A ridesharing company (also known as a transportation network company or a mobility service provider) is a company that matches passengers with vehicles, via websites and mobile apps. Ridesharing companies for automobiles are commonly referred to as ride-hailing services, and such companies exist for aircraft and watercraft as well. Ridesharing companies are examples of the sharing economy and shared mobility. It has been estimated that ridesharing provides at least $7 billion in consumer surplus per year in the United States (2015 prices).
Ridesharing companies have been noted for providing service in less populated or poorer areas that are not regularly served by taxicabs, and charging lower rates than taxicabs, since taxicab rates are often set by local jurisdictions.
Studies are inconclusive on whether ridesharing companies reduce drunk driving rates in cities where they operate, with some studies showing that it depends on the city.
Ridesharing companies are regulated in most jurisdictions and have been banned in a few jurisdictions. Regulations can include requirements for driver background checks, fares, the number of drivers, licensing, and minimum wage. Airport taxi drivers in some places spend more than $3,000 annually on required commercial permits and insurance. For more information, see Legality of ridesharing companies by jurisdiction.
- 1 Definition and terminology
- 2 Criticism
- 2.1 Criticism by the taxi industry
- 2.2 Classification of drivers as independent contractors
- 2.3 Driver criticism of compensation
- 2.4 Dynamic pricing
- 2.5 Increased traffic congestion
- 2.6 Reduced usage of public transportation
- 2.7 Lack of wheelchair accessible vans
- 2.8 Drivers using their phones while driving
- 3 References
Definition and terminology
Ridesharing vs. ridehailing
The term ridesharing is commonly used by many international news sources, including the Washington Post, CNN, BBC, the New York Times, the Associated Press, and the Los Angeles Times. Many drivers and their groups, including Rideshare Drivers United and The Rideshare Guy (Harry Campbell), also use the term, with an argument being that hailing an Uber or Lyft vehicle is generally illegal, while these services also offer shared rides such as UberPool and Lyft Line. Usage is inconsistent, with the same publication or the same article sometimes using both terms.
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 taxis, ridesharing companies cannot pick up street hails. However, the Associated Press has also used the term ridesharing as well.
In 2013, the California Public Utilities Commission defined, for regulatory purposes, a transportation network company as a company that uses an online-enabled platform to connect passengers with drivers using their personal, non-commercial vehicles. This provided a legal, regulatory framework for rideshare companies to operate in the state. The Virginia Department of Motor Vehicles defines a TNC as a company that "provides prearranged rides for compensation using a digital platform that connects passengers with drivers using a personal vehicle."
In 2017, Uber opened a mobility service for boats.
Criticism by the taxi industry
The taxi industry has claimed that ridesharing companies skirt regulations that apply to passenger transport and ridesharing companies are therefore illegal taxicab operations. This has resulted in additional regulations imposed on ridesharing companies and, in some jurisdictions, certain ridesharing companies are banned from operating.
In New York City, use of ridesharing companies has reduced the value of taxi medallions, transferable permits or licenses authorizing the holder to pick up passengers for hire. After soaring in value[clarification needed] after the Great Recession due to their perceived safety, New York City taxi medallions were again trading for around $170,000 each in 2018. Annual rental rates were $30,000. A couple of credit unions that lent money secured by medallions suffered from bank failure.
Classification of drivers as independent contractors
Unless otherwise required by law, rideshare drivers are generally independent contractors and not employees. This designation may affect taxation, work hours, and overtime benefits and lawsuits have been filed by drivers alleging that they are entitled to the rights and remedies of being considered "employees" under employment law. In response, ridesharing companies say they provide "flexible and independent jobs" for drivers.
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", rather than self-employed individuals, and are entitled to the minimum wage under the National Minimum Wage Act 1998, paid holiday, and other normal worker 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 the decision. In December 2018, Uber lost an appeal of the case at the Court of Appeal, but was granted permission to appeal to the Supreme Court of the United Kingdom.
In March 2018, the Federal Department of Economic Affairs, Education and Research of Switzerland, gave the legal opinion that under the conditions that bind drivers to Uber that they should be classified as employees.
In April 2018, the California Supreme Court ruled in Dynamex Operations v. Superior Court that document delivery company Dynamex has misclassified its delivery drivers as independent contractors rather than employees. This ultimately led to California passing Assembly Bill 5 on September 11, 2019, which would require many jobs, to be classified as employees, with the according minimum wage protections and unemployment benefits, beginning in 2020. Uber and Lyft both pledged to keep drivers classified as contractors, saying they could meet the requirements of the new test, and both pledged $30 million on a 2020 ballot initiative against AB 5.
Driver criticism of compensation
Drivers have complained that in some cases, after expenses, they earn less than minimum wage. As a result, in some jurisdictions, such as New York City, drivers are guaranteed a minimum wage. The New York City minimum wage was set at $26.51 before expenses or $17.22 after expenses in 2019, and an analysis by the NYC Taxi and Limousine Commission revealed that 85% of drivers made less than the minimum wage prior to the law.
In May 2018, a unanimous panel of the United States Court of Appeals for the Ninth Circuit found that the City of Seattle's attempt to engage in collective bargaining on behalf of ridesharing company workers was not entitled to state action immunity from the Sherman Antitrust Act.
Ridesharing companies use dynamic pricing models; prices for the same route 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. The rate quoted to the rider reflects such dynamic pricing.
Ridesharing companies were criticized for extreme surcharges during emergencies such as Hurricane Sandy, the 2014 Sydney hostage crisis, and the June 2017 London Bridge attack, especially when taxis offered to transport riders for free; however, in many cases, the surcharges were refunded by the ridesharing companies and the companies later agreed to either not charge surcharges, or in some cases, offer free rides, during certain emergencies.
Increased traffic congestion
Ridesharing companies have been criticized for increasing traffic congestion in New York City and San Francisco. A report published by Schaller Consulting in July 2018 showed that, as a result of ridesharing companies, traffic congestion increased in both cities, which already had comprehensive public transport systems in place. A main reason was that a large number of people, who would otherwise have used public transport, shifted to services offered by transportation network companies. Compared with data in the report, taxis out-perform ridesharing companies in high-demand locations in terms of rider waiting time and vehicle empty driving time, and thus contribute less to congestion and pollution in downtown area.
Reduced usage of public transportation
Studies have shown that ridesharing companies have led to a reduction in use of public transportation.
Lack of wheelchair accessible vans
In some areas, ridesharing companies are required by law to have a certain amount of wheelchair accessible vans (WAVs) on the road at any given time. This can be a difficult requirement for ridesharing companies to meet because the companies don't provide vehicles and most drivers do not own a WAV, causing a shortage.
Drivers using their phones while driving
When a customer makes a pick-up request, a driver is notified via mobile app and is provided the customer's location. The driver has approximately 15 seconds to tap the phone to accept the request. In many jurisdictions, tapping a phone while driving is against the law as it could result in distracted driving.
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