Ride-sharing is “a system where an automated process employed by a ride-share provider matches up drivers and riders on very short notice, which can range from a few minutes to a few hours before departure time.” For most people, it is a convenience service, allowing affordable travel without the burden of a prearrangement. Ride-share companies, or Transportation Network Companies, depend on mobile Internet technology and smartphones, matching drivers and riders in a network that tracks geographical proximity. With a GPS enabled handheld device, a rider may request a ride, marking his/her current location as the trip’s point of origin. Whether navigating a new city or moving from one location to another in their hometowns, travelers make decisions on how to get to a destination by considering a number of criteria, including “cost, travel time, flexibility (ability to adapt to changes in schedule), convenience (such as the location of the pick-up and drop-off points, and the ability to listen to music, or privacy), reliability, and perception of security.”
The biggest ride-share company worldwide is Uber, followed by competitors like Lyft, which operates in 300 U.S. cities, and SideCar. Local companies include Dallas-based GetMe, and RideAustin, the nonprofit ride-share group that began as a response to the city’s legal conflicts with Uber and Lyft.
Ride-sharing is distinguishable from carpooling, both traditional carpooling and so-called casual carpooling. Traditional carpooling depends on prearrangement for recurring trips (such as the typical parent-to-parent arrangement of school drop-offs and pick-ups). Casual carpooling is a spontaneous, non-recurring event wherein an arrangement is reached on the spot (such as hitch-hiking or sharing a taxi from an airport curbside area). Prearranged rides may be facilitated either by service operators or by matching agencies. Services operators, such as airport shuttles, employ their own drivers and use their own vehicles. By contrast, matching agencies for ride-shares coordinate individual drivers who operate their own vehicles. This conserves resources for all parties involved, as “individual drivers have their own trip plans and provide their unoccupied seats for passengers to share their travel expenses.”
A history of communal transportation methods published in the journal of Transportation Research reveals that the first organized ride-sharing was initiated by the U.S. government during World War II in an effort to conserve fuel. The first employee-targeting carpool services (using company vans) were run by 3M and Chrystler, serving commuters. In the early days of the Internet, ride-sharing seemed a promising way to utilize a communication network of mobile individuals. And yet coordination efforts were used primarily to facilitate pre-scheduled and recurrent travel, such as commuting trips and long-distance trips. These programs, which were often not designed for profit, declined in popularity until 2009. They were too onerous and required too much advance notice to be truly user-friendly. The break-through for companies like Uber and Lyft came with technologies that enable network-distributed ride requests on demand.
Ride-share drivers are motivated to join and participate in the transportation mechanism of the gig-economy for various reasons. Some are college students making a few extra dollars between classes. Some are recent graduates with indeterminate plans for the foreseeable future. Some are intermittent parents with or without more conventional employment, supplementing a family income. Some are retirees that have discovered a way to meet people, including younger passengers, while earning money that their financial plan did not anticipate. For the most part, the public impression of employment as a ride-share driver is positive – it seems like everyone profits and thrives. This idealized impression, however, may potentially overlook the risky circumstances and the personal financial burden of maintaining a safe vehicle and adequate insurance coverage.
Some of the technological aspects of ride-sharing have presented problems for riders. For example, the New York Times reports that a common practice among drivers is to accept more than one request with no intention of picking up the requesting passenger. “This can happen with drivers who operate both Uber and Lyft simultaneously; they will accept rides on both platforms to keep their acceptance rate high (necessary to get incentive bonuses) but complete only one of them. The stranded passenger, they hope, will simply give up and cancel the ride (sometimes granting the driver a cancellation fee).” 1
When Uber has on several occasions found itself at the center of controversy, it has recurrently been because of the labor conditions of its drivers, which the company classifies not as employees but as “registered partners.” Regular drivers have attempted to establish working rights vis-à- vis Uber with the argument that they use their own cars, and ought to be protected from the financial pressure of the ride-share provider’s oversight. On average, Uber charges its drivers somewhere between five and twenty-five percent commission on each ride. 2 And whereas Lyft has long had a tipping feature as part of its ride-hailing app, Uber enabled tipping as late as 2017, which has drawn criticism from multiple unions and the Independent Drivers’ Guild. 3 The argument presented by ride-share companies is that because of the centrality of the smartphone app to their business model, each company is first and foremost a technology supplier, rather than a transportation agency. They claim to provide a neutral tool (an app) that connects riders and drivers; the notion of a fleet of cars and drivers, constantly and immediately available, is thus obfuscated.
Given the personal freedom of ride-share drivers and the decentralized oversight of the business model, a recurring legal dispute between ride-share companies and drivers has been whether the latter are technically independent contractors, or ought to be recognized as employees. The distinction makes a significant different since employees since the time of the second World War enjoy various rights and protections by law: extra payment for overtime labor, standards for minimum wage, health insurance, and worker’s compensation. Providing these benefits is burdensome to employees, which is why many organizations try hard to maintain a labor force that may be categorized as consisting of independent contractors.
To distinguish between employees and independent contractors for the purposes of labor law, courts have since the mid nineteenth century relied on the so-called the control test. Although no federal statue exists for this test, many states and agencies have adopted some version of the process that assesses the “amount of control exerted over the putative employee by the employer.” 4 Beyond this test, courts presented with a case where the distinction is at stake may consider “the economic realities test,” which determines “whether, as a matter of economic reality, the workers depend upon someone else’s business for the opportunity to render service or are in business for themselves.” 5 Two legal experts, including a member of the Texas state bar association, argue compellingly that applicable “laws do not provide a clear answer as to whether the drivers should be classified as employees or independent contractors. Ultimately [their report] recommends that the tests be applied on a case-by-case basis to consider the different types of individuals participating in the sharing economy, and that the tests be reconsidered in light of the tension between control and user safety that exists today.” 6
Like many of the emergent, data-driven conveniences of the 21 st century, ride-sharing is simple to use but sustained by a complex management system. Much of the research and entrepreneurship surrounding the ride-share business model centers on algorithms and networked habits theory. In some sense, the most profitable ride-share service is the one with the most sophisticated technology. Ride-sharing systems are based on a dispatch algorithm that connects drivers and riders for short-term arrangements in order to maximize efficiency. The efficiency standard is geared toward the total number of miles driven within the system as a whole, or the potential for drivers and riders to coordinate their paths in locally focused patterns. Regular ride-share customers recognize this model from the way a smartphone allows a potential customer to view drivers in his/her vicinity before confirming a request. Some ride-share algorithms depend on a “deterministic rolling horizon,” in which matching arrangements are tentative until a confirmation is set. “Plans are made using all known information within a planning horizon, but decisions are not finalized until necessitated by a deadline. At each execution of the algorithm, the planning horizon is ‘rolled’ forward to include more known information, and the process continues.” 7
Ride-share companies, including and especially Uber, have been instrumental in the development of self-driving vehicles. It is easy to see how the commercial deployment of driverless cars would align with the business model of a ride-share enterprise, which aims to maximize use of resources at low overhead cost. In 2016, Uber opened a driverless car research center in Pittsburgh, PA, in partnership with Volvo. With its ambitious innovation, Uber has intermittently been in conflict with Alphabet Inc., the parent company of Google, over proprietary technology. Google initiated a self-driving car project in 2009, and took over the technology known as Waymo from its parent company in 2016. The risks involved with driverless cars operating as part of a ride-share service are significant. In March 2017, a self-driving Volvo XC90 sports utility vehicle of the Uber fleet crashed into another vehicle at an intersection. An industry analyst interviewed by the Wall Street Journal noted that information input in a complex scenario is not necessarily tantamount to safe decision-making. According to the journalist, “Statements to police suggest turning traffic blocked both parties’ views before the collision, raising new questions about what the sensors and cameras onboard the Uber vehicle could see and how data from those pieces of hardware was used to respond to a tough driving situation.” 8
The fundamental economics of the ride-share industry rely on an automated fixed percentage of the profit automatically directed to the provider, typically a company like Uber or Lyft. The rest of the revenue goes to the driver as a service fee and reimbursement for costs accrued. During peak hours of high demand, fees rise. The profit margins are expansive because the bookings, the route, the calculation of the fare, and the submission of payment are configured through a smartphone app. The process is instantaneous, and requires minimal labor allocation in administration. Additionally, the resources necessary for running the system are kept small because of the matching of supply and demand, which outpaces taxicab services.
In the ride-share industry, Uber dominates globally and nationally. Founded in San Francisco in 2009, Uber was initially designed to compete primarily with an inadequate taxicab infrastructure. 10 A history of Uber published by Fortune chronicles the typical start-up narrative, complete with young, inexperienced “techies” and eager interns with limited knowledge of regulatory structures. One of the senior members of the original team recalls that “In a start-up, no one knows what they’re doing,” commenting on her initial realization that “Oh, we should probably do vehicle checks moving forward.” 11 The aggressive attitude and managerial style of chief executive Travis Kalanick has produced, according to the New York Times, a “Hobbesian environment […] in which workers are sometimes pitted against one another and where a blind eye is turned to infractions from top performers.” 12 It is hardly an overstatement to say that Uber has been outspokenly cavalier about the regulations and agencies whose express purpose is to maintain public welfare and safety.
By the summer of 2017, Uber was valued at seventy billion dollars, with service networks in more than seventy countries. The two features of Uber that account for its international success are its strategy for market disruption innovation and its reliance on a sharing economy. Market disruption innovators gain an advantage by identifying and exploiting particular weaknesses of competitors and regulatory structures. 13 And the sharing economy, supported by integrated technologies, make use of spare or extra resources by bringing suppliers and users/consumers of those resources together. Simply put, Uber rose to unprecedented prominence very quickly because it took advantage of the market weaknesses of taxicabs, mobilized a user-friendly algorithm that maximized the value of an unused resource, viz., idle cars’ proximity to people who need a ride, and operationalized all of it faster than the regulations of transportation and labor could follow.
In the wake of Uber’s success have followed political and economic controversies internationally. More than a hundred lawsuits have been filed against the ride-share giant since October 2012. 14 The numerous class action lawsuits that have been filed regarding the employment status of Uber drivers have typically been settled, racking up hundreds of millions of dollars in payouts for the ride-share giant. In more than one instance, dense urban areas have rejected Uber’s method of seizing control of passenger vehicle traffic and inner-city infrastructure. In November of 2017 the Employment Appeal Tribunal in central London struck down Uber’s appeal to overturn a decision granting Uber drivers certain workers’ rights, including minimum wage, holiday breaks, and rest periods. While Uber immediately announced its intention of moving forward with additional appeals, the decision has potentially significant implications for other industries of the “gig economy,” “where individuals work for multiple employers without a fixed contract.” 15
The emergence of ride-share services has shaped urban traffic practices in significant ways. The ride-share industry, and the mobility culture that comes with it, have the potential not only to facilitate convenient and affordable transportation, but to reduce greenhouse gas emissions, traffic congestion, travel costs, and system-wide congestion and pollution. 16 For travelers, ride-shares are a quick, affordable, and easy way to get from one place to another, often a safe way to get home at night while eliminating the concerns surrounding alcohol and safe driving. On a macro-level, ride-sharing may alleviate environmental concern in densely populated areas. 17
Ride-sharing portends changes in the consumer economy and infrastructure. In many ways, the instant availability of what may seem like a personal chauffeur at an affordable prize is bafflingly appealing to some. In other ways, the easy access to convenience seems perfectly in keeping with a culture that increasingly provides all things at all hours for anyone with the requisite technological savvy. Executive chairman of The Futures Company J. Walker Smith describes an “Uber-all economy” in which “all consumer goods will be available as a service and all consumer services will be available on demand.” 18Smith identifies two elements of the ride-share business model that are especially likely to extend to other industries: personal service and immediacy – the constant and ubiquitous availability of all services and products, tailored to user needs. From the perspective of material loss and personal injury, both of these elements represent a potential risk. Both personal service and speed are conditions under which the risk of harm is high. When a service is provided by one individual for another’s benefit with limited or no oversight, there is danger of corruption and injurious behavior. Add to this that the services are delivered at breakneck speed, in which completing a request and reaching a delivery may be prioritized over safety, and the outcome may be disastrous.
Ride-sharing is a gauge on the cultural consequences of economic development on a system-wide scale. The so-called sharing economy—also referred to as the peer economy, access economy, or collaborative consumption—is designed to activate human and material resources that, in specific time-frames, are unutilized. The traditional modern economy contains a lot of “slack resources” wherein assets sit idle; the average car is driven for about an hour a day. 19 The sharing economy, on the other hand, takes advantage of “underutilized space, skills, and goods by matching providers who have specific assets or skills with the people who need them.” 20 Put somewhat simply, it is the macro-economic version of saying to someone, “Do you mind if I borrow your car when you’re not using it?” Extending this “might as well” notion to other industries, services, and goods, the question could be, “When you’re buying groceries for yourself, would you mind buying some for me?” or “When you’re walking your dog, would you mind bringing my dog along as well?” The critical issue from a legal standpoint, with a particular focus on risk and injury, is: What responsibility or even culpability would the person performing a “gig” (in the two gig economy examples) have for the quality of food being delivered, or the health and safety of the dog? Who assumes liability for the groceries and the pet in transit? And what is the total system-wide threat presented by not having a definitive answer to these questions?
A person who steps into a ride-share vehicle is scarcely more protected than someone who rides in a stranger’s car. Simply put, the principal reason why ride-sharing is a public safety hazard, whose legal consequences are mostly undetermined as of yet, is that most of the decisions about safe driving and vehicle maintenance and operation are left to the individual driver’s discretion. As noted in the Mercer Law Review, some ride-shares allow “virtually anyone to drive for the company as long as a few minimal requirements are met. These include passing both a background and Department of Motor Vehicles check, owning a vehicle, and having car insurance.” 21 As reported by the Chicago Tribune in 2014, Uber in particular failed to screen “thousands of drivers,” and allowed them to operate in service “despite not knowing whether or not they had felony convictions.” 22 And while Uber is the biggest ride-share company, or Transportation Network Company in the world, the dangers of ride-sharing extend far beyond this corporation. From a public safety standpoint, requiring little more than a car and personal car insurance may be insufficient.
The public is generally unaware of the under-regulation of ride-share drivers, and the potential risks involved. Indeed, ride-share companies “are actually piggybacking on the trust that consumers feel in what is typically a highly regulated economy.” 23 Consider a comparison: Commercial motor vehicle drivers and taxi drivers are heavily regulated and subject to extensive scrutiny. Their vehicles are monitored both for the reliability and safety of the mechanics, and for the operational habits of the driver. Commercial motor vehicle drivers (such as truck drivers) are permitted to drive for only a set number of hours before they are required to rest: a fatigued driver is more likely to experience a slowed reaction time and to make poor judgments on the road. Regulatory agencies protect the public and the welfare of professional drivers with hours-of- operation standards, medical health checks, and licenses. This kind of oversight, however, is severely lacking with regard to ride-share services. One investigative report finds that 17-hour workdays for ride-share drivers are not uncommon. 24 In the intense environment of urban traffic, a driver who has been active on his/her ride-share app for this long may be seriously impaired in judgment and capacity.
One of the most publicized cases of ride-share fatality happened in January of 2014, when a San Francisco Uber driver hit six year old Sophia Liu who was crossing the street with her mother and younger brother. Liu was killed, and her brother and mother injured. Sophia’s parents sued the driver for wrongful death. Notably, the driver had a reckless driving conviction that had not precluded him from eligibility as an Uber driver. 25 Uber denied liability, claiming that its insurance policy did not cover drivers in between fares. The Liu family’s suit claimed that Sophia was killed while the Uber driver was logged into the fare-locating app. Because the Liu case was settled, the question of Uber’s legal liability was ultimately undetermined.
Some of the risks involved in ride-sharing are similar to those in traditional taxi transportation, while others are unique to the ride-share format. Uber is an especially notorious ride-share service when it comes to harassment complaints. In 2014 an UberX driver was charged with a misdemeanor battery count when he assaulted a passenger who was attempting to take pictures of his vehicle after the driver had asked the passenger to exit. The driver had multiple drug-related felony convictions that the background check overlooked. A Chicago woman filed a lawsuit against a driver who she claims fondled her persistently while she was in the front passenger seat. Uber responded by deactivating the driver’s account. The company has repeatedly denied indictments of weak screening practices of drivers, but also fought aggressively against state-by- state legislations that would require background checks, including finger-printing, as intense as those used to scrutinize taxi-drivers. 26
1 Lucas Peterson, “How to Use Uber and Other Ride-Shares,” New York Times, November 20, 2016, LINK
2 Geoffrey Dudley, David Banister, and Tim Schwanen, “The Rise of Uber and Regulating the Disruptive Innovator,” Political Quarterly 88 (2017): 497.
3 Faiz Siddiqui, “Riders can now tip Uber drivers in D.C. and nationwide,” Washington Post July 17, 2017, LINK
4 Richard A. Bales and Christian Patrick Woo, “The Uber Million Dollar Question: Are Uber Drivers Employees or Independent Contractors?” Mercer Law Review 68 (2017): 4.
5 Richard A. Bales and Christian Patrick Woo, “The Uber Million Dollar Question: Are Uber Drivers Employees or Independent Contractors?” Mercer Law Review 68 (2017): 5.
6 Richard A. Bales and Christian Patrick Woo, “The Uber Million Dollar Question: Are Uber Drivers Employees or Independent Contractors?” Mercer Law Review 68 (2017): 2.
7 Niels A. H. Agatz, et al., “Dynamic ride-sharing: A simulation study in metro Atlanta,” Transportation Research Part B 45 (2011): 1452.
8 Tim Higgins, “Uber Self-Driving Car Crash Detailed in Police Report,” Wall Street Journal, March 30, 2017.
9 Mike Isaac, “How Uber Deceives the Authorities Worldwide,” New York Times, March 3, 2017, LINK
10 Julian Chokkattu & Jordan Crook, A Brief History of Uber, TechCrunch (Aug. 14, 2014) LINK.
11 Adam Lashinsky, “Uber: An Oral History,” Fortune, June 3, 2015, LINK.
12 Mike Isaac, “Inside Uber’s Aggressive, Unrestrained Workplace Culture,” New York Times, February 22, 2017, LINK.
13 Geoffrey Dudley, David Banister, and Tim Schwanen, “The Rise of Uber and Regulating the Disruptive Innovator,” Political Quarterly 88 (2017): 492-499.
14 Richard A. Bales and Christian Patrick Woo, “The Uber Million Dollar Question: Are Uber Drivers Employees or Independent Contractors?” Mercer Law Review 68 (2017): 5.
15 Staff, Reuters Business News, November 10, 2017, LINK.
16 Douglas O. Santos and Eduardo C. Xavier, “Taxi and Ride Sharing: A Dynamic Dial-a- Ride Problem with Money as an Incentive,” Expert Systems with Applications 42 (2015): 6728.
17 Jung-hee Lee, “Shall We Share a Ride, Wildcats? CVM Study of the Willingness of Weber State University Students to Accept Ride-Sharing,” Journal of the Utah Academy of Sciences, Arts & Letters.
18 J. Walker Smith, “The Uber-All Economy of the Future,” Independent Review 20 (2016): 383.
19 James Surowiecki, “Uber Alles,” The New Yorker, September 16, 2013.
20 Richard A. Bales and Christian Patrick Woo, “The Uber Million Dollar Question: Are Uber Drivers Employees or Independent Contractors?” Mercer Law Review 68 (2017): 3.
21 Richard A. Bales and Christian Patrick Woo, “The Uber Million Dollar Question: Are Uber Drivers Employees or Independent Contractors?” Mercer Law Review 68 (2017): 2.
22 Leonor Vivanco & Cynthia Dizikes, “Gaps in Some Ride-Sharing Firms’ Background Checks,” Chicago Tribune, February 14, 2014.
23 James Surowiecki, “Uber Alles,” The New Yorker, September 16, 2013.
24 Avi Asher-Schapiro, “Is Uber’s Business Model Screwing Its Workers?” Moyers & Co., October 1, 2014, LINK.
25 Olivia Nuzzi, “The Definitive List of Uber Horror Stories,” The Daily Beast, November 19, 2014, LINK.
26 Mike Isaac, “Uber’s System for Screening Drivers Draws Scrutiny,” New York Times, December 9, 2014, LINK.