Austin voters on Saturday decisively rejected Uber and Lyft’s $8.6 million bid to overturn the city’s rules for ride-hailing apps, bringing a stunning conclusion to the most expensive campaign in city history.
The failure of Proposition 1 brought new threats that the ride-hailing giants would retreat from Austin as the neighborhood and labor groups that defeated them on a shoestring budget celebrated.
“Uber, I think, decided they were going to make Austin an example to the nation,” said longtime political consultant David Butts, who led the massively outspent anti-Prop 1 campaign, Our City, Our Safety, Our Choice. “And Austin made Uber an example to the nation.”
Following the results Saturday night, Lyft reiterated its threat to terminate service in the city as of 5 a.m. Monday.
“Lyft and Austin are a perfect match and we want to stay in the city,” said Lyft spokeswoman Chelsea Wilson, in a statement. “Unfortunately, the rules passed by City Council don’t allow true ridesharing to operate.”
That came just hours after Uber finally put a date and time to its pullout threat: 8 a.m. Monday.
“Disappointment does not begin to describe how we feel about shutting down operations in Austin,” Uber Austin general manager Chris Nakutis said in an emailed statement. He added: “We hope the City Council will reconsider their ordinance so we can work together to make the streets of Austin a safer place for everyone.”
Austin Mayor Steve Adler, who had urged voters to reject Prop 1 with the hopes of getting Lyft and Uber back to the negotiating table, held out hopes for more talks.
“We’re at a place right now where we welcome Uber and Lyft to stay in the community, and I hope that they’ll continue to talk with me,” Adler said Saturday night. “We need TNCs (transportation network companies) in this community so we have mobility choices, but how we’re going to do that and who we do that with, obviously, at this point, is something that we need to work on and work out.”
My opinion continues to be that while Uber and Lyft are nice to have, the city of Austin did quite nicely without them for a long time. It will find a way to carry on if they leave. And while the concept of transportation network companies is a good one, there’s no law saying it has to be those two providing the service. To me, a fine outcome of their departure will be for another company to take advantage of the opportunity to emerge in a market that isn’t dominated by a couple of operators who care primarily about crafting an advantage for themselves.
All of this has to make you wonder. Why is fingerprinting such a line in the sand? I can see the argument about it limiting the pool of drivers in a needlessly broad way, and I can see the argument that it’s a burden on those who wish to drive. In either of these cases, there is a sympathetic story to be told, and surely a lot of consensus for finding improvements to the process. Surely launching a multi-million dollar effort to repeal an ordinance that went through the normal lawmaking process, after trying unsuccessfully to recall the Council member who led the process to pass that ordinance, is the last arrow in one’s quiver, nor the first thing you try. So why was this a hill that both companies were so willing to messily and expensively die on? Well, here’s one possible reason for that.
The San Francisco and Los Angeles district attorneys have accused Uber of failing to uncover serious crimes on the records of some drivers allowed to operate in the two cities. The attorneys said they discovered 25 drivers in the two cities whose criminal records had gone undetected, and at least some records included felonies. Notably, one of the drivers whose criminal record went undetected was a convicted murderer who spent 26 years behind bars.
The discovery would appear to put pressure on Uber to adopt a more thorough background check process in order to stay in consumers’ good graces. But there’s more at stake here: If the company does adopt more rigorous background checks, which could include fingerprinting, drivers seeking classification as employees could try to use the move as evidence they are indeed employees and not private contractors, says one labor attorney.
The issue at hand is how much control Uber exercises over its drivers, according to Aimee E. Delaney, leader of the Labor & Employment Practice Group at the Chicago headquarters of Hinshaw & Culbertson LLP. Generally speaking, evidence of an employer attempting to control a person’s behavior can be used to determine that the worker is an employee.
One question that can help determine if someone is an employee is “Does the company control or have the right to control what the worker does and how the worker does his or her job?” according to the IRS website. So theoretically, asking someone to take an extra step to show they are qualified to do the work could constitute a form of control. The IRS admits however, “There is no ‘magic’ or set number of factors that ‘makes’ the worker an employee or an independent contractor” when it comes to control.
“I sympathize with where they are at because I think they are in a difficult position,” Delaney says of Uber, adding that the company has to “walk kind of a fine line.”
If the company simply ran background check materials through an additional database, that probably wouldn’t feed the case of drivers seeking employee classification. But if Uber puts a new requirement on drivers to be fingerprinted, that might come up in such a labor dispute.
Delaney, who represents employers in labor arbitrations, says that while fingerprinting wouldn’t necesarily provide enough fodder to nudge drivers into classifications as employees, she imagines it’s an idea that has crossed the minds of Uber’s legal team.
That makes a lot of sense, no? It’s all about protecting the business model, which depends on the labor being as low-cost as possible. At least until such time as driverless cars become available and make the whole thing moot.
What may also be moot is having this argument at a municipal level. The next step of this battle has already begun.
Today, Senator Charles Schwertner, MD (R-Georgetown) announced he will file a bill in the upcoming legislative session designed to establish consistent and predictable statewide regulation of ridesharing services like Uber and Lyft, also known as transportation networking companies (TNCs). The 85th Session of the Texas Legislature convenes in January 2017.
“It has become increasingly clear that Texas’ ridesharing companies can no longer operate effectively through a patchwork of inconsistent and anti-competitive regulations,” said Schwertner. “Any legitimate safety or liability concern regarding ridesharing clearly deserves to be addressed, and I welcome all parties to engage productively in that discussion. But as a state with a long tradition of supporting the free market, Texas should not accept transparent, union-driven efforts to create new barriers to entry for the sole purpose of stifling innovation and eliminating competition.”
The issues surrounding ridesharing have also had a significant economic impact on the citizens of Senate District 5, including approximately 40,000 Austin residents living in Williamson County. As a source of employment, ridesharing provides fulltime or supplemental income for over 5,000 Uber or Lyft drivers living in Williamson County, and countless other residents of north Austin, Cedar Park, Round Rock, and Georgetown depend on ridesharing services to commute to work, travel to the airport, or get home safely from downtown.
“I’ve heard from dozens of constituents in my district, including many Austin residents, who depend on either the service or revenue that ridesharing provides,” said Schwertner. “People are free to select whatever method of transportation they prefer, but we shouldn’t be trying to restrict the options available to our citizens when it comes to addressing our transportation needs.”
Yes, I’m sure the anti-Prop 1 forces, which were outspent by more than fifty to one, were in the thrall of Big Taxi. You do you, Senator. I’d advise you to have a statement about economic impact ready for your constituents when that driverless rideshare car initiative comes to Texas. Getting back to the main issue here for a moment, I will note again that Sen. Robert Nichols, the chair of the Senate Transportation Committee, was last quoted saying that a statewide law should have a fingerprint component in it. Whether that’s still his position now, or will be after Uber and Lyft back a dump truck of lobbyist money into his office, remains to be seen. For what it’s worth, the Council members in Houston who have expressed an opinion so far have all been 1) Republican, and 2) in favor of fingerprinting. So this fight next year may be more multi-dimensional than it first appears. Ben Wear, who has a really good take on this, the Observer, and the Rivard Report have more.