by Matthew W. Daus, Esq.
After considerable opposition and back and forth, the long saga of the New York State Transportation Network Company (“TNC”) legislation has come to an end, at least for now. New York State Governor Andrew Cuomo’s Uber bill will pass as part of a budget deal reached with the state legislature on Friday evening, April 7, 2017.1
The New York State budget, which often appends tag along bills known in Albany as the “Big Ugly,” added the TNC bill. There were a few small victories for the incumbent industry, but it was mostly “ugly,” creating a more “uneven playing field” between limousine and taxicab businesses and the TNCs.
While New York City (“NYC”) is exempt, Nassau, Westchester and Suffolk counties are not automatically exempt which could allow TNCs to operate at less cost and with less regulation upstate, downstate, and all around the borders of NYC. Many small transportation businesses in New York may go under water usurping the job creation goal of the TNC bill. This new law may lead to TNC sharks circling NYC waters looking for prey.
Governor Cuomo has made the legalization of TNCs in upstate New York a priority in his State of the State speech in Buffalo,2 to allegedly spur economic development in upstate NY.3 As of April 2017, 44 states and the District of Columbia have enacted some form of TNC legislation.4
Overnight, NY went from the last state with a more even playing field to potentially the most lopsided one in the country or the world. Below is a recap of the final provisions of this “Big Ugly TNC Law,” that will become effective 90 days after enacted:
What is critical here is the ease by which NYC’s neighboring counties can “opt-out” of the TNC state licensing paradigm in NY. Unlike the NY State reciprocity law, where a notification or letter can be sent from one City, County, or Taxi & Limousine Commission (“TLC”) to another to “opt-into” reciprocity,5 here, all counties in NY (except NYC) must pass local laws to affirmatively “kick-out” TNCs.
This plays right into the TNCs’ hands, as Uber will most likely start operating immediately, and take the usual tactic of getting the passengers and local politicians on their side to prevent them from stopping service. This is right out of their lobbying and media strategy playbook, and has happened in countless cities.6
The chances of Nassau, Suffolk and Westchester acting quickly enough with county legislation to opt-out is highly unlikely. It is more likely that the Nassau and Westchester TLCs will be disbanded or rendered legally ineffective while at the same time immediately rescinding the long standing mutual recognition of NYC, Westchester and Nassau County TLC licenses.
Enforcement Will Be the Key To Saving The Industry! The Governor’s bill will allow TNCs to drop off passengers in NYC, but would prohibit point-to-point transportation within NYC, or pick-ups in NYC to destinations outside NYC. Since TNCs may not be required to have special plates, like other FHVs, it will be a massive challenge for enforcement to identify “straight plate” TNC vehicles attempting illegal pick-ups while in NYC.
Enforcement will be difficult as trip data that existing NYC FHV companies and taxicabs must already provide to regulators may be exempt from disclosure to the NYC TLC for TNCs under the state law. Also, recent federal case law now prohibits the previously long standing practice of seizing or confiscating unlicensed FHVs.7
Law enforcement personnel may be prevented from legally stopping many TNCs picking up passengers. Administrative stops may not be permitted for personal motor vehicles without commercial/license plates absent an alleged traffic or other civil or criminal violation. Envisioning a TNC car stop where NYC TLC inspectors may need to ask passengers to see their smartphones would be awkward and unworkable.
The only other way to effectively police the so called upstate/NYC border would be to obtain data from TNCs and geo-fence TNC vehicles. The future of the NYC for-hire industry will rest with whether the TLC and NYC will quickly develop an effective enforcement plan to prevent infiltration of outside TNCs in NYC, and infestation at NYC airports and border areas (like the Bronx and Queens).
The NYC livery industry near the borders of Nassau and Westchester will be particularly susceptible to UberX low cost transportation competition. NYC TLC must take action with a comprehensive enforcement plan as soon as possible. This is true, especially after the record attendance and outcry at its recent taxicab fare increase hearing. Extensive testimony was offered speaking of Uber’s unfair competition and market dominance in NYC.
Taxicabs and for-hire vehicle businesses must do everything they can to cut costs, step up efforts to protect their brand and customers, and hold onto their drivers and customers. The onslaught will begin shortly, with the most vulnerable being livery or community car services and black car companies.
NYC is probably the only real revenue generating market for Uber, and it is where it is making a stand to actually try and reduce its billion dollar losses.8 Nassau, Westchester and Suffolk must demonstrate leadership by immediately submitting bills to opt-out of the new state TNC law or face the rescission of reciprocity and the end of their regulatory reign.
In terms of enforcement, the DMV, at the urging of everyone, must ensure there is a real and objective third party validator or company that oversees whatever background checks are being performed by TNCs. In Boston and Houston recently, even under the inferior background checks TNCs conduct, a plethora of convicts of criminal offenses were discovered.9
Also, the DMV must issue special and prominent TNC license plates, not removable stickers, in order to aid enforcement in NYC and in counties that opt-out. In addition, the TLC must take a stand to use whatever data it has to see if the TLC can overcome the FOIL law exemptions to track TNC activity (pick-ups and drop-offs) by auditing and prosecuting transgressions.
The NYC TLC should hire additional inspectors and enlist the Port Authority Police and New York City Police Department to assist in enforcement, especially at the borders of NYC and at the airports. NYC must geo-fence TNCs out of NYC, and build an impenetrable enforcement wall around its jurisdiction or the end will be near.