Senate Bill on regulating Uber, Lyft, etc.

A working group led by the Senate Ways and Means Committee has spent weeks carefully vetting the options for regulating of Uber, Lyft and other “transportation network companies”. I played an active role in the process and fully support the bill that came out of the process. I believe that it will protect public safety without creating barriers to the expansion of TNCs.

I’ll summarize the main features of the bill — which I am all fine with — and one small area on which I’d appreciate feedback — a proposed requirement that companies allow tipping.

The bill does affirmatively regulate TNCs, creating a new division in the Department of Public Utilities. However, the new division will not directly regulate or register drivers or vehicles. Instead, it will require each TNC to seek a single statewide operating license, subject to annual renewal. The TNCs will have to demonstrate to the satisfaction of the division that they have adequate procedures in place to vet and insure drivers.

The bill recognizes that modern vetting techniques that consult many data sources and triangulate to produce a complete personal history are superior to old-fashioned fingerprint checks based on a single database. TNCs must show that they are using sophisticated vetting approaches and the DPU is required to annually audit them. The bill does put in place basic driver standards — must be over 21, must not have had a major criminal offense in the past 7 years, must not have too many traffic violations, may not be a registered sex offender.

The bill requires that TNCs make sure that their drivers are fully covered by insurance. TNC drivers use their own vehicles, so, of course, the vehicle must be insured for personal or livery use under existing law. But, in addition, the bill requires that TNC drivers have a policy that covers the period when they have the “app” on, but are not actually going to a call or carrying a rider. The TNC will have the option of either providing that insurance on an umbrella basis or requiring that drivers prove that their personal policy will cover that situation at the $100,000 level. Once the driver actually has connected with a rider and is traveling to a pick up point or is carrying the rider, then the TNC is required to maintain a policy providing up to $1 million per occurrence.

It is worth noting in passing that under these rules, TNC drivers will be carrying much more insurance than taxis do. Taxis are typically insured at the current minimum commercial level — $40,000 — and are typically owned by corporate shells that insulate their ultimate owners from any greater liability.

The bill includes no limitations on the operating area of TNCs — under the Senate approach, TNCs will remain free to serve Logan and the Convention Center. The bill includes no bail out for taxi medallion holders. Some have suggested that because Boston medallions were sold roughly fifteen years ago to help support the Convention Center construction, the state has some obligation to medallion holders. In truth, those medallions were priced based on expectations of earning potential. For most of the last 15 years, the earning potential of those medallions has exceeded expectations — values soared from $200,000 to $700,000, reflecting strong earnings. Even if these medallions ultimately plunge to zero (which they have not and will not — they are still above $200,000 in the market place), original purchasers will still have made good money. The most passionate advocates for bailout are specialized lenders who made bad loans.

The bill does give cities and towns a ten-cent-per-ride revenue stream from which they can make whatever investments they need to support transportation and it does not prevent them from using that very modest fund to give medallion holders some help if they so wish.

Just one small feature I’m a little queasy about. The bill requires TNCs to build a tipping feature into their app and allow drivers to accept tips. As a former restaurant worker, I personally tip generously in restaurants and barber shops. But the real consequence of allowing tips is that drivers will get paid less per ride by the TNCs, just as restaurant workers get low hourly wages. The market for drivers is competitive. If drivers want to work for a company that builds tipping into its system, they can do so (Lyft does allow tips). If drivers feel they can make more money with less interpersonal hassle at a company that doesn’t encourage tips, they should be able to do that.

Based on the dialog we’ve already had on this website and on the vetting I’ve been part of, I’m fully committed to the rest of the bill, but would welcome your input on the tipping issue.

Update on June 29

The Senate did debate and pass the legislation today. Based on the input received here, I did offer an amendment striking the tipping language. It was adopted. Your comments here make a difference — it was helpful for me to be able to talk about the strong majority view among my constituents that the tipping decision should be left to the businesses, not legislated.

The other significant change in the bill was to require the oversight division to do some kind of backup background checking in addition to the background checking by the company. I didn’t support that, but it is not too big a deal, as long as drivers can start driving after the initial check is done by the company. The bill now will go to a House-Senate conference committee.

Published by Will Brownsberger

Will Brownsberger is State Senator from the Second Suffolk and Middlesex District.

147 replies on “Senate Bill on regulating Uber, Lyft, etc.”

  1. DON’T FORCE COMPANIES TO ALLOW TIPS

    I agree this should be taken out of the bill and that companies should decide if they want to allow tips or not.

    I also don’t understand the purpose of the 10c per ride revenue to the city.

  2. I strongly support being allowed to include a tip to the uber driver through the uber app, which would not make tipping mandatory. The benefit of uber is not having to carry cash or use a credit card and deal with the usual swiping and figuring out the user interface. I have used uber many times in many cities. I would be happy to tip the driver on the app on my phone, which can be done after one is out of the car and being asked to rate the driver. I don’t see why being able to tip a driver would impact the rate the company pays the drivers.

  3. Tipping doesn’t seem regulation-worthy. Let the companies approach this how they see fit. If you require tipping, then they will just reduce salaries.

  4. If the UBER basic cost was higher, i.e. paying the drivers more per ride, why not eliminate tipping? Given that the drivers can rate their customers, it is likely based on the generosity of the tip. Far better to pay more to start with, and get rid of tipping, as in much of Europe.

  5. I am glad TNCs are now regulated. I think the Taxi coverage of $40K is absurdly low. I think the taxi medallion owners should pickup up the tab for a higher coverage to what the TNCs will be required. The taxi industry is a license to print money

  6. I shade your reluctance regarding tipping. The drivers will get less per ride. I agree this is what happened to restaurant workers when my daughter was a waitress.

  7. I like Uber’s no tip policy. It means that the driver is earning more up front, all the more reason to not tip. Tipping is a hassle. The state should not require companies to tip.

  8. Tipping should not be regulated, its inclusion or exclusion should be the subject of the service provider’s business model. If tipping is in fact a better model for both driver and customers we will see this happen naturally.

    In general we in the US rely to heavily on tipping where proper wages would be better, but that is really irrelevant to whether it should be government regulated. A concept I find very odd.

  9. The problem with allowing tipping is that you will now get bad if you do not tip 20%. What was nice about no tipping is that it was seamless no matter what country you went to and the same for foreigners visiting Mass. I rather they pay the drivers more and charge us a little more than change the model.

  10. I completely agree with your comments in otalics. Not sure why the public sector feels the need to tinker with a successful business model that’s attracted drivers and riders at an exponential rate.

  11. The bill looks good to me, however if the TNC will not cover the $100,000 insurance when the app is on, but no passenger, the cost of the insurance will put a lot of part time drivers out of work. Due to health reasons, I can only drive part time, so I’d be out of a job.

  12. It seems to me that tipping is a decision made by the customer, between the river and the customer. What right does the company have to forbid or for that matter, require it.

    1. Whether or not passengers are allowed to give drivers tips is not at issue here.

      I can’t speak for every TNC, but Uber, the biggest one, which doesn’t support tipping in its app, does allow passengers to tip. From https://www.uber.com/legal/terms/us/:

      You understand and agree that, while you are free to provide additional payment as a gratuity to any Third Party Provider who provides you with services or goods obtained through the Service, you are under no obligation to do so. Gratuities are voluntary.

      Furthermore, as far as I can tell, the driver contract with Uber does not prohibit drivers from asking for tips, though given the no-tipping culture that Uber has promulgated, I have to assume that drivers who ask for tips outright would get low ratings from passengers and this would impact their success with the company.

      Given that passengers are allowed to tip and drivers are not prohibited from asking for tips (though that might not be such a good idea), at issue here is only whether it is reasonable for state law to require Uber and other TNC’s to accept tips through its app on behalf of drivers.

      I’ve yet to see any rationale for a compelling state interest in such a requirement.

  13. No tipping. A big difference between TNC and conventional cab transport is that TNC drivers rate their passengers. This is a good feature because customers who behave badly are so identified and can be rejected by future TNC providers. However, customers who choose not to tip can also expect to receive poor marks from drivers (and many TNC riders love the fact payment is done separately and is not part of the ride experience.)

  14. The reason I love Uber is that you don’t have to tip! I always find the negotiation of a tip uncomfortable and it is so nice not to have to deal with it. I also have my kids use Uber and like that they do not have to deal with giving a tip. I prefer to have the tip wrapped into the fee paid to the driver than have it be an optional extra.

  15. My view is that services like Lyft and Uber are offering a useful service that is being used by many people. The intrenched interests of the Taxi community have a vested interest to block this innovation.

    However, taxis have not innovated their service. They are not focused on service and the fixed commissions are too high.

    This is totally counter to someone in government, but your best response is to do nothing.

    Tom Woodhouse

  16. This bill seems to address some of the problems, but it does not address the inequities between the taxi owners and these TNCs. You say the owners did well in the past, but now they will be out of luck, and out of jobs. There are small owners who work full time as drivers, and taxi drivers who do the same. They are struggling to stay afloat. Why can’t regulations put equal requirements on TNCs so they will compete on a flat playing field?

    1. Ironically, from what I hear from taxi advocates, if we required them to provide the same insurance levels that we are requiring from the TNCs, it would put the taxis out of business. The taxi business model is a very flawed business model.

  17. Whenever an Uber driver goes above and beyond the call I do tip them. And generously. And they know why I am doing it. Nothing about this system seems broken to me.

  18. Let’s see. We’re laying off teachers at the University of Massachusetts campuses so we can pay administrators for sick days they didn’t take, there are herds of political hacks triple and quadruple dipping in no-show jobs, and the regional transit system nothing but an unfunded pension plan so we decide to spend the time of our elected representatives on tipping Uber drivers?

    Will, this is Roman games. Distract the voters with trivia like this so they won’t notice the financial black hole in the middle of the room that is going to bring the whole begger-thy-neighbor governmental Ponzi scheme crashing down.

    Anyway, I don’t understand the issue. I always tip my Uber driver (well, almost always) and I haven’t once gotten a cease-and-desist letter from a Uber lawyer. (Of course, now I probably will.)

    Cheers, Scott

    1. Give me a break, Scott. We’ve spent weeks putting together a serious bill on TNCs — they are a major feature of our transportation system and getting it right matters. The tipping thing is a detail, I agree, but, as you can see from the response, it is one that people care about.

      We are also spending a lot of time getting the budget right, but that is a hard thing for people to react to specifically — will report further on that shortly.

  19. I think people should earn based on the service they give. The price asked should include all service fees and tips. Their pay should reflect their customer satisfaction. Tax collecting is better that way.

  20. I agree that integrated tipping should not be required.

    Uber and Lyft and the rest correctly identified an over-regulated industry that could, and should, be turned upside down. We should not repeat the mistakes we’ve made with taxi regulations. If someone builds a better system – tip or no tip – let them.

  21. I think that it is very problematic to permit Uber to serve Logan, in that there is very limited capacity in the tunnels which access the airport, and in the roadway systems at Logan. The airport provides cabs who bring a passenger to Logan to get into the taxi pool to provide service out of Logan, to reduce the amount of empty trips causing further congestion. This current practice excludes cabs from Cambridge, Somerville, and Brookline, which seems unfair, and precludes some better efficiency. And it might be reasonable to expand the privilege to the other cabs. It seems difficult to allow Uber the same access because there is finite capacity in the system, and no apparent lack of service to provide access to the region from Logan. It is not clear how to require Uber drivers to behave in compliance with airport rules, and prohibit drivers from refusing service to minority neighborhoods, or bargaining for different fares,without exacerbating the spacial problems at Logan. Uber drivers seem to be an enforcement problem, and often block bus stops, without an apparent effective means to enforce rules of behaviour. I think that the Logan access issue needs more consideration.Massport should be required to study this issue and make recommendations for public consideration, prior to passing the legislation.

    1. Fred,
      I am sympathetic to the Logan (over)use concern and respect your knowledge of the situation. Perhaps the TNCs can take advantage of the same pick up spots provided to private livery companies? I do not know if this uses incurs a fee or license but if so, same could be required of Uber Lyft etal to operate at Logan.

    2. Fred, Massport can regulate Massport and does — they only let in Uber drivers with livery plates. The fact is that taxi service is often very poor at Logan and if you banned Uber from Logan, it would be a disaster for passengers.

      On another point, Uber is doing a much better serving minority neighborhoods than taxi drivers ever did. I’ve gotten that feedback directly from residents of those neighborhoods.

  22. The Federal judge stated very clearly that Taxi and TNC are providing a similar services and should be treated in similar manner.
    This senate proposal doesn’t worth the paper it is printed on.
    I am extremely disappointed in the way you personally and other senators approached the entire situation.
    You created a complete anarchy out of the transportation system in the city of Boston with “gypsy cabs” and multiple other unlawful operators driving around. You created a system that is waiting for something really bad to happened (like another 9/11 or Boston Marathon or UBER unregistered and without license sex offender driving women in Boston – most recent Fox 25 investigation).
    I will never allow my children to use this service and you personally lost my vote.
    The point that you are asking opinion about tips shows how little you really know about transportation business and you are spending valuable senator time on such an issues versus really getting to understand the transportation.

  23. Tipping seems to be creeping into more and more areas of life, and it’s not a good thing. I don’t see why the state should be involved in it, especially not to the extent of requiring an app to include it. The state should be concerned with whether workers get a decent wage.

  24. Dear Will,

    I am with you on this. As a former waitress my first reaction was “Tips, yes!” But not knowing that some drivers would be adversely affected coloured my response. I don’t use Uber myself but think each company should be allowed to continue with policies towards tipping that they already have in place.

  25. Will, Thank you for sharing this information and for taking your usual thorough and thoughtful approach to this matter. I am glad to learn that the legislature is developing a comprehensive set of regulations for the TNCs and I fully support this both as an obvious necessity, given the growth of the market, and as a way of promoting the public good with regard to this significant and valuable service.

    My view is that the scope of these regulations should be limited to providing for public safety and ensuring that customers are treated fairly. I am not a libertarian in most matters, but the growth of TNCs reflects the powerful and somewhat unpredictable effect of a confluence of innovations and technologies and I do not think the government should attempt to control or direct this particular market very much at this time. Traditional taxi companies and drivers may be at somewhat of a disadvantage at this time, but it should not be the government’s role to protect such businesses any more than it does so when other markets change or new products are introduced.

    For this reason, I see no reason why statewide regulations should require something as specific as a tipping option in the design of the software that is used to connect TNCs and their customers. If a tipping option is beneficial to the businesses and/or provides some competitive advantages, it will be added. There is no need for the government to require that. And I agree with you that allowing or even requiring tipping (as happens in restaurants) often actually distorts the incomes of employees, shifting costs from employers to customers and making the actual cost structure of the product (in this case transportation) opaque and difficult for customers to understand. There are a few cases in which a tip may contribute to better customer service, but I am not convinced that transportation such as TNCs or taxis provide is such a case. Overall, government should promote transparency in commercial transactions rather than prevent it, and in my view, tipping does not contribute to such transparency.

    Rather than offering a tipping option, TNCs should ensure that their drivers receive a fare payment and drivers should choose the companies they work for based on the payment that they expect to receive.

    For this reason, I do not support having any requirement that TNCs provide a tipping option in their apps.

  26. i think a built in gratuity would be best, say 20% but an option to negate if there is poor service or bad driving.

  27. Will,

    In general I am pleased to see your support of the bill and encourage you to let the marketplace sort out the tipping policy rather than have state interference.
    That said, two comments.
    One I am struck by the seven year no criminal offense rule in light of moves to have criminal offenses not reveled in the hiring and college application processes. If the offense was a violent crime, I can understand the wait period but what about a youth drug possession or white collar crime?
    This needs more thought as does my second concern, the insurance difference. As a consumer of THCs, I like the additional mandated protection and suggest this tips the scales to THCs given Taxi company’s meager protection and corporate shield. Perhaps the Senate should level the playing field and require Taxi company to have similar protection to TNCs.

    1. Jim, here is the language on criminal record.

      (vii) has not had a conviction in the past 7 years for: (1) a sex offense or violent crime as defined in section 133E of chapter 127 [violent enough to yield a sentence of one year or more of imprisonment]; (2) a crime under section 24 of chapter 90 [drunk driving] or been assigned to an alcohol or controlled substance education, treatment or rehabilitation program by a court; (3) leaving the scene of property damage or personal injury caused by a motor vehicle; (4) felony robbery; or (5) felony fraud;

      I’m not at all a fan of limiting the ways that people who have made mistakes can live, but I’ve chosen not to quibble with this definition in the context of this bill — my priority in this legislation is to keep the regulation burden from becoming excessive and strangling an important new industry.

  28. Creating a tipping aspect allows for a non-livable wage. No tipping and maintain a wage that is viable for the driver

  29. Tipping should be allowed, with a clause that it is TOTALLY optional.
    Also, tipping history must be banned from sharing in client records (otherwise – who would pick a passenger who’s known not to tip?).

    1. Of course drivers will rate passengers based on their tipping. There’s no way to stop them.

  30. Hi Will:

    As an avid user of Uber and Lyft while on vacation, I always tip. It’s easier to tip with Lyft because you can do it via the app. With Uber, I just give the tip to the driver in cash.

    I had no idea that Lyft takes more money from the drivers because it allows them to be tipped via the app. I’d like to know how much more money Lyft takes than does Uber. And are the fares comparable between both companies? As I said, I’ve used both companies, but I never did a fare comparison.

    After speaking with all of my Uber/Lyft drivers, they tell me that people are under the impression that they don’t have to tip TNC drivers because they keep most of the fare money. I believe Uber takes 20% plus $1.00 from each fare. Not sure about Lyft. The drivers then have to pay for very expensive gas, insurance, and vehicle maintenance, all of which, I believe, is tax deductible. But still, it’s not a high-profit means of earning income unless the drivers are busy all day/night.

    In this sharing economy where the workers receive none of the benefits of those holding typical jobs (i.e. health insurance, sick/vacation time, 401K, etc.), please do whatever will put more money in the pockets of the drivers.

  31. I think that making the drivers have
    so much insurance will limit the number drivers dramatically and is VERY bad.
    Why make them have this? Most of the drivers cannot afford this. So it will kill this business. Uber and Lift have made getting around the city so much better, limiting need for parking, an making the city better. Tipping? I have no opinion. I would rather pay up front.

    1. This levels the playing field and the insurance is necessary because the vehicle is being used as public transportation.

      Every Cab on the road pays over $5,000 per year for Auto Insurance. And their rates are fixed by the City or Town..

  32. Like the bill but please nix the tipping requirement. Tipping is bad for consumers and bad for drivers. Also it incentivizes being a jerk because if you’re a jerk and don’t tip your rides are cheaper. We should design systems that instead incentivize good behavior.

  33. Like you said tipping is on Lyft already and most drivers drive for both uber and Lyft. If we really want to tip we can leave cash.

  34. Overall, I like the bill.

    Regarding tips, I think adding an option to tip in the app would be nice. I always give the driver some cash when using these companies, and this would make it more convenient.

    We shouldn’t delude ourselves that discouraging tipping will ensure that Uber and other companies will pay their drivers a decent wage. They aren’t providing any kind of benefits now. Based on what I have heard from drivers, Uber has cut wages when they are fighting for market share. While they may now allow tips, that was not always the case. I have noticed that their drivers often seem hesitant to accept the cash.

    I agree with you that TNCs should be able to go to Logan, they serve a real need that taxis were not meeting.

    Thanks for your work on this issue.

  35. Will –
    1. I commend the Senate for thorough, nicely-drafted comprehensive legislation to address the TNC issue, responsibly addressing public safety while allowing growth of this much-valued service and benefits to the Commonwealth from this sharing technology. Your justifications for support ring true to me.
    2. I would not require TNCs to include a tipping feature. Uber/Lyft users whom I know appreciate not having to add or worry about this; the “all-included” pricing is a strong appeal of TNC service. Let the market manage how companies address this issue.
    Thank you.
    Myron

  36. I am not sure either. I use Uber very often and really enjoy the ease of no hassle about tips. I do not tip. I would happily pay for a tip included BUT not if the driver would earn less. Not sure how to accomplish that customer convenience.

  37. Allowing a rider to give a tip through the app should be required. Tipping is optional so if you don’t want to include a tip you don’t have to.
    Tipping would increase the driver’s earnings not lower them because the tip is in addition to the fare. The bill should mandate that the tip is in addition to the fare which is what Lyft does now.
    Making the availability of tipping easy will increase earnings for the driver in a different way. Now most Uber riders don’t leave a tip because Uber advertises that as a feature. I feel that is unfair to the driver, especially since Uber takes 20% of the total fare.

    1. Jim,

      You’re at least the second person in this discussion to show a lack of understanding of how adding tipping as a cultural norm will actually disadvantage the people receiving the tips. I let it slide before, but I feel like I need to spell it out now.

      Uber unilaterally decides on what percentage of each fare it takes from the driver.

      There is one and only one consideration it uses when making that calculation: what is the biggest cut it can take without discouraging too many drivers from taking Uber fares?

      If tipping is handled through the app, then Uber will know exactly how much its drivers are receiving in tips.

      It will take that additional driver revenue into consideration and raise its percentage cut commensurately so that the drivers, on average, aren’t actually making any more money than they were making before. It has no incentive not to do that. There is no way a law could be reasonably constructed to make it illegal for Uber to do that.

      In addition, Uber would be required to report to the IRS any tips given through the app. Let’s be honest: some drivers are surely reporting all their tip income to the IRS as they are legally required to do, but many are not. If tipping happens through the app rather than via cash, they have no choice but to report that income and pay taxes on it.

      In addition, tips given in cash go 100% to the driver, whereas Uber would take a slice of tips given through the app to compensate it for the credit-card processing fee on the tip.

      In addition, while Uber will increase its percentage cut so that on average drivers make the same amount they were making before, tip income is irregular and unpredictable, as opposed to the fares set by the app which are consistent and predictable, so while some drivers might make more money as a result of tipping, other drivers would make less, some significantly so.

      None of this benefits drivers.

      Why do you think restaurants encourage patrons to tip in cash?

  38. I think that the state has no business in this situation. As long as there is a healthy competition, the government should stay away. It is a business decision on Uber’s side. They are entitled to succeed or fail, as long as they don’t break the law. If people really want to tip, let them use Lyft. If drivers are more motivated by Lyft and people want to tip the drivers, then Uber will fail, but it is something that they need to handle.
    Moreover, tipping the driver will further legitimize the service as a cab business, which is what both Uber and Lyft are trying to avoid and portray it as a “ride sharing” service. It is a whole different topic if the state wants to allow workarounds to the license-based taxi business.

  39. I don’t think a tipping feature should be required. Part of the appeal of (most of) the TNCs is that you don’t have to worry about cash or tipping. And, if drivers or customers demanded it, TNCs could include this feature at their own discretion; it does not seem like something that the government should mandate.

  40. I agree with you wholeheartedly Will – forcing TNCs to have a tipping feature is effectively inviting them to pay lower wages.

    Give them the flexibility to build a tipping function or not, and workers/consumers will decide which arrangement is most effective.

    Best,

    Paul

  41. I favor no tipping

    It is so much cleaner and more pleasant

    Makes for a much better ride experience

    – Gene

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