A ridesharing company (also known as a transportation network company, ride-hailing service; the vehicles are called app-taxis or e-taxis) 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.
Terminology: 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 these companies, 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.
Ridesharing declined precipitously between the 1970s and the 2000s, peaking in the US in 1970 with a commute mode share of 20.4%. By 2011 it was down to 9.7%. In large part this has been attributed to the dramatic fall in gas prices (45%) during the 1980s.
In the 1990s it was popular among college students, where campuses have limited parking space. Together with Prof. James Davidson from Harvard, Dace Campbell, Ivan Lin and Habib Rached from University of Washington, and others, began to investigate the feasibility of further development although the comprehensive technologies were not commercially available yet at the time. Their work is considered by many to be a forerunner of carpooling & ridesharing systems technology used by Garrett Camp, Travis Kalanick, Oscar Salazar and Conrad Whelan at Uber.
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.
In 2013, California became the first state to regulate such companies; they are regulated as public utilities by the California Public Utilities Commission and the legal term used is "transportation network companies".
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.
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 2020 California 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.
In March 2021, the Supreme Court of the United Kingdom ruled that Uber has to classify all of its drivers not as independent contractors but as workers, complete with the standard benefits. This includes minimum wage and holiday pay with other potential benefits depending on the contracts.
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."
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.
Because it increases the number of people riding in automobiles instead of safer forms of transportation, 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, some apps require drivers to 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.
Studies are inconclusive on whether drunk driving rates have declined, with some studies showing that it depends on the city.
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.
In the United States, drivers do not have any control over the fares they charge; lawsuits allege that this is an illegal restraint on trade in violation of the Sherman Antitrust Act of 1890. Rideshare companies have argued that they only connect riders and drivers, set service terms, and collect fares. Uber was able to force Meyer v. Uber Techs., Inc., a lawsuit alleging price-fixing, into arbitration.
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. The case was eventually ruled in favor of the visually impaired passenger, Lisa Irving, with Uber ordered to pay her out $1.1 million.
Bias against minority passengers
Complaints that passengers in certain demographic groups were discriminated against by drivers have prompted services like Uber and Lyft to remove identity information from advertised rides. However, once a ride is accepted, the driver gets the name and photo of the passenger, along with other information. A 2018 study in Washington, DC, found that compared to other passengers, drivers more frequently cancelled rides for African American passengers and LGBTQ and ally passengers (indicated by a rainbow flag), but cancelled at the same rate for women and men. The higher cancellation rate for African American passengers (only) was somewhat attenuated at peak times, when financial incentives were higher.
Increased traffic congestion, carbon emissions, and reduced usage of public transport
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.
Rideshare has reduced usage of public transport. Studies have shown that rideshare took significant market share from public transportation during the COVID-19 pandemic due to concerns surrounding its infectious nature of COVID-19.
Ridesharing may as a result contribute to automobile dependency.
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. Taxi companies have sued ridesharing companies for various reasons, including allegedly operating illegal taxicab operations; however, they rarely, if ever, been successful.
- Hitchhiking and slugging, also known as casual carpooling
- Peer-to-peer economy
- Carsharing, which allows consumer to access automobiles for self-driven journeys
- Peer-to-peer carsharing, where customers drive themselves in cars rented from individual owners
- Demand responsive transport
- Flexible carpooling
- Illegal taxicab operation
- Mobility as a service
- Rideshare advertising
- Sharing economy
- Sustainable transport
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