Smartphone Ride Services Like Lyft, UberX Steer Around Regulations

Sep 20, 2013

Two new ways to get around town have landed in Charlotte: they let you skirt traditional taxi and limo options and summon a ride through your smart phone.

The companies themselves are skirting Charlotte ordinances that govern vehicles for hire, as they have in most cities where they operate. But in North Carolina, they first slipped a new law through the state legislature that means Charlotte may not have any authority to regulate them.

Gresham Worrell pulls up in his brand new Hyundai Santa Fe with a ridiculous fuzzy pink mustache strapped to the front – a sign that he's my Lyft. He greets me with a fist-bump and invites me to sit in the front seat.

"That's what we do in the Lyft community," says Worrell.  "It's the difference from a taxi – this is a much friendlier system."

Friendlier, perhaps. Definitely less formal. At the end of our 15 minute ride, my phone prompts me to rate the experience and pay a suggested donation of $11 with my credit card already on file in the app. Lyft keeps 20 percent of what drivers make.

Gresham Worrell drives for Lyft in his spare time. His full-time job is in sales at a Charlotte tech company.
Credit Julie Rose

I give Gresham five stars because he arrived at my door less than five minutes after I requested the ride. It was a few bucks cheaper than a taxi would have been, too, and he was very pleasant. What he's not, however, is permitted by the city of Charlotte to give people rides.

True, says Gresham, but "we are not drivers for hire. We are not hired to provide professional driving services. We are simply a community of drivers who are willing to share the seats in their car to help you get where you need to go. We are completely donations based."

Being "donations-based" is a distinction that has helped Lyft side-step "vehicle for hire" ordinances in some cities. But Charlotte's ordinance says you're a "vehicle for hire" if any transaction takes place – including a donation.

Crown Cab owner Mayur Khandelwal says Lyft and a similar service called UberX are "shamelessly flouting" the city's laws.

"All of a sudden the authority to decide who belongs in a driving seat and who does not belong in a driving seat has gone to a private entity who is based in Silicon Valley and who doesn't care about our rules," says Khandelwal.

Khandelwal is also a member of the Passenger Vehicles for Hire board which oversees the city's extensive taxi and limo ordinances. Every driver and vehicle must have a city permit, which costs several hundred dollars and can take months to secure. They have to be fingerprinted, pass background and driving record checks and annual drug tests.

Every month, the Passenger Vehicles for Hire Board meets to consider appeals from drivers whose permits were rejected because of something on their record. At this week's meeting, the board turned down two would-be drivers because of past drug charges.

Drivers for Lyft and Uber do not go through this process.

"That's against what the city's taxi and limo system stands for," says Andy Thompson, a PVH board member and vice president of Rose Chauffeured Transportation.  

Source: Websites for Uber, Lyft and City of Charlotte.
Credit Julie Rose

  "We stand for safety of the public and permitted vehicle safety and drivers being screened and being drug tested and things like that," says Thompson.

In fairness, taxi and limo companies also stand for preserving their share of the market. Naturally they're against new competition, say Uber, Lyft and their many devoted fans.

Both companies say they do background checks on their drivers, inspect their vehicles and require insurance. They don't do a drug test or take fingerprints, but Uber's East Coast Regional Manager Rachel Holt argues the service is actually safer.

"As soon as you request a car you get the driver's name; you get their phone number; you have their license plate; you get a photo of them," says Holt. "There's additional accountability and safety that you just don't get from sticking your hand out to catch a taxi. You don't know who that driver is."

But, you do know that taxi driver has been through the city's screening and permit process, because those permits are displayed right on the dashboard.

None of this criticism is new to Uber and Lyft: they've faced stiff opposition from taxi companies and regulators in dozens of cities – including driver arrests and cease-and-desist orders. So, before coming to North Carolina, Uber hired two lobbyists at McGuireWoods Consulting to smooth the way with state lawmakers.

"When we talked to folks in North Carolina, the state was incredibly receptive to the idea of having an innovative technology company have an office and have large presence in North Carolina," says Uber's Rachel Holt.

It's unclear which lawmakers backed Uber, but the company's lobbyists managed to get a clause inserted into an omnibus regulatory reform bill (see section 12.1.a) that contained so much other controversial stuff, nobody seemed to notice the section called "Regulation of Digital Dispatching Services." It describes how companies like Uber do business and specifically prohibits cities from imposing regulations on them.

A few months later, Uber's high-end sedans and Lyft's fuzzy pink mustaches popped up in Charlotte, catching city officials by surprise. (So did the new state law, by the way.)

City attorneys are now scrambling to assess the situation, while Uber and Lyft gain traction on Charlotte's streets.