Don’t Be Afraid to Share: Ridesharing Companies Lyft, Sidecar, UberX Get Official OK in California

It's often been difficult for "sharing economy" participants to confirm what they're doing is legal. But now we have a little clarity—at least in terms of the sharing of car rides, at least in California.

  • Share
  • Read Later
Sabine Scheckel / Getty Images

Regulators know how to regulate traditional businesses. But they haven’t been sure how to handle “sharing economy” businesses like Airbnb, RelayRides, and Lyft, which involve tech-assisted peer-to-peer sharing of lodging, cars, and car rides, respectively. It’s often been difficult for participants to simply confirm whether or not these “sharing” arrangements are legal. But now we have a little clarity—at least in terms of the sharing of car rides, at least in California.

To varying extents, sharing economy businesses have been operating in a murky world in which almost no one gets in trouble for occasionally renting out their car to strangers, or perhaps renting out their whole apartment or an extra room for a few weeks of the year. And yet periodically, participants have gotten busted, and sharing companies have been ordered to shut down. Over the summer, a New York City judge fined an Airbnb host $2,400, and San Francisco International Arport authorities reported that they’d been arresting and fining rideshare drivers picking up passengers via Lyft and Sidecar. Various cities have also issued cease-and-desist letters to ridesharing companies over the last year.

The players involved have been left wondering: Are these operations legal or not? Is there a possibility of getting in trouble or not?

(MORE: Wanna Share a Ride at the Airport? Be Careful Before You’re Arrested)

On Thursday, a unanimous decision from California’s Public Utilities Commission offered some clarity, at least in the case of ridesharing in California. In a press release, the CPUC stated that it had created a new category of business, the Transportation Network Company (or TNC), to be applied to operations that “provide prearranged transportation services for compensation using an online-enabled application (app) or platform to connect passengers with drivers using their personal vehicles.”

The creation of such a category amounts to an endorsement of this business model’s legality. It also allows the CPUC to regulate TNCs like Lyft, Sidecar, and UberX. And regulate they will. “To ensure that public safety is not compromised,” the commission established 28 rules that rideshare companies must abide by, including obtaining a license to operate in the state, holding commercial insurance policies with liability coverage of at least $1 million per incident, conducting background checks on drivers and 19-point inspections on cars, and enforcing zero-tolerance policies on drug and alcohol use by drivers.

While some of the regulations are stricter than some sharers might like, for the most part, established rideshare companies already follow the same or similar guidelines. A year ago, for example, Sidecar and Lyft announced that drivers and passengers using their services would have insurance coverage for up to $1 million.

And the CPUC’s decision was met with near universal enthusiasm in the sharing economy community. “Today we have a new transportation category — the first in 16 years! — and a new set of rules that will allow rideshare to flourish in California,” Sidecar CEO Sunil Paul wrote in a blog post. “This new roadmap will pave the way for transportation innovation nationwide.”

John Zimmer, co-founder and president of Lyft, told TechCrunch that the decision in California demonstrates there’s “a way to do this that doesn’t compromise on safety, innovation, or choice for consumers.”

(MORE: The Other Complication for Airbnb and the Sharing Economy: Taxes)

The hope among ridesharing companies is that California, with its large, trendsetting, tech-forward community, shows the way for other states to follow. “A lot of what we do is a model for other states,” UCLA transportation researcher Juan Matute said to the Los Angeles Times. “We have the resources to engage in a comprehensive rule-making process that’s very public. This will definitely help other states that are looking to do something similar.”

Unsurprisingly, taxi drivers and cab and limousine companies, which have previously held rallies in protest of laws endorsing ridesharing, bashed the CPUC’s decision. Instead of the new classification TNC for ridesharing operations, the San Francisco Cab Drivers Association has suggested ITNC (Illegal Transportation Network Companies). In a statement, the association called the decision “disturbing,” and that because rule enforcement will be difficult if not impossible, the spread of ridesharing will hurt drivers and passengers alike. “Without proper local regulatory oversight this can only lead to abuse by TNC drivers, companies and the opportunistic element leading to the decreased quality of passenger service for the disabled, elderly and disenfranchised who rely on taxis for transportation,” the statement reads.

10 comments
gabi12
gabi12

RD3TQ will give you $25.00 in credit

monc
monc

I used lyft and sidecar in San Diego, and although you cannot make an appointment for a pickup ahead of time, these drivers are generally more reliable  (AND MORE PLEASANT) than the taxi services around the area!


For new sidecar members, you can use the promo code dxvtx  when setting up an account for a free $5 sidecar credit.



nmy
nmy

while everyone's excited about the cheap rides, missing out on the bigger picture, LIABILITY! Uberx drivers drive their personal cars with personal insurance NOT commercial. After speaking with an insurance agent, came to find out, if an Uberx driver gets into an accident, his insurance is NULL & VOID! Their insurance is not purchased for a commercial use. So, if you get into a wreck while riding Uberx, and you have to go to a doctors/hospital, you are on your own. The driver wont have any insurance. Uber has been advertising that, they these driver have a license from the city and these care livery registered, they are lying. Livery vehicle will have a Livery plate, while these vehicles have standard passengar plates. So, next time you are calling Uber/Lyft, check out the plate and decide for your self, if it's the worth the cheap ride let alone FREE RIDE!!!. Riders and Drivers, beware, it's a disaster waiting to happen

paulkomo
paulkomo

These ride sharing services are great for cities where TAXI services are horrible.  I use both LYFT and UBER and have been very happy with the experience.  I also got $10 credit for LYFT by using promo code BXL4YV under the payments tab...

MikeBFS1
MikeBFS1

There is always a challenge pleasing all sides of the discussion,especially with what could become a hot topic for California as far as, ridesharing. I don't forsee a decrease the the types or kinds of services available to the disenfranchised and the like. I guess when you step on enough "traditional business models" you're rocking the boat. Well, it might be time for them to get ahead  of the game before they are deemed obsolete. 

Need funding for your small business or big start-up idea? Get up to 200,000 in funding. How? 

Contact us @ http://bfs.ag/346665/2678 

MikeM.
MikeM.

Brad, I am very disturbed that you are writing for the prestigious Time Magazine, as well as teaching journalism.  If you were actually reporting facts, you would have found that these companies are in no way, shape or form a ride share, nor part of a sharing economy.  It is true that the companies are putting drivers on the road without proper insurance, as well as allowing them to operate as an illegal taxicab service.  This can be found under Title 49 Section 13102 of the United States Code.  The State of California disregarded all laws and allowed these companies to grow out of the jurisdiction of just "one city", which the commissioners do not have jurisdiction. DRIVERS FOR THESE COMPANIES WILL FIND THAT THEY WILL BE LIABLE FOR THEIR DAMAGES TO THEIR VEHICLE AND INJURIES TO THEMSELVES, WHICH IS NOT COVERED UNDER THEIR OWN INSURANCE POLICY. THEY WILL ALSO BE LIABLE FOR ANY DAMAGES AND INJURIES AFTER 1 MIL HAS BEEN EXHAUSTED, IF THE COMPANIES ACTUALLY COMPLY WITH PAYING OUT.  Safe now?  Good luck.

BrettRothenberg
BrettRothenberg

Don't be afraid..? 1. Call your own insurance company and tell them you want to drive for these companies.. listen to their response.. (if they don't cancel your policy for asking about using your care for a commercial/ridesharing ride, one without destination and being able to prove expenses went to gas/etc).. 2. Also check your owners manual.. your brand new car warranty is void if you are fleeting/taxi'ing your vehicle... so even though legal by the state.. no insurance and no warranty on the vehicle (in theory)...

BrettRothenberg
BrettRothenberg

This is a really great article, everyone should try these services.. if you use promo code "UBERMKZ" you can get $10 off your first uber ride.. they are definitely worth checking out!

Aguest
Aguest

@nmy  Not ALL UberX drivers are as you described.  Some have commercial insurance which protects them, their passengers and their vehicles if they are at fault in an accident.  And you are not entirely "on your own" if injured: if your claim against the driver at fault is denied for lack of coverage, feel free to sue the company (Uber/Sidecar/Lyft). They will likely sue the driver to recover their costs if their lawyers don't screw you first.  They don't require UberX drivers to have commercial insurance nor do they recommend they do so. it is the driver who will lose his home and life savings, of course.


Best policy? WEAR SEATBELTS IN ALL VEHICLES!


You are also incorrect about the livery plates - in California, you can have a TCP permit and carry commercial insurance to transport passengers for hire in a private vehicle with ordinary plates. The CPUC has approved a new category of transportation provider: TNC (Transportation Network Company). More regulation is on its way.