drivers are "workers", not self-employed, and are entitled to the minimum wage under the National Minimum Wage Act 1998, paid holiday, and other entitlements. Two Uber drivers had brought the test case to the employment tribunal with the assistance of the GMB Union, on behalf of a group of drivers in London. Uber appealed to the Supreme Court of the United Kingdom; in February 2021, the court ruled that drivers should be classified as workers and not self-employed. Uber drivers won the right to minimum wage, holiday pay, and protection from discrimination in the ruling. After losing three previous court cases, the company had appealed to the Supreme Court, arguing that its drivers were independent contractors.
In March 2018, the Federal Department of Economic Affairs, Education and Research of Switzerland ruled that drivers should be classified as employees.
In April 2018, the Supreme Court of California ruled in Dynamex Operations West, Inc. v. Superior Court that Dynamex, a delivery company, misclassified its delivery drivers as independent contractors rather than employees. This ultimately led to California passing Assembly Bill 5 (AB5) on September 11, 2019, with a test to determine if a tasker must be classified as an employee and receive minimum wage protections and unemployment benefits. In December 2019, Uber and Postmates sued California, claiming AB5 is unconstitutional. In 2020, they spent tens of millions of dollars campaigning in support of California's Proposition 22, which passed, granting them a special exception to Assembly Bill 5 by classifying their drivers as "independent contractors", exempting employers from providing benefits to certain drivers.
In November 2019, the New Jersey Department of Labor and Workforce Development determined that drivers should be classified as employees and fined Uber $650 million for overdue unemployment and disability insurance taxes.
Compliance with minimum wage laws
In some jurisdictions, drivers are guaranteed a minimum wage, such as in New York City, where drivers must earn $26.51/hour before expenses or $17.22/hour after expenses. Analyses have shown that absent such laws, many drivers earn less than the stated minimum wage. A May 2018 report by the Economic Policy Institute found the average hourly wage for drivers to be $9.21. Reports of poor wages have been published in Profil, Trend, and The Guardian. A 2017 report claimed that only 4% of all Uber drivers were still working as such one year after starting, primarily due to low pay.
However, a 2019 study found that "drivers earn more than twice the surplus they would in less-flexible arrangements."
Increased traffic congestion, carbon emissions, and reduced usage of public transport
Ridesharing contributes to automobile dependency, displacing other modes of transit that are more efficient and come with fewer societal costs.
Studies have shown that ridesharing has increased traffic congestion in cities where extensive public transport networks are in place. Many people who use these services would otherwise be using public transport. Taxicabs were noted to have lower rider waiting time and vehicle empty driving time, and thus contribute less to congestion and pollution in downtown areas. However, another report noted that these companies serve as complements to public transit.
Most rideshare rides are currently made at a loss to the company and subsidized by investors. Public transportation advocates worry that, if public systems atrophy due to the competition, they will be unavailable if rideshare companies run out of investor funds and begin offering rides at cost.
Crimes have been committed by rideshare drivers as well as by individuals posing as rideshare drivers who lure unsuspecting passengers to their vehicles by placing an emblem on their car or by claiming to be a passenger's expected driver. The latter led to the murder of Samantha Josephson and the introduction of Sami’s Law. Lawsuits claim that rideshare companies did not take necessary measures to prevent sexual assault. Rideshare companies have been fined by government agencies for violations in their background check processes.
By increasing automobile dependency, ridesharing has exacerbated its dangers compared to other modes of transit. A study from the Becker Friedman Institute at the University of Chicago tied ridesharing to an increase in traffic fatalities, including pedestrian deaths.
Ridesharing has also been criticized for encouraging or requiring phone use while driving. To accept a fare, drivers must tap their phone screen, usually within 15 seconds after receiving a notification, which is illegal in some jurisdictions since it could result in distracted driving.
It is unclear if rideshare vehicles are less or more safe than taxicabs. Major cities in the United States don't have much data on taxi-related incidents. However, in London, taxi drivers were responsible for 5 times the number of incidents of sexual assault as compared to Uber drivers.
Dynamic pricing and price fixing allegations
Due to dynamic pricing models, prices for the same route may vary based on the supply and demand for rides at the time the ride is requested. When rides are in high demand in a certain area and there are not enough drivers in such area, fares increase to get more drivers to that area. In some cases, this resulted in extreme surcharges during emergencies such as Hurricane Sandy, the 2014 Sydney hostage crisis, and the 2017 London Bridge attack.
Ridesharing has been criticized for providing inadequate accessibility measures for disabled people compared to the public transit it displaces.
In some areas, vehicle for hire companies are required by law to have a certain amount of wheelchair accessible vans (WAVs) in use. However, most drivers do not own a WAV, making it hard to comply with the laws.
While companies have strict requirements to transport service animals, drivers have been criticized for refusal to transport service animals, which, in the United States, is in violation of the Americans with Disabilities Act. In one case, this resulted in a lawsuit, which was referred to arbitration.
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