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Transportation Network Companies: New Legislation Addresses Long-Standing Issues


July 27, 2022  by  Steve Gross
Category:  Licensing and Regulation

Transportation Network Companies: New Legislation Addresses Long-Standing Issues

This blog summarizes the new statewide regulations contained in ESHB 2076 that apply to Transportation Network Companies (TNCs), such as Uber or Lyft, and their drivers.

Summary

For local governments, the key thing to know is that the state legislation preempts most local regulation in certain areas. No local government may impose any tax, fee, or other charge on TNCs or drivers, but they can impose generally applicable business, sales, use, excise, or property taxes. There are some exceptions to the preemption, but these only apply to Seattle and King County.

In addition, the preemption does not prevent an airport operator from requiring TNCs to enter into contracts related to operating on airport property.

Background

TNCs such as Uber and Lyft use computer and mobile-phone-based computer applications that allow individuals to use their own vehicles to provide rides and other automobile-based services to the public. The use of these applications is not without some controversy. While their developers and users tout the convenience to both the drivers and customers, the use of private vehicles for commercial purposes raises issues of liability for accidents, the personal safety of drivers and passengers, and other working conditions for the drivers using the applications.

Additionally, local governments have scrambled to figure out how to fit TNCs into their existing “for-hire” vehicle regulations. MRSC wrote about these challenges in a September 2016 blog: Regulating Uber, Lyft, and Other Transportation Network Companies.

In addition to the “usual” for-hire issues of ensuring safe vehicles, transparent fares, and knowledgeable drivers, local governments were increasingly asked to regulate the labor relationship between the TNC companies and the drivers who use the companies' applications. The TNCs' position has historically been that the drivers were independent contractors, not employees, and therefore, the TNCs were not “responsible” for drivers the same way a traditional employer would be.

Some of the drivers, as well as labor organizations, took the position that because the TNCs imposed very specific conditions on drivers, including what they could charge, routes they had to take, response times, etc., the drivers were employees and should be treated (and protected) as such. Exacerbating these issues is the age-old tension between local governments that want to regulate these businesses in a way that best suits the needs of their local interests and the TNCs' desire to avoid a patchwork of contradictory rules that may change the company’s or a driver’s requirements every time a car crosses a city or county border.

The New Rules

The Washington State Legislature addressed some of these issues in ESHB 2076. According to the House Bill Report, the bill:

  • Establishes minimum per mile, per minute, and per trip rates for drivers of TNCs and provides drivers with paid sick time and workers' compensation coverage;
  • Creates uniform statewide regulations of TNCs;
  • Creates a fund for a Driver Resource Center to, among other things, support drivers in resolving disputes related to account deactivations; and
  • Establishes statewide preemption of local regulation with exceptions for certain local ordinances from Seattle and King County.

These provisions do not all take effect at the same time but are phased in to allow the TNCs and drivers time to comply.

The new law is lengthy and comprehensive. For those agencies that have adopted regulations which apply to TNCs, the new statute will probably make most of those regulations obsolete. For the agencies that have not adopted TNC-specific regulations, this is a good time to review and update your local code provisions related to “for-hire” vehicles in general to ensure that they are consistent with the statutes related not only to TNCs, but to other for-hire services such as taxicabs (Chapter 81.72 RCW), limousines (Chapter 46.72A RCW), and those additional services outlined in Chapter 46.72 RCW.

Resources

MRSC maintains webpages on PRA Court Decisions and Recent Court Decisions of Interest to Local Governments, both of which include summaries of the 2018 case Lyft, Inc. v. City of Seattle, 190 Wn.2d 769. 

Additionally, here are sample codes regulating TNCs. These examples were likely adopted before the passage of ESHB 2076, so check the code language for its adoption date and consult your agency attorney before relying on them.


MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

About Steve Gross

Steve Gross joined MRSC as a Legal Consultant in January 2020.

Steve has worked in municipal law and government for over 20 years as an Assistant City Attorney for Lynnwood, Seattle, Tacoma, and Auburn, and as the City Attorney for Port Townsend and Auburn. He also has been a legal policy advisor for the Pierce County Council and has worked in contract administration.

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