Legal Considerations in Relationships Between Transit Agencies and Ridesourcing Service Providers (2018)

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3 LEGAL CONSIDERATIONS IN EVALUATING RELATIONSHIPS BETWEEN TRANSIT AGENCIES AND RIDESOURCING SERVICE PROVIDERS By Jocelyn K. Waite, Waite & Associates, Reno, NV I. INTRODUCTION Mobility management is not a new concept,1 but technology has accelerated the trend, leading to increasing integration of scheduled mobility and mobility on demand (MOD).2 Private3 and public4 interests alike have recognized the importance of MOD to the future of transportation. MOD can play various roles in a transit system, for example, providing connections to fixed-route service, replac- ing nonproductive service, or providing transit service where none existed before. Engaging with companies like Uber, Lyft, Via, and Chariot to provide service is one, but not the only, alternative available to provide MOD services. Determining the appropriate approach for inte- grating MOD into a transit system will depend on multiple factors, including the transit agency’s oper- ational needs, budget, public policy concerns, and the legal risks associated with deploying the MOD service in question. This digest focuses on that final factor. As of 2017, the relevant law, both in terms of the regulatory landscape and case law, was evolving. However, while the relevant law unfolds, the legal issues that will determine the course of this evolu- tion are apparent. Understanding these issues will assist transit agency counsel in determining the legal risks inherent in adopting the various MOD alternatives that may be considered by their agen- cies, and to be better able to advise those agencies so that the legal risks of the alternatives are appropri- ately taken into account. A. Purpose Use of ridesourcing service providers (referred to hereinafter as RSPs), including but not limited to transportation network companies (TNCs), has the potential to help transit agencies address the first mile/last mile (FMLM) challenge and to decrease the financial and logistical burdens of providing paratransit services.5 Moreover, to the extent that TNCs reduce the availability of taxicab services, transit agencies that have relied on taxicabs for provision of paratransit or other on-demand services may find it advantageous to work with RSPs to fill the resulting gap. However, because of the purported non-employee relationship between many of the 1 Mobility Management: Customer-Focused Public Transportation, APTA, March 2012, http://www.apta.com/ resources/reportsandpublications/Documents/APTA- Mobility-Management-Brochure-March-2012.pdf. See also, the National Center for Mobility Management, Promoting Customer-Centered Mobility Strategies, http://national centerformobilitymanagement.org/. 2 Tomio Geron, Public Transit Agencies Take a Lesson From Uber, WALL ST. J., June 20, 2017, https://www.wsj. com/articles/public-transit-agencies-take-a-lesson-from- uber-1498010880 (accessed June 21, 2017); Richard A. White, Public Transportation and the Emerging Mobility Ecosystem, BRINK, May 5, 2017, http://www.brinknews. com/public-transportation-and-the-emerging-mobility- ecosystem/ (accessed May 5, 2017). For a more detailed dis- cussion of possibilities of shared mobility integration with transit, see SuSan Shaheen, adam Cohen & ISmaIl Zohdy, Shared mobIlIty: Current PraCtICeS and GuIdInG PrInCIPleS 47–50, FHWA rePort no. FHWA-HOP-16-022 (April 2016), http://www.ops.fhwa.dot.gov/publications/fhwahop16022/ index.htm. 3 Andrew J. Hawkins, Why car companies are trying to imitate Uber and Lyft, the VerGe, Jan. 18, 2017, http://www. theverge.com/2017/1/18/14230040/ford-gm-maven- mobility-uber-lyft-ces-detroit-2017 (accessed Feb. 25, 2017); Nathan Bomey, CEO: Ford can make money on public tran- sit, USA today, Jan. 9, 2017, http://www.usatoday.com/ story/money/cars/2017/01/09/mark-fields-ford-motor- co/96321984/ (accessed Feb. 20, 2017). 4 For example, Hillsborough Area Regional Transit amended the mission and vision statements in its policy manual to reflect this shift in emphasis. Second and Final Public Hearing on the Fiscal Year 2018 Millage Rate and Annual Budget and Regular Board of Directors Meeting, Sept. 25, 2017, at 2–16, http://www.gohart.org/Board%20 PDFs/00-%20September%2025,%202017%20Board%20 Packet%20-%20Compressed%20for%20Posting. pdf#search=stantec (accessed Nov. 15, 2017). See also, Stefan M. Knupfer, Eric Hannon & Shannon Bouton, Tech- nology Is Changing Transportation, and Cities Should Adapt, harV. buS. reV. Sept. 13, 2017, https://hbr.org/ 2017/09/technology-is-changing-transportation-and-cities- should-adapt (accessed Nov. 11, 2017); New Mobility Play- book, Seattle Department of Transportation, September 2017, http://www.seattle.gov/Documents/Departments/ SDOT/NewMobilityProgram/NewMobility_Playbook_ 9.2017.pdf. 5 Unless otherwise stated, throughout the digest the term “paratransit” means “ADA paratransit.” The term “complementary paratransit” always means “ADA paratransit.”

4 RSPs and their drivers,6 the evolving nature of applicable federal and state regulatory require- ments, and the lack of case law on major issues— due in part to the prevalence of settlements rather than full adjudication of RSP-related claims—there may be some uncertainty concerning the legal risks of collaborating with RSPs. Areas of uncertainty include ensuring compliance with federal, state, and local requirements for provision of transportation services; properly structuring procurements; and appropriately allocating liability risks. The digest is meant to provide transit agencies with the necessary legal context to conduct more jurisdiction-specific research and to analyze the legal implications of various approaches to integrat- ing RSP-provided MOD into their transit systems. The digest also discusses the legal concerns reported by a number of transit agencies that have consid- ered RSP projects. The intent is to allow other tran- sit agencies to apply the legal principles identified in the digest to assess—based on the transit agencies’ own legal analysis and operational considerations— the legal benefits and costs of entering into various types of RSP relationships. B. Focus Part II of this digest presents background infor- mation concerning the historical use of third parties to provide demand response service, the growth of ridesourcing services, the impact of RSPs on para- transit service, and other RSP issues. Part II also discusses taxicab regulation. Part III of the digest reviews federal statutory and regulatory require- ments that relate to RSPs, including eligibility for federal financial assistance, the Americans with Disabilities Act of 1990 (ADA),7 Title VI of the Civil Rights Act of 1964,8 drug and alcohol testing require- ments under 49 C.F.R. Part 655, data collection, 49 U.S.C. § 5333(b) (formerly section 13(c) of the Urban Mass Transportation Act of 1964),9 and employment classification law. Part IV then exam- ines relevant state and local legal and risk manage- ment issues, including general state and local requirements related to regulation of RSPs, employment classification, disability accessibility, minority and low-income accessibility, maintenance of insurance, tort liability, RSP permitting, driver safety, public space, and data, public records, and privacy. Part V analyzes RSP cases and regulatory proceedings related to employment classification, accessibility, fraud, misrepresentation, unfair competition, privacy, and tort actions, as well as several miscellaneous types of RSP actions. Part VI of the digest summarizes highlights of survey ques- tionnaire responses from 24 transit agencies/local governments, including the type of relationships those agencies have established with RSPs, the legal issues those agencies considered significant, and the contract provisions they deemed critical to include in their agreements. Part VII sets forth suggested best practices based on the survey responses and research conducted for the digest. Part VIII reviews major legal issues of concern in evaluating RSP alternatives that may be available to meet a transit agency’s MOD needs and in subsequently negotiat- ing contracts for such services. While it is beyond the scope of this report to render a legal opinion or recommend specific contractual language, Part VIII offers some additional points for transit agency counsel to consider in evaluating the legal risks of various RSP alternatives, highlighting some areas where problems may arise in such evaluation and negotiations and identifying potential pitfalls. This digest includes citations to state TNC legis- lation and regulations (Appendix A); examples of local TNC regulations (Appendix B); the survey questionnaire (Appendix C); a description of projects of the agencies that responded to the survey ques- tionnaire, which indicates the range of approaches transit agencies have taken in using RSPs, from including them in transit agency ridesharing apps, to using them for FMLM connections, to relying on them to provide paratransit services (Appendix D); brief descriptions of additional transit agency rela- tionships with RSPs (Appendix E); and several request for proposal (RFP)/agreement examples (Appendix F). As is the case throughout the report, links to citations in the appendices are provided for convenience; transit agencies should verify current statutory language from official sources. C. Scope Relevant federal statutes that protect public transportation patrons are analyzed to the extent that they affect relationships with RSPs. Detailed assessments of such statutes—including process issues that apply to all cases brought under such statutes, such as exhaustion of administrative 6 Sharon FeIGon & ColIn murPhy, Shared mobIlIty and the tranSFormatIon oF PublIC tranSIt 31 (Transit Coopera- tive Research Program, TCRP Report 188, Transportation Research Board of the National Academies of Science, Engineering and Medicine, Washington, D.C., 2016); infra Part V.A, Employment Classification. Federal and state employment classification law is discussed in detail infra Parts III.G and IV.B, respectively. 7 Pub. L. No. 101-336, 104 Stat. 327. 8 42 U.S.C. §§ 2000d–7. 9 Pub. L. No. 88-364, 78 Stat. 302.

5 remedies—are beyond the scope. While situations in which federal drug and alcohol testing requirements must be met by RSPs and/or their drivers are discussed, the details of those requirements are beyond the scope of the digest. A number of categories of issues that may be of interest to transit agencies, and may affect how they interact with RSPs, are either generally outside the transit agencies’ control or simply beyond the scope of the digest’s legal issue frame- work, and thus beyond the scope of this digest. Generally, these include public policy consider- ations and recommendations;10 operational details (including what type of ridesourcing would be most effective in a given location11); substantive contract issues, such as setting fares/fees; and embryonic services, such as autonomous vehicle-related activ- ities being pursued by RSPs12 and considered by transit agencies for FMLM solutions.13 While regu- lation of autonomous vehicles is even more embry- onic than regulation of RSPs,14 how TNCs interact with regulatory agencies regarding autonomous vehicles15 may be instructive for transit agencies in assessing the risk of RSP relationships. Examining the question of whether to engage with RSPs in the first instance raises numerous policy questions, including the effect that promoting RSPs may have on the local taxicab industry and thereby on the transit agency’s flexibility in using taxicabs for demand response service, and whether promoting RSPs will ultimately erode support for public tran- sit, as well as questions about dealing with the public relations issues that may arise concerning RSPs. These are beyond the scope of this digest. 10 Several recent reports explore policy issues, e.g., between PublIC and PrIVate mobIlIty: examInInG the rISe oF teChnoloGy-enabled tranSPortatIon SerVICeS, SPeCIal rePort 319, TR newS 302 (Transportation Research Board of the National Academies of Science, Engineering and Medicine, Washington, D.C., March–April 2016), p. 2 (issues discussed include protecting public interest in taxi driver pay and working conditions, equity, increase in dig- ital divide; makes recommendations concerning public policies and regulations that should be adopted “to improve mobility, safety, and sustainability,” identifying needed information to develop and implement such poli- cies and regulations, and integrating innovative features of RSPs into existing transportation systems and ser- vices). See id. at 8 for list of policy issues raised in trying to incorporate RSPs into existing for-hire regulations. 11 See FeIGon & murPhy, supra note 6, at 12–17; 21–22, discussing analysis of shared mobility usage and transit usage patterns that indicate where FMLM RSP service could be effective in Chicago. 12 E.g., Johana Bhuiyan, Alphabet is leading a $1 billion round in Lyft that values the company at $11 billion, reCode, Oct. 19, 2017 (noting that Lyft has more self-driving partnerships than Uber), https://www.recode.net/2017/10/ 19/16503628/alphabet-lyft-ride-hail-investment-billion (accessed Oct. 20, 2017); Johana Bhuiyan, Inside Uber’s self-driving car mess, reCode, Mar. 24, 2017, https://www. recode.net/2017/3/24/14737438/uber-self-driving-turmoil- otto-travis-kalanick-civil-war (accessed Apr. 1, 2017); Steve Harrison, Will self-driving cars kill transit as we know it? It could be Charlotte’s $6 billion bet, Charlotte obSerVer, Feb. 24, 2017, http://www.charlotteobserver.com/news/ politics-government/article134742964.html; Paul Lienert, Exclusive: GM plans to build, test thousands of self-driving Bolts in 2018 – sources, reuterS, Feb. 17, 2017, http://www. reuters.com/article/us-gm-autonomous-exclusive-id USKBN15W283 (accessed Feb. 22, 2017). The economics of autonomous mobility are discussed at length in Jonathan Walker, Charlie Johnson, Peak Car Ownership: The Market Opportunity of Electric Automated Mobility Services, Rocky Mountain Institute, 2016, http://www.rmi.org/ peak_car_ownership. 13 E.g., Stantec Signs Contract with HART for the Down- town Tampa Autonomous Transit Project, maSS tranSIt, Nov. 14, 2017, http://www.masstransitmag.com/press_ release /12381048/stantec-signs-contract-with- hillsborough-area-regional-transit-authority-hart-for-the- downtown-tampa-autonomous-transit-project (accessed Nov. 15, 2017); MNDOT Chooses EasyMile for Autono- mous Shuttle Bus Project, CroSSroadS, Oct. 4, 2017, https:// mntransportationresearch.org/2017/10/04/mndot- chooses-easymile-for-autonomous-shuttle-bus-project/ ?lipi=urn%3Ali%3Apage%3Ad_flagship3_feed%3B5%2 FkaTD80Q7mTaJqKkxQZ%2BQ%3D%3D (accessed Oct. 16, 2017). The HART project was approved in September 2017 and is described in the meeting minutes. Second and Final Public Hearing on the Fiscal Year 2018 Millage Rate and Annual Budget and Regular Board of Directors Meeting, Sept. 25, 2017, at 2–19 to 2–21, available upon request at http://www.gohart.org/Board%20PDFs/00-%20 September%2025,%202017%20Board%20Packet%20 -%20Compressed%20for%20Posting.pdf#search=stantec (accessed Nov. 15, 2017). 14 Steve Twedt, Study: City leaders must plan for driv- erless future or ‘face major risks’, PIttSburGh PoSt-GaZette, Mar. 13, 2017, http://www.post-gazette.com/business/tech- news/2017/03/13/Pittsburgh-self-driving-cars-New-study- urges-city-leaders-to-plan-for-driverless-future-or-face- major-risks/stories/201703130063?pgpageversion= pgevoke (accessed Mar. 17, 2017); Cheryl Miller, California Opens Door to Fully Autonomous Vehicle Testing, reCorder, Mar. 10, 2017, http://www.therecorder.com/ id=1202781057809/California-Opens-Door-to-Fully- Autonomous-Vehicle-Testing?slreturn=20170213134524 (accessed Mar. 17, 2017). 15 E.g., Uber began operating its self-driving cars in San Francisco without a DMV permit. The California DMV issued a cease and desist letter. April Glaser, Uber plans to keep its self-driving cars on San Francisco roads despite DMV’s demand to stop, reCode, Dec. 16, 2016, https://www. recode.net/2016/12/16/13990352/uber-self-driving-cars- dmv-san-francisco-no-permit (accessed Dec. 15, 2016); Uber took the position that it did not require a permit, but then pulled its vehicles. aSSoCIated PreSS, Uber yanks self- driving cars from Calif. roads after DMV tiff, USA today, Dec. 22, 2016, http://www.usatoday.com/story/tech/news/ 2016/12/21/uber-yank-self-driving-cars-calif-roads-after- dmv-tiff/95733360/ (accessed Dec. 22, 2016).