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An alternative to the traditional cab is now available in NE Ohio
In late August, Akron joined several other Communities around Ohio whose residents now have access to the free ride-hailing smartphone app, Uber. UberX is generally cheaper than a traditional taxi, but lawsuits filed in Massachusetts and California threaten its current business model, and if successful, some attorneys say that could lead to higher prices. (Photo courtesy of Uber).
SHERRY KARABIN
Legal News Reporter
Published: November 4, 2014
Until recently, people living in northeast Ohio who needed transport to and from a location and didn’t want to drive could either call a cab or ask a friend or relative to help out.
But in late August, cities like Akron joined several other communities around Ohio whose residents now have access to the free ride-hailing smartphone app, Uber.
“Uber is a technology platform,” said Chardon native James Ondrey, general manager for Uber Technologies, Inc.’s Ohio region. “We don’t actually own the cars or employ drivers. We simply connect people who are looking for a ride with available drivers at the push of a button.”
Ondrey said the app is free to download and can be used in all 220 cities where Uber operates. “When you open it up, it finds your current location via GPS or you can type in a different address where you want to be picked up. A simple tap lets you request a driver,” he said. “Drivers signed onto the Uber network receive a beep on their phone if they are the closest to a request and it's one touch of the screen for them to accept a trip.”
Ondrey said the potential passenger is given the name and picture of the driver, the make and model of the car and a phone number. “The rider can watch the driver approach in the app in real time,” he said. “The average wait time is five minutes or less.”
People who use Uber are asked to set up an account in advance and provide PayPal information or a credit or debit card to cover the charges for any rides they decide to take.
UberX is the lower cost option. Drivers use their own personal cars to pick up passengers and make extra income, explained Ondrey. “Everyday citizens take control of their own business, set their own hours, and become entrepreneurs on the road,” he said. UberBLACK, a higher-end service, is about 40 to 50 percent more expensive than a taxi and consists of professional chauffeurs who drive limousines and pick up passengers during their downtime. Only uberX is available in the Akron area at this time.
While using the app might not be that difficult, its introduction has caused an uproar in many cities across the nation. In Columbus, city officials filed lawsuits in Franklin County Municipal Court in April against both uberX and another ride-hailing app, Lyft, to bar them from operating in the city. Columbus cab drivers argue Uber has an unfair advantage because it can be flexible in its pricing, whereas the city dictates the rates for cabs.
In April, Lt. Gov. Mary Taylor, who also serves as director of insurance, warned drivers and users of potential insurance issues.
“Ohioans considering these types of services should weigh all factors including any coverage gaps that may exist,” Taylor said in a press release. “While the driver may have insurance, his or her policy may or may not provide all the coverage needed should an accident occur.”
The dispute in Columbus was resolved in July when the city council voted to allow Uber and Lyft to operate legally provided they follow a number of rules. Uber drivers must undergo a criminal background check, have a letter of good standing, proof of vehicle ownership or a letter of permission from the owner, and $1 million worth of insurance.
“Safety is our number one priority, so we were already doing the things the city required,” said Ondrey. “We put every potential driver through a rigorous screening process that includes a background check using multiple state and federal criminal databases and we also review the driver’s motor vehicle history. There are a bunch of different things we screen for that would prevent a driver from ever accessing the Uber platform—felonies, reckless driving offenses, violent crimes and too many speeding tickets.
“If a person passes the screening, we examine the vehicle and have them watch training videos or attend an in-person session. After every trip, we have riders rate their experience via the app so we are constantly receiving and monitoring feedback to keep the quality level of transportation providers very high.”
While uberBLACK drivers already have commercial auto insurance policies, Ondrey said uberX riders are covered by the company’s $1 million commercial auto policy from the moment they make a match in the app with a driver.
“This is double the coverage required of a taxi in Akron,” he said. “We also carry another million dollars of underinsured motorist coverage so that if a driver on uberX is hit by a vehicle that does not have insurance they are still covered.”
In addition to Columbus and Akron, Uber has launched in Cleveland, Cincinnati and Dayton.
"The city of Cincinnati is also working on new legislation that addresses areas of public safety, while at the same time recognizing the benefits of this innovative new business model as a transportation alternative,” said Ondrey. “We hope other cities will follow in this lead."
While Uber hasn’t generated many headlines in Akron, Eric Jacobs, who owns Tri County Taxi, is concerned about the company’s presence.
“It hasn’t affected my business yet but it will,” said Jacobs. “A lot of people don’t know about it. My brother in Atlanta said a lot of the yellow cab drivers have left to work for Uber. I expect the same will happen here.”
“From a legal perspective, there is nothing that can keep Uber from operating in the marketplace,” said Tony Dick, an associate in the Cleveland office at Fisher & Phillips.
“The issue is whether it can sustain its current business model.
“One of the benefits of Uber is that its fares are oftentimes cheaper than a taxi service,” said Dick. “Uber is able to charge less because, in many markets, it is not subject to the same regulatory requirements and licensing fees as traditional taxi and limousine services and it doesn’t pay a salary or offer benefits to its drivers since they are classified by the company as independent contractors.”
However, Dick said wage and hour lawsuits pending in Massachusetts Superior Court and California federal court alleging that Uber is misclassifying its drivers as independent contractors to avoid offering traditional employee benefits could threaten the way it operates.
“It has been Uber’s position since its inception that it simply acts as sort of a digital middleman in the open market that brings together individuals seeking rides with individuals willing to offer rides,” said Dick. “The plaintiffs in the pending litigation are arguing that, regardless of how the company characterizes itself and its drivers, Uber is at its core a transportation services company and its drivers meet the definition of employees under the law.
“In these types of cases, the decision almost always turns on how much control the company exerts over the individuals’ work and job duties. The more control, the more likely a court will find that the workers should be classified as employees.”
Dick said factors such as the level of supervision over the worker’s job duties, whether the worker is required to wear a company uniform or undergo company training and whether the worker is required to work a set schedule dictated by the company are key to the determination.
“If these drivers are deemed to be employees they could be subject to licensure and the company could be obligated to pay them benefits,” said Dick. “If that happens Uber would almost certainly lose its pricing advantage over its taxi counterparts.”
He said the plaintiffs in each of the lawsuits also allege that Uber is unlawfully retaining a portion of gratuities that are meant for drivers.
“Under Uber’s business model, tips are built into the fare and drivers are instructed that they are not permitted to accept gratuities,” said Dick. “The lawsuits claim that Uber’s practice of taking a cut of each fare results in a reduced gratuity to the driver in violation of state tipping laws. The suits also claim that by telling customers that the gratuity is built into the fare, Uber is keeping prices artificially low and interfering with drivers’ abilities to earn higher tips for exemplary service. For its part, Uber counters that drivers make more than they otherwise would with other transportation services.”
Ondrey would not comment on the pending litigation but did say, “There are no tips included on uberX or uberBLACK. Drivers are independent contractors that choose when and where they want to work on the Uber platform,” he said.
If the business structure remains sound, Tom Crookes, a partner in the Akron office at Vorys, Sater, Seymour and Pease, said it could force taxi companies to rethink the way they operate.
“Perhaps taxi companies will switch to more of an Uber-based model where people will use their devices to request a cab.”