Uber Facing Huge Fines in New England; 3 Takeaways for Small Businesses

Uber’s growth is disrupting markets across the country. The Newsroom reports that, “At its current rate, the Uber platform is generating 20,000 new driver jobs every month.” As Uber grows, its business practices have drawn attention and are under scrutiny. In states all across New England lawmakers and taxi company owners are growing upset over Uber’s failure to follow regulations that other “vehicles for hire” like taxis are required to follow.

According to the Newsroom, unlike taxi services, which require drivers to spend “$3,500/month – over $40,000/year – just to lease their taxi,” Uber allows drivers to use their own cars. As a result of Uber’s presence in the market, larger municipalities are losing out on major revenue generated by the sale of medallions- traditional yellow painted cabs regulated by the Taxi and Limousine Commission. In some cities Uber is failing to pay taxes or obtain required licenses.

New England State Officials Universally Agree: Uber is illegal

• • Massachusetts: In Massachusetts, each municipality is responsible for creating laws and regulating vehicles for hire. Boston requires taxi drivers to obtain special licenses and plates to operate taxi or livery services. These are obtained through background checks and vehicle inspections. In a recent article, the Boston Globe stated that “companies like Uber and Lyft still operate in a legal gray area because their drivers have not been licensed locally as taxi or livery drivers.” Driving without such licenses mandates a $500 fine. This gray area is creating controversies with lawmakers on how to regulate the company.

• • Rhode Island: The Auto Blog recently posted an article about Uber’s presence in Rhode Island.“The Providence Journal reports that Terrence Mercer, associate administrator at the Division of Public Utilities and Carriers and a critic of the ride-hailing companies, said neither Uber nor Lyft has registered to file sales tax. That was confirmed last week by Tax Administrator David M. Sullivan.”

• • Vermont: Under current law in Burlington, Vermont, Uber vehicles are considered “vehicles for hire” and should be regulated under the same city ordinances that taxis are. However, Burlington Free Press reported that City Attorney Eileen Blackwood  wrote a letter to an Uber representative bringing to their attention that, “Neither Uber nor the individual drivers have sought licenses from the city, and therefore, as the ordinance is currently written, Uber and its drivers are operating vehicles for hire without a license in violation of the law.”

• • Connecticut: Connecticut has decided to keep Uber in the state, says a recent article from the Connecticut Mirror. Bill Scalzi, the owner of Metro Taxi in Connecticut, is trying to get the state of Connecticut to recognize that “there is an unprecedented corporate law-breaking.” Metro Taxi, as well as all other Connecticut cab companies, must abide by 100 year old regulations that dictate who they can hire, how many cabs they can have on the road, where those cabs can drive, and how much they can charge. Uber does not comply with any of these requirements. Additionally, it takes Scalzi “more than seven months to obtain permission to add a cab to his fleet” while some Uber drivers
    can get approval from Uber in under a week according to the Connecticut Mirror.

• Maine: Maine Business announced that Uber’s presence is expanding in the state. When Uber arrived in Portland last year, city legislators were quick to draft new regulations in response to the company’s presence. Now in addition to Portland, Uber will be available in Bar Harbor, Orchard Beach, Ogunquit, and Kennebunk. It is likely that these city legislators will follow suit and create new regulations as well.

Uber is not the first company to be a market disruptor- and it is certainly not the last. In a recent article the Huffington Post predicted that, “Industries that are heavily regulated, with fragmented supply, are going to face significant pressure from competitors that are looking to move fast . . . Traditional companies continue to grow, but the rapid expansion of this new breed of technological competitor will force traditional companies to adapt in order to maintain competitiveness.”

What Can Your Small Business Learn From Uber?

1. 1. First note that Uber cut the costs of barriers to entry and just dove into the vehicle for hire industry. They risked noncompliance and got caught. While Uber may be well-aware that they’re breaking regulations and have the money to pay for the fines that are piling up, as a small business, you don’t have that luxury. Compliance with the law is important to avoid fees later down the line.

1. 1. Additionally, note that Uber runs background checks. Uber is being responsible by credentialing drivers to make sure that they do not have a criminal history that would endanger the public. Background checks are extremely important. Like Uber, you should run background checks on job candidates to ensure they are who they say they are and meet qualifications. The consequences of not doing them are huge.

1. Thirdly, be on the lookout for market disruptors. They will create more competition and force you to adapt, but this can also benefit your business, pushing it to the next level.

Have more questions on how Uber’s noncompliance practices are affecting the economy and what legal regulations are changing? Please contact us for more information on how market disrupters impact your small business.