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Transportation services have historically been heavily regulated due to their impact on the public. It makes sense that taxi companies are monitored as they are often trusted to safely and efficiently convey a city’s citizens and visitors around the city’s streets. Since the invention of cell phones, smart phones, and the applications that run on them, the options available to a potential passenger have increased significantly from standing on a corner to flag a taxi.  Companies such as Uber and Lyft have created a niche category for themselves and until recently have gone largely under the regulatory radar in many states.  California, however, caught on fairly quickly to these technological transports.

Uber, Lyft, and the Regulatory Landscape

In California, regulation of “transportation network companies” (TNCs) began around 2013 after the state ordered the companies to stop what it believed was unauthorized transportation operations. This new category joined the three other modes of transportation – taxi companies, charter-party carrier services, and passenger-stage companies. The regulations included permitting mandates, criminal background checks, driving record check requirements, and increased insurance coverage for accidents involving Uber/Lyft drivers and their vehicles during their app-arranged trips.

To make a tricky regulatory situation more complicated, California’s Department of Motor Vehicles entered the fray in January of 2015, when it began to mandate that cars used as transportation for Uber must have commercial registration. In addition to commercial plates, there are different rules (and fees) that apply to commercial vehicles than apply to registration as a personal vehicle. The DMV claimed that it was merely clarifying a rule that has been in place since the 1930s, but TNCs and lawmakers alike accused the DMV of “heavy-handed over-regulation.” While the advisory has since been retracted by the DMV, it highlights just how fluid the current regulatory environment is with the entire rideshare movement.

This landscape was altered most recently in June, when California’s labor commissioner’s office ruled that Uber drivers were “employees” under the state’s labor law statutes. The ruling goes against Uber’s practice of classifying its drivers as independent contractors and provides much more legal oversight into how Uber treats the people that use its app to drive for some extra cash.  Essentially, by mandating that Uber classify its drivers as employees, Uber must now reimburse one driver for expenses that he or she incurs while “on the clock.” While the company is appealing this decision, if it stands, it could mean more than just reimbursement in the future as it would mean that California’s labor laws would apply and offer Uber drivers more protections than their independent status previously allowed.

Out of a Quagmire, into Success?

One thing that has not changed with the ever-changing legal and regulatory landscape governing rideshare companies such as Uber and Lyft is the fact that they are still growing in popularity.  Americans (Californians included) have spoken through their continued use of the phone apps that they are ready for something more than yesterday’s transportation options. If you have questions about the legality of rideshare companies or about California’s laws governing the transportation industry, call the professionals at Garcia & Gurney today. We can answer your questions and provide representation if necessary to resolve your company’s regulatory compliance issues.

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