Key takeaways from new ride-for-hire legislation

There is, fortunately, no major cause for concern in the bill produced by the state lawmakers that labored through the closing hours of the legislative session this past Sunday. They succeeded in finalizing a balanced piece of legislation to regulate transportation network companies (TNCs). With approval and signing from Governor Baker, Bill H.4570 will become law.

Offering arguably the most comprehensive regulatory framework for TNCs among all states nationwide, the bill lays out a number of provisions that would help to ensure innovative companies like Uber, Lyft and Fasten can continue to operate in the Commonwealth without overly burdensome restrictions. Importantly, the legislation would also establish a ride-for-hire task force to review current regulations governing taxis, livery service providers and TNCs, with consideration of a range of policy items including how to improve public safety and level the playing field for all actors in the ride-for-hire industry. While most of the key areas of regulation should be considered a win for consumers, there a few questionable provisions in the legislative language that should raise some eyebrows in the ride-for-hire industry. The following are some of the key items addressed in the legislation:

Background checks 

Bill H.4570 would establish a ‘two-tiered’ background check—the first of its kind in the nation. The two-part process would require TNCs to conduct their own check and submit ‘identifying information regarding an applicant’ to a new regulatory division under the oversight of the Department of Public Utilities (DPU), which would provide this information to the department of criminal justice information services for the state to perform its own background check. This approach goes with the Senate’s proposal to make TNCs the gatekeepers in the flow of information for background checks. The House version, in contrast, would have required TNC operators to submit information to the state directly—a requirement that Uber and Lyft vehemently opposed on the grounds that it would be a disincentive to prospective drivers and would thus hurt the firms’ business.

Importantly, the legislation does not include a fingerprinting requirement, as was originally proposed in the House version and was pushed aggressively by a number of legislators.  While TNCs are happy with the omission, Boston Police Commissioner, William B. Evans—an early supporter of the fingerprinting requirement—criticized the legislative move to exclude it.

Insurance 

Insurance requirements in the bill in large part mirror what companies like Uber already employ in coverage for their drivers. The legislation requires TNC drivers logged onto a TNC digital network and available to take ride requests to have automobile liability coverage worth at least $50,000 per individual for bodily injury, $100,000 of total coverage for bodily injury, and $30,000 for property damage. The legislation also mandates that TNC drivers have at least $1,000,000 in automobile liability coverage per occurrence for any incident that takes place while a prearranged ride is in progress.

The provisions on insurance, while reasonable in establishing policy that would not be too restrictive on TNCs, stipulate significantly higher insurance coverage than what is required of operators in the taxi industry. As covered in the Boston Globe spotlight series, many Boston taxi companies carry the minimum in bodily injury coverage—$20,000 per person and $40,000 per accident.

Logan Airport and Boston Convention Center

In arguably the biggest win for TNCs, the legislation would authorize the Massachusetts Convention Center Authority to come up with its own rules to govern TNC business at the Boston Convention and Exhibition Center (BCEC). Similarly, the Massachusetts Port Authority (Massport) would be allowed to establish new rules for TNC pick-ups at Logan Airport, as long as the new policy accords with federal regulations. Yesterday, the Boston Herald reported that Massport’s leadership will introduce new policy at Logan terminals to establish a designated area for TNC pick-ups.

New Regulatory Body and Transportation Infrastructure Enhancement Trust Fund 

The bill would establish a new regulatory body within the DPU, which would be funded through a surcharge on each firm in the TNC industry, the amount of which would be determined by the commissioner of the new division in accordance with Massachusetts General Law Chapter 159A½.

Another provision would enact a $0.20 per-ride assessment on all TNC trips to be collected by the new division—double the amount originally proposed in the Senate version of the legislation introduced in June. As the Globe reported earlier yesterday, the assessment is projected to generate an estimated $3-6 million per year. Half of this would go towards municipalities based on TNC ridership within them for purposes of road, bridge and other infrastructure repair and maintenance, while ¼ would go towards financial assistance for small businesses in the taxi or livery industries and ¼ towards the Commonwealth Transportation Fund.

The provision that 25 percent of all revenue from this fee will go towards financial relief for legacy ride-for-hire companies marks a unique and unprecedented move for regulation of the transportation services industry. The proposal to allocate revenue collected from taxing a new participant in an industry to subsidize companies subscribing to an older model is bolstering a failing industry in which legacy actors refused to adapt. The policy, in this way, would set a precedent for governments to financially support firms that stubbornly continue to employ outdated systems and practices to the detriment of consumers.

Even with the provision that this fee revenue will go towards taxis, the legislation is still a very hard pill for the taxi industry to swallow. Taxi drivers, the true victims of misguided regulators and exploitative business owners, were arguing for much more stringent rules on TNCs. But the answer is not to subsidize failing companies that continue business as normal in the face of innovation. The pragmatic direction forward for the taxi industry will be eliminating the antiquated restrictions that make them unable to compete with firms like Uber and Lyft. Ensuring they can compete on price by overhauling the municipal-set minimum meter rates and eradicating outdated municipal prohibitions on pick-ups, as Pioneer reported last week, are two ideas that could help on this front. It would be a sound policy direction, producing benefits for both cabbies and consumers, to enact reforms in the taxi industry that are long overdue.