Rideshare companies like Uber and Lyft aren’t leaving Arizona, even though their drivers will continue to receive tickets for illegally operating a taxi service after Gov. Jan Brewer vetoed a bill that would have legalized rideshare businesses in the state.
HB2262 would have defined rideshare companies like Uber and Lyft as something other than taxis and subjected them to a different, looser set of regulations than taxi companies.
In her veto letter, Brewer wrote that she nixed the bill because it would not have subjected rideshare drivers to pre-employment drug tests, as taxi drivers are required to undergo, and because the insurance structure for the rideshares create “gaps in insurance coverage that (would result) in a financial risk to (rideshare) drivers, passengers and other motorists.”
Without the law, rideshare companies are operating in Arizona illegally, according to the Arizona Department of Weights and Measures, which regulates taxi companies in the state. That’s because though their drivers provide transportation-for-hire services, the companies don’t carry the same mandatory insurance as taxis are required to carry, and the drivers do not have commercial drivers’ licenses.
Providing transportation services for hire without those qualifications can lead to civil penalties of between $200 and $500 for each violation, according to Shawn Marquez, director of compliance programs for the Department of Weights and Measures.
“They’re transporting people, [but] they don’t have commercial insurance, they don’t have commercial plates. At this point, they’re not legal. They are considered right now just pirate [taxis],” Marquez said.
Uber and Lyft, however, claim that they are not subject to the regulations governing taxis. The companies argue that because they are technology companies, and not transportation companies, they do not fall under the same regulations as taxi businesses, and are neither expressly allowed nor prohibited by state law. Both companies have operations in both Phoenix and Tucson.
Rideshare companies like Uber and Lyft use a smartphone application to connect passengers in need of a ride with people who are willing to drive them to their destination in their own personal car — for a fee. The companies set the price of the trip based on time and distance traveled and a supply and demand rubric that charges the passengers more during busy times. The companies keep a percentage of the charge, and the rest goes to the driver.
The companies claim that because they do not own the cars and are merely connecting those who have an extra seat with those who need a ride, they are not a transportation company and are not subject to the same rules as taxi companies.
But following the veto of HB2262, Marquez said the department will continue citing rideshare drivers for not having the proper insurance or licenses needed to operate a vehicle for hire.
“We’re out there weekends, nights, holidays, [and at] sporting events making sure that taxi services and limousines are all playing fair, and in the course of those inspections on the street, if we run into these guys, we’re going to handle them just as we have,” Marquez said, noting that local police are also ticketing the rideshare drivers.
Marquez said the Department of Weights and Measures alone has issued between 20 and 50 tickets to rideshare drivers, but catching them in the act is difficult because drivers communicate quickly on social media to warn each other of areas where the department is watching. Adding to the difficulty, he said the companies have started asking passengers to sit up front in order to avoid detection as a taxi.
After the veto of the bill that would have legalized the booming business model, Lyft spokeswoman Paige Thelen repeated the rideshare industry’s opinion that the practice does not fall under any Arizona regulations. She said that, even though the rideshare bill was vetoed, the company has no plans to move out of Arizona.
“We will continue to stand strong as a community and do everything possible to ensure that we will have a path worked out to allow ridesharing to thrive in Arizona,” Thelen said. “We’re still evaluating the next step now, but we’re continuing to operate.”
That is contradictory to the message the rideshare companies put out during legislative hearings on the bill, where they warned that not passing the bill would result in the loss of jobs, with the implication being that they would pull up their stakes and leave.
Uber’s Phoenix general manager Steve Thompson did not return calls about whether the company would continue operating in Arizona. But in an email blast after the veto, the company sent a message that “ridesharing as we know it is dead in Arizona… However, all is not lost… Uber will work in the coming months with the state of Arizona to find a permanent home for ridesharing.”
Uber communications person Lane Kasselman would not speak on the phone, but said in an email that the company is still “evaluating our options” about how to proceed since the bill was vetoed. Uber continues to operate in Arizona.
Ignoring attempts to shut them down is not uncommon for Uber and Lyft, which have started operations in numerous cities without gaining prior approval from transportation regulators, and have declined to cut off their services in many of the cities after regulators issued threats.
In some cases, persistence has paid off. Thelen cites the case of California, where Lyft was served a cease and desist order and a $20,000 fine, but the company continued operating and negotiated with local regulators on a new set of rules for the companies, which are now legally licensed by the state of California.
She said Lyft is trying to work with regulators at the Department of Weights and Measures to find a compromise that would legalize their ongoing operations in the state.
In the meantime, Thelen said Lyft drivers in Arizona shouldn’t be worried about getting ticketed for illegally operating a taxi service. The company pays the fines and legal fees for its drivers who are ticketed for illegally operating a commercial transportation vehicle, and remains in close contact to let them know that the company has their backs “100 percent,” she said.
But Marquez warned that often, the department finds that drivers aren’t even aware that what they are doing is illegal, because the companies have misled them: “These companies come in and [tell drivers], ‘Hey, we’ve looked at all the laws on the books and you’re perfectly legal. None of these apply.’”
Thelen said that’s untrue, and drivers are aware of the risks.
“They’re up to speed on our stance on our operations in Arizona, which is that we do not think that our model falls under current regulations,” she said, noting that drivers are aware that there is a possibility that they could be ticketed.
But Marquez said the Department of Weights and Measures isn’t giving up. He said there are still avenues that the department is looking at to crack down on the companies rather than going after the drivers one-by-one, which simply isn’t effective.
“The bill was vetoed last week, and one of the things we didn’t want to do was go in and kick the doors down, but, certainly, discussions are taking place right now internally about what we’re going to be doing,” Marquez said.