Politics

SCOTUS Ruling: End of the Road for Interstate Transportation Entitles as Arbitration Exemption Applies To All Employment Relationships, Including Independent Contractors

On January 15, 2019, the Supreme Court of the United States of America (“SCOTUS”) ruled on 1/15/19, in a unanimous 8-0 decision, that federal courts cannot force interstate transportation workers, whether classified as employees or independent contactors into arbitration. (See New Prime Inc. v. Oliveira). The Federal Arbitration Act (“FAA”), passed in 1925, enshrined in law a strong pro-arbitration policy. Pursuant to the FAA’s requirements, federal and state courts regularly enforce arbitration agreements. But as described below, there are exceptions. Several recently decided SCOTUS cases interpret the FAA very broadly and have enforced arbitration agreements, including in the employment context. (See Epic Systems Corp. v. Lewis) However, Section 1 of the FAA excludes “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” which the Court previously ruled to include “contracts of employment of transportation workers.”  See 9 U.S.C. § 1; Circuit City Stores v. Adams. Prior to New Prime Inc. v. Oliveira, lower courts interpreted the Section 1 exemption to apply only to employees and not to independent contractors. 

Dominic Oliveira, a truck driver brought a class action suit against New Prime alleging that the company failed to pay him minimum wage for all hours worked. Oliveira brought the suit in federal court despite a provision in his independent contractor agreement with New Prime in which the parties agreed to arbitrate their disputes. Oliveira argued that the FAA’s exemption for “contracts of employment” for interstate transportation workers refers to all contracts to do work with employees, including those signed by independent contractors. The term “contracts of employment” was interpreted by SCOTUS according the arguments made by counsel for Oliveira, which was based upon the meaning of the words from the time of the FAA’s passage in 1925. In other words, counsel for Oliveira argued that the Court must interpret the statutory language based on what the words meant at the time the statute was passed. In 1925, when the FAA was enacted, “contracts of employment” referred generally to all agreements to perform work and included both employment agreements and independent contractor agreements. Because labor strife in the 1920s served as partial motivation for passage of the FAA, and because both employees and independent contractors can cause labor strife, it was argued that it would make no sense for them to be treated differently.

The SCOTUS decision was decided unanimously in workers’ favor. On the first issue, the Court ruled that a judge, rather than an arbitrator, should decide the applicability of the Section 1 exemption. In doing so, Justice Neil Gorsuch (writing for the majority) rejected the employer’s delegation clause argument, and instead cited the fact that Sections 3 and 4 of the FAA—which in part require a court to stay litigation and compel arbitration—are limited by the exceptions defined in Section 1 of the FAA. Thus, Justice Gorsuch reasoned that a court should decide whether the Section 1 exclusion applies before ordering arbitration. Justice Gorsuch explained that, in order to invoke its statutory powers under Sections 3 and 4 to stay litigation and compel arbitration, a court must first know whether the contract itself falls within or beyond the boundaries of Sections 1 and 2.

On the second and more critical issue, SCOTUS ruled that the term “contracts of employment” pertains to contracts with employees AND independent contractors.  In reaching this conclusion, Justice Gorsuch explained that then the FAA was enacted in 1925, a “contract of employment” meant nothing more than an agreement to perform work.  So, at the time, the common understanding of the Section 1 exemption meant that Section 1 applied to both agreements between employers and employees as well as agreements for independent contractors to perform work. Justice Gorsuch reinforced his decision by looking at dictionaries from the relevant time period and comparing the word “employment” as a synonym for “work;” with all work being treated as employment. Further, the Court looked at legal authorities from the time period and saw no evidence that a “contract of employment” strictly meant that an employer-employee relationship was formed. 

SCOTUS’s decision to hold that “contracts of employment” in Section 1 of the FAA include independent contractor agreements, transportation employers will now find that the arbitration agreements and class action waivers they signed with their independent contractors are mostly likely to be considered invalid. Further, some state courts applying state law have refused to uphold certain arbitration provisions, such as class action waivers, on unconscionability grounds. This means that a wave of class and collective actions can threatening to overwhelm transportation entities engaged in interstate commerce.

Arbitration is a means to permit disputes to be resolved with less litigation expense. SCOTUS’s ruling will likely raise legal and operational costs for transportation companies. These companies may be forced to pass on the higher costs to consumers who depend on interstate trucking/transportation for the delivery of commercial goods. This decision is a victory for transportation workers’, but if the costs of the goods being transported are increased due to the increased costs of litigation, it will be the public that pays the ultimate costs.

 

Congestion Surcharge on For-Hire Vehicles is a Sham

A lawsuit was filed against the State and City of New York as a result of the Congestion Surcharge that is set to go into effect on January 1, 2019. The congestion fee on taxis and for-hire vehicles was enacted under false pretense of reducing congestion but is really just a cash source for the strapped MTA. A judge issued a temporary restraining order preventing the Congestion Surcharge from going into effect. A hearing is set for January 3, 2019 for the Court to determine if the Congestion Surcharge should go into effect, as the state wants, or order a stay until the court case is resolved.

The court case was filed by yellow taxi owners, who argue the law discriminates against them.  The fact is, it’s also bad for the for-hire livery industry.  The law, set up to favor behemoths like Uber and Lyft, could put it out of business; residents of Northern Manhattan and the boroughs, who have long relied on local liveries to get around, will also suffer.

Fortunately, there's still time for the state to act and save these small businesses and protect riders. In its rush to pass it, the state ignored the law’s impact on hundreds of for-hire livery bases and some 15,000 drivers. 

Here’s how: the Congestion Surcharge law requires a $2.75 fee to be added to rides below 96th street in Manhattan. The financial responsibility of remitting the money to the state rests with companies, not drivers. This fits perfectly with companies like Uber and Lyft because they collect the fee from the passenger through their apps.

On the other hand, the law is completely incompatible with the livery base model. In our business, the driver, NOT the base, collects the fee (in cash) from passengers. The livery base is then dependent on the driver passing the fee to it before the base can pass it along to the state.

Livery bases will be penalized financially for failing to pass on the collected congestion fees. Yet, the law carries not a single provision protecting livery bases against driver refusal to pass the collected fee. All this for a sector that probably services 1% of its' trips below 96th Street. We can still fix this law and help small car services survive in the age of Uber.

If the judge today allows the law to move forward, New York State should amend the law to either exempt neighborhood livery service, given the very few trips that will apply to them, or replace the per-trip fee with an annual congestion fee that is paid by the driver at the beginning of each year.

This kind of regulatory support will not have a negative financial implication to the state, but will go a long way towards protecting small livery businesses.

To do any less would essentially lead to the extinction of the industry and fewer transportation options for New Yorkers.

One day, Hopefully soon...Uber Will Have Its Day of Reckoning

What does an Uber ride actually cost? That simple question is often lost among the many controversies facing Uber, but it is surely one of the most important question of all when it comes to determining the value of Uber which has built its business on massive subsidies to both riders and drivers, producing huge losses in the process, and has yet to show that it can maintain growth without them.

Although a private company dos not need to release its financial data, Uber has started releasing limited financial data, and in May reported a loss of $708 million for the first quarter, down from $991 million in the fourth quarter. While their upcoming financial report may show further improvement on margins, Uber continues to spend heavily on subsidized rides.

The question vexing everyone is what the company is worth. Truthfully, I really don't care. Not just because I am anti-Uber but because their entire business model is based upon explanation of persons and creating the myth of providing jobs when their true intent is to totally divest itself, in due course, of all drivers. How drivers do not see this and continue to driver for them is beyond me. Maybe I am wrong in my forecast or perhaps I just simply do not like illegal monopolies.

Uber’s losses stem from its drive to win global market share at almost any cost. That strategy was built on the assumption that Uber could achieve a dominant position in many big cities quickly and eventually raise prices. Kalanick himself said low fares were temporary. But eight years in, the strategy is now in doubt as competition in many markets continues to intensify. Uber must solve the problem of how to eliminate subsidies without losing customers and thereby undercutting its valuation.

At some point in time, Uber will have its day of reckoning as they will eventually have to raise prices and get rid of driver subsidies. And we all know what happens when you raise prices - demand goes down. And when you give up driver subsidies - supply of drivers goes down.

Regardless of their Valuation, in my humble opinion, Uber has become an illegal monopoly. I have conducted my fair share of research on the Sherman Act and its progeny since the late 1800's when certain monopolies were declared illegal. Monopolies are bad for the public, bad for the economy and bad for competition. Uber will eventually raise its prices and do away with driver subsidies...and then the riding public will see Uber for what it truly is. Not an aid to the Salvation Army, but a money hungry technological monopoly that is built on a house of cards. When one of the cards start to fall, the others shall follow. Then I hope to see Kalanick himself driving around in his own vehicle with the stupid "U" in the front window.

Time for the Public to see Uber for What they Really Are.....and to go elsewhere

Uber’s global pattern of driver mistreatment, corporate bullying and legal transgressions should be tolerated no more.  For years, Uber managed to conceal its bad behavior with expensive P.R. campaigns and by claiming they are a technology company and not a transportation provider. Their games may have worked for a while, but their grand plan is quickly unraveling.

Uber is convenient and fast in New York City. The combination of cashless transactions and location technology make for a great service. But no amount of convenience can cover up the toxic culture that has taken hold at Uber. This hold true now not only in the treatment of its huge driver workforce, but at the company’s headquarters as well. Uber’s CEO has finally been forced to resign, but this is simply not enough.

We all know by now that Uber’s wrongdoing does not end at the door of its corporate headquarters. Just as evil is Uber’s model of “employment”. In my opinion, under New York law, Uber is an employer, but offers no employee benefits to its drivers and does not pay the taxing and regulatory costs associated with employing persons. In the vast majority of cases, Uber drivers are offered low pay, no sick pay, no vacations, no 401K. In return, they are promised “flexibility”, or the freedom to work whatever hours suit them. In practice, many Uber drivers are working long, long shifts for extremely poor pay in order to try to make ends meet. On the other hand, Uber continues to operate outside of the law with impunity.

Politicians are yet to condemn Uber. Perhaps their political contributions are just too large to refuse. I am at the point where I refuse to believe politicians will intervene and Uber is surely not going to change its business model on its own volition. But not using the app will surely send them a clear message. The consuming public needs to use its power as customers to force Uber to change their behavior. The workforce of drivers need to stand up to Uber and say “no more”, by disaffiliating with them and refusing to accept their dispatches.

 While Uber is convenient and fast in New York City due to their combination of cashless transactions and location technology, there are plenty of other car services in New York City that do the same exact thing. The only difference is that Uber operates outside of the law, while the car services that provide the same type of service in New York City have been in business for decades and know who to operate a transportation business. The consuming public and the drivers affiliated with Uber should use their collective power and go elsewhere. Uber is not going to change on its own, but you do have the power to “vote” by not using their service. Uber is no longer the sexy newcomer with a cool service. It is a lawless entity that uses drivers like slaves and laughs at the consuming public along the way. Why should anyone put up with this type of service. The time has come for the public to consider that Uber did force many of the incumbents in the industry in New York City to revolutionize and create their own technology to meet the demands of the public. It is now time to go back to these companies and use their service. You deserve better

The Gig Economy Is Here to Stay

Lets face it. The gig economy is here to stay. If it was not a good idea, then the entire market of new companies that have been created would not be flourishing…and they are not all flourishing because they are taking advantage of loopholes in the law. When something does not go the way they expect it, the layperson calls it a “loophole in the law”. When someone or some company escapes legal liability on a “technicality” the public calls it unfair. It is almost always an afterthought reaction when a group of persons file a class action lawsuit against a company alleging that the company misclassified them as independent contractors. Of course, they don’t seek “justice” by making the market reform to the existing laws and they don’t petition their elected leaders to change the law, but they seek the usual object of a lawsuit….MONEY (compensation for missed lunch breaks, minimum wage compensation, reimbursement for business expenses, and overtime, in addition to other penalties). While a lawsuit and the payment of money may have the unintended result of making a company reform its business practices, the current wave of class action lawsuits will not change an entire industry that has been created in the past 5-6 years.

Lawsuits against companies utilizing the “gig economy” are like a threatening cloud in a brewing storm. People who provide services surely deserve respect, fair treatment, and open communication, but that does not mean that all persons who provide services are employees, as opposed to independent contractors. Yes, there surely are many companies that misclassify their workers as independent contractors as opposed to employees in order to avoid the legal and financial liabilities associated with hiring an employee. But there are also many who follow the law and do utilize independent contractors, but still have to navigate the legal maze of bottom feeding lawyers that seek out these class action lawsuits, not to reform an industry or a market, but to get money.      

This rising legal retribution is a huge threat to the gig economy. Not being responsible for employees’ taxes and benefits allows companies to operate with 20% to 30% less in labor costs than the incumbent competition. If they lose this workforce structure either via class-action lawsuits or intervention by regulators, or through the collective action of disgruntled workers, and you will surely lose the gig economy.

The lawmakers may need to alter the very definition of “employee” in order to meet the demands of the in a tech-enabled, service-driven economy in the 21st century American Gig economy. Many companies do not own cars, hotels, or even their workers’ cleaning supplies. What they own is a marketplace with two sides. On one side are people who need a job done–a ride to the airport, a clean house, a lunchtime delivery. On the other are people who are willing to do that job. In the middle is a broker. This is the one that puts the two parties together and takes a “piece of the action”. Little or no direction and control over the means by which a person provides their service is the legal equivalent of an independent contractor. If you don’t like being an independent contractor, then go out and get a job as an employee, which involves more supervision, more direction and less autonomy. There is nothing wrong with that, but just don’t complain later on that you were cheated after you speak to a scum sucking ambulance chaser.

Some say a new deal has to be worked out and one that squares the legal rules governing work with new products and new services. Some believe the gig economy created a marketplace where people who provide services do not fit neatly into the traditional definition of employee or independent contractor. Right now, one who provides services is not sure what benefits to expect from a quasi-employer. For those who want to know, all you have to do is ask. If you don’t like the answer, then don’t accept the job or don’t provide the service. I believe one can be both independent and tethered to an app-based company. The social contract between gig economy workers and employers may be outdated, but it is far from broken. Who will fix it, and how, will determine the fate of many thousands of workers and billions of dollars.

Thanks to these new on-demand startups, though, whether you’re a stay-at-home mom with a few odd hours to spare or a recently unemployed fast-food worker who needs to make ends meet while looking for a job, you can work whenever you want, doing whatever you want. Many like the flexibility and feel like it gives them a better work and life balance. In the gig economy, you’re better than an employee; you’re a little business. We now live in a world where people can be entrepreneurs or micro-entrepreneurs, Just like the government didn’t begin to regulate the Internet before it became a behemoth, regulating this new economy before it’s fully created could halt innovation. Perhaps I just don’t have much faith in regulators whose job is not to ensure a properly working system, but to regulate for the sake of regulation by implementing more and more rules of operation to the point of choking a business to death. Just like the New York City Taxi and Limousine Commission did to the for-hire vehicle industry in New York City.

 

I believe the gig economy has been improperly interpreted as a loophole for avoiding labor laws. There is little economic security or predictability in being an independent contractor, but then again, there is the promise of starting off with your own small entity and creating something new and ever bigger and better than before. If you want security and predictability, then go get a job teaching 4th grade in an elementary school. If you want to take a risk and be your own boss and possibly fulfill your dreams, then start your own business and make it rain…and don’t come complaining later when your own ideas and inventions don’t work out because it is not the fault anyone other than you and your own choices. Some don’t like the gig economy because there is no power among workers to get a fair share of the profits. For those who believe this, take a step back and realize that you don’t get the profits of a private company by being an employee or a person that provides services.  Many people try and fail to make money with gig economy jobs, and then complain that their legal rights were violated. Why did they not think of this when they signed on to be an independent contractor in the first place

It’s safe to say that there are advantages to being an employee (security, safety laws, minimum wage, benefits) and that there are also advantages to being an independent contractor (freedom, independence, opportunity for more profit). Similarly, there are advantages to hiring employees (quality control, dependable workers) and hiring contract workers (cheaper, don’t need to guarantee work). Where platforms and new markets get into legally dubious territory is when they try to claim the advantages of both systems at the same time. But just remember that simply because you utilize the platform of another company does not mean that you don’t have control over the work you did. If the company that provided the platform or means to access the marketplace, then you would not have the option to be an independent contractor.

The laws that determine independent contractor and employee status vary from state to state and from situation to situation, but many of them focus on the question of how much control workers have over their work. If their employer is mainly focused on the outcome of that work, there’s a very good chance they’re fairly being classified as an independent contractor. When their employer begins to control not only what work they do, but how they do it, that classification gets murky. Giving persons suggestions for how to do their work should not made the company more vulnerable to a lawsuit. Similarly, though traditional taxi drivers are often independent workers rather than employees, a platform like Uber takes a certain amount of control when it fires them for low ratings or changes their fare prices. Some don’t like the idea of going into work one day and your “boss” telling you that you’re going to have to do the exact same job you did last week but make less money”. But ”firing” someone for low ratings does not necessarily make them an employee, it may just means that the company no longer desires to utilize their services.

Right now, our legal system only has two buckets for workers who aren’t volunteers or interns. You are an employee. Or you are an independent contractor. The risk of being sued has led many in the gig economy to place workers into the employee bucket. This also drives costs to the consumer up because the cost structure for these companies increases by about 30% by paying for taxes and benefits that they may not have to, but they just want to be cautious. Other companies in the gig economy place workers into the independent contractor bucket, which entails the risk of worker misclassification claims for disgruntled persons who formerly provided services and/or tax hungry governmental entities that have every intention of finding an employer-employee relationship so they can increase revenue for the city, state and/or federal government. The legal risk, the risk of being asked to pay back-taxes by the IRS or Department of Labor is a battle that everyone knows is coming and each entity that utilizes independent contractors should make budgetary preparations, emotional preparations and legal preparations to fight and defend.

The pressure in the marketplace right now is to push workers into one bucket or another (employees or independent contractors). This creates an inherent fear of the governmental fines if you are wrong and the fear of the cost of defending a class-action lawsuit where a group of former disgruntled persons allege that a company misclassified its workers. But on the other hand, classifying a person as an employee will raise the cost to consumers in many situations when the worker is not an employee and thus, the increased cost to the consumer for no good reason.

But some wonder if there is some room for compromise in this system. The question is whether there is some sort of a new middle ground that works for everybody. Forcing all companies to use these old constructs (employees or independent contractors) may not quite be the right thing for the worker and for the growth of the economy. After all, the answer to decreasing employment is not to get more people deemed as misclassified.

One answer, of course, is that the gig economy should be destroyed if it can’t follow existing labor laws. These legal protections have been put in place for the protection of workers and have evolved over a century and surely were not accidental. Others call for change where parts of the sharing economy could self-regulate, with oversight from the government. Others have supported creating a third category of worker that falls between an independent contractor and employee, which would allow companies to give their independent workers some benefits without fear of being sued for treating them as employees.

Lawsuits are a big, visible threat to the gig economy, but even if none are successful, there’s another, slower-burning problem that will corrode the gig economy if left unresolved. It’s a problem that gets worse every time a worker completes hundreds of jobs via a platform with nearly unanimous perfect reviews of his work, is let go and then the person becomes disgruntled and there is nothing that the company could ever do to win him back as a dedicated service provider.

In my humble opinion, the most important thing a corporation can do is to have an experienced lawyer perform a full exam of your corporation to see if it is properly classifying its workers/service providers. Do not wait until you are sued or the government performs an audit. By that time, it is too late to do anything other than damage control. The most important thing a person can do before they take a job, is to determine whether they will be classified as an employee or an independent contractor. Go into the job with your eyes wide open, knowing what your benefits and rights are based upon who you are being classified. Speak up and ask questions and make a fully informed decision before taking the job. Don’t cry the blues later on because you were fired and failed to do your homework before taking the job. Finally, the most important thing is what the government can and should do. This means to stop the audits and put aside the money grab for the moment. Take the time to involve leaders and stakeholders in each major industry that straddles the line between hiring employees and utilizing independent contractors. Figure out a way to make the line clearer for businesses and help them understand their potential legal liabilities all while another last option is pursued. That option is to bring the same leaders and stakeholders in each major industry together with the government regulators to figure out a way to find a middle ground that works for everybody. Utilizing old constructs of what it means to be an employee or an independent contractor will not work when analyzing the new gig economy. We have to come up with new constructs and figure out a way for the companies of the nation to know its legal rights and responsibilities all while giving the independent contractor some benefits that they ordinarily would not be entitled to under the current system.

There is middle ground and finding that middle ground will be a better solution for the worker, the business and the economy in general. To do otherwise is to be trapped by dogma, which is living life with the results of other people’s thinking. 

TNC’s ARE DRIVING THE TAXIS INTO EXTINCTION

Transportation Network Companies (TNC) are companies that use online-enabled platforms to connect passengers with drivers. While connecting passengers with drivers is nothing new in the for-hire vehicle (“FHV”) industry, the use of high tech software to do so is a more recent phenomenon. The TNCs initially sparked controversy with the FHV industry because TNCs came into the marketplace, especially in New York City (“NYC”), and operated illegally for such a long period of time. During this period of time, when the TNCs operated without license and without being subject to regulation, gave them an unfair advantage. Regulations, especially in NYC, are costly and very burdensome. Some regulations are good because they protect the public, but others are nothing more than bureaucratic red tape that is created and used to justify the existence of certain people who are employed by the governmental regulatory agency. In NYC, the Taxi and Limousine commission (“TLC”) has become an albatross crating regulation upon regulation, much without any need or justification. These regulations place the traditional FHV’s (car services, luxury limousines, clack cars, etc.) in a world in where they are not permitted to operate outside of. When Uber first hit the scent in NYC, they claimed to be a technology company and not a transportation company. Time has proven that Uber and other TNC’s are surely transportation entities, albeit very sophisticated ones. But the TLC regulators in NYC bought into the Uber Kool aid and let them operate for so long and without any restrictions to the point that once they came under the regulatory umbrella of the TLC, they already created a massive network of users that is virtually impossible to duplicate. Putting aside, for the moment, that the TNCs have billions of dollars to literally buy drivers, subsidize rides for passengers and pay of politicians (oh…sorry…I mean donate to their political reelection campaigns). The lack of regulation of the TNCs and the unconscionable delay of the TLC in regulating the TNC’s created an unfair competitive advantage that, at this point in time, has caused the demise of the taxi industry in NYC. The taxi industry deserves some fault in their demise because they refused to innovate by embracing new technology and/or because they refused to see that technology would one day be used to provide a similar but better service that would eventually lead them down the path of the dinosaur (i.e. extinction). I focus this piece on the effects of the TNCs upon the taxi industry and not the rest of the FHV industry in NYC. I do this because while the TLC does regulate all FHV’s, the NYC government has a massive financial interest in the taxis and since the advent of the automobile, the taxi medallion was sold to investors with the virtual guarantee that money would be made. Today, the City of New York and its elected leaders have turned their backs on the taxi owners and the banks and credit unions that lent money to the medallion buyers. They are all failing and the City of New York takes the hands-off approach, not because they want the free market the rein and work out the kinks, but because the elected leaders have a financial interest in seeing the TNCs prevail. Remember, TNCs bring in a massive amount of money via sales tax. While TNC’s provide transportation in areas of New York state where less than desirable and plentiful transportation was previously available, the focus of this piece is on the NYC market because taxi medallions in NYC are like no other taxi in the world.

No one can deny at this point in time that TNCs generally have shorter wait times, cheaper prices, and increased convenience, aspects that appeal to consumer preferences. But keep in mind that the cheaper prices are mainly due to subsidies from each TNC that artificially lowers the cost of the trip. Once the taxis and other FHV’s are driven out of the market, what do you think the TNC’s will do with their prices. If you think they will keep prices the same, you are sorely mistaken. Also, increased convenience is due to the fact that TNCs can afford to pay driver subsidies. These subsidies put more money directly in the pockets of the FHV drivers. Once the taxis and other FHV’s are driven out of the market, what do you think the TNC’s will do with their driver subsidies. If you think they will keep paying subsidies to drivers after the marketplace for competition has significantly decreased, you are sorely mistaken. Once the driver subsidies are gone, the drivers may seek alternate jobs b3cause as it is now, some drivers are actually making a bit more than minimum wage. The benefits of driving for a TNC are illusory……..but the public simply ca not yet see the forest from the trees. TNCs have billions of dollars to burn and will keep burning them until the competition is driven from the marketplace. When competition is significantly lessened or extinct, then a monopoly is created. Remember, the U.S. Supreme Court broke up Standard Oil over 100 years ago because monopolies are a bad thing.

Since the emergence of the TNCs, the taxi industry fought to increase TNC regulation, but has done little to create innovative technology and had done nothing to modify its service to appeal more to consumers. Why stand in the street like an idiot and wait to hail a cab when you can use your smartphone, which you were already probably using, to virtually hail a cab, but instead of hailing a yellow cab, the public is virtually hailing an Uber.

In NYC, the night takes on a different meaning. Dinner turns into drinks, drinks turn into the club, and the club turns into wherever the night ends. Instead of spending an arm and a leg on metered city parking or waiting to hail an overpriced taxi, partygoers now catch a ride with Uber and/or Lyft. The TNCs appeal not only to partygoers, but also a wide range of other groups including families, businessmen, and travelers. An innovative blend of technology, transportation, and low-cost convenience, Transportation Network Companies (TNC) appeal to the interests of all people with a smartphone, which is virtually everyone. TNCs utilize three major technologies: GPS navigation, smartphones, and social networks, each serving a distinct purpose. GPS navigation systems provide ride efficiency in both distance and time, smartphones allow for convenience and accessibility, and social networks build trust and accountability for both the drivers and the riders. These companies operate similar to a taxi service, however they differentiate in that TNCs use online-enabled platforms to connect riders to. Providing a service called “ridehailing”, the user-friendly apps operate with only one click, locating not only the location of the potential rider, but also the density of drivers nearby and the wait time for the closest driver. They also provide driver information and a method of contact in order to arrange the one-time ride. The payment system is simple—price is calculated with respect to speed and distance, and customers are billed directly, with receipts sent via email. Convenient and fast, these apps remove stress from both the driver and the rider, providing a very strong incentives for riders to switch from taxis to TNCs.

However, accompanying all their success, TNCs confront controversy and outrage from the taxi industry. Even though TNCs promote their service as a way to fill up empty seats in passenger cars, they function similarly to a taxi service, and as such, they are a massive threat to traditional taxicab drivers competing for the same consumer base. The biggest complaint the taxi industry has is that TNCs operate without proper regulations, avoiding the licensing costs, driver insurance, standard employee training, and routine background checks that taxi drivers are subjected to. Taxi drivers argue that since TNCs and taxis serve an almost identical purpose, they should have the same restrictions and costs. This argument surely makes a great deal of sense. But the law does not always keep up with the times and the law will always be behind advances in technology. As such, legal action against TNC’s and the government relators have failed. In the end, TNCs have acted as a price and quality substitutes for taxicab service and thus have lead us all down the path of elimination of the taxi industry.

Similar in method of transportation, TNC services follow a point-to-point route of travel; therefore these services are often perceived as entrants in the taxi market. However, there are contesting opinions on the debate between taxicabs and TNC services. Supporters of the latter service claim that TNCs such as Uber and Lyft fulfill a previously unmet demand of quick and convenient mobility, as TNC services require as little effort as the tap of a button. This opinion suggests the consumer base of TNCs is not identical to that of traditional taxicabs. Instead, people entered this transportation market specifically due to the unique and convenience of app-based mobility. In opposition, critics claim that TNCs serve identical roles as taxi drivers, but without proper regulations that are used to counteract negative externalities such as “job misconduct” in taxi services. While some may believe TNCs and taxicab companies operate differently, I believe in equality and that TNCs should be regulated the same as other FHVs. To do otherwise may not be illegal, but it is surely a distinction without a difference. My prediction is that in the long term, TNCs will be fatal to the taxi industry, acting as a substitute and not a complement.

Regulations are used to be favorable for taxi drivers. Generally speaking, government regulation is implemented because it is demanded by the regulated industry and provides favorable gains for the industry. Economic regulations in taxicab markets exist because of the presence of negative externalities such as air quality, traffic congestion, and asymmetric information. With an unlimited amount of taxis, quality is bound to decrease which is bad for the consumer and incentivizes taxi companies to cut corners when it comes to costs such as vehicle maintenance. Favorable to cab companies, government regulation theoretically allows for higher fares than those that would exist in the free marketplace. Regulation of Taxis and other FHV’s is fine, but when all other FHVs are heavily regulated and TNCs are not regulated or regulated with minor disruption, then there will be an oversupply of drivers and the devaluation of taxi licenses. This is exactly what happened in NYC.

While it still claims to be simply an app-based technology rather than a transportation company, Uber is essentially a modernized version of the traditional taxi. Operating free of regulations, Uber and similar companies compete against the taxi industry at a lower cost, making each ride cheaper for the consumer and more profitable for the business. The increase in supply makes each taxi medallion license lower in value and each taxi driver less profitable.

By nature, TNC apps have an advantage due to accessibility. With the exception of upfront costs such as the purchase of a smartphone device, these transportation apps are free to download and easy to use. In order to reach a driver, a rider simply opens his app and taps “set pickup location.” The app uses GPS services to locate the exact location of a smartphone, send the location and contact information to the nearest driver, and notify riders of the remaining time before a car arrives. Fast, reliable, and efficient, TNCs take the guesswork out of transportation. One of the top reasons people use a TNC service is the ease of payment. TNC’s provide an added convenience by allowing consumers to pay directly from their phones. At the end of a trip, the rider is billed directly to a preset card in the app, and both parties are ensured that payment has been received. For some, this method of payment is definitely preferable, however it is less attractive to others. The perception of these services is likely to be linked to the use of technology, and younger populations associate technology with efficiency. Older generations who have not grown up in a technological world are often less trusting of online payment methods, generally find it more convenient to pay manually at the end of a trip, with the option to use alternative forms of payment. But the baby boomers are getting older and older and the millennials are soon going to be running the major corporations of the world.

At the very least, TNCs have provided consumers with the freedom of choice. These companies expanded quickly and have made an impact within a matter of years, however this impact is not solely positive. Although TNCs have the potential to improve welfare for some individuals, it is likely to be at the expense of others. To gain a thorough understanding, it is important to weigh the costs and benefits associated with the eventual demise of the traditional taxicab and the taxi driver.

While my opinions on the impact of TNCs on the taxi industry is not conclusive, it does lean towards one particular outcome. The combination of minimal regulation, low prices, short wait time, and certain preferences gives TNCs an enormous advantage over taxis. And although TNCs have come under fire recently, the barriers to entry have been and remain relatively low. Additionally, the new age of technology refuses growth to taxicab companies, who have made few technological changes throughout the years. Despite their success, TNC’s continue to find new ways to innovate. Recently, Uber introduced UberPool, a carpooling services that allow riders to share rides and split costs with others traveling a similar direction. Uber has also introduced Uber for Business and UberRush, each with features that appeal to different demographics. Assuming that TNCs continue to function under current circumstances, I predict they will drive out the taxi industry.

The taxicab industry is heading towards extinction; but I believe that certain modifications could change its direction. First, regulation for TNC must be the same as other FHVs. Without the same level of regulation, taxicabs and TNCs are competing for a similar consumer base on uneven playing fields. Next, taxis must improve their technology and communication methods—an update that is long overdue. By evolving with the general population’s interests, the taxi industry is more likely to be successful. It would be beneficial to create an app similar to those created by TNCs. Lastly, the taxi industry must seek innovative ways to re-recruit riders. Taxis have the advantage of time and experience, and unlike TNCs, they have been around for over a century, surviving through the darkest economic times. In order to stay competitive with a company like Uber, taxi companies must be innovative and strategic in their methods.

Since their inception six years ago, TNCs have already made a significant impact on the taxi industry. These companies entered the market without the restrictions and regulations that serve as barriers of entry for traditional taxicab drivers. As a result, this advantage allows TNCs to operate with lower costs, and therefore provide better prices to consumers. Like all other service-oriented industries, the transportation industry is reliant upon consumer demand. Riders will always choose the service that provides them with a higher utility based on individual preferences. For transportation, the top three preferences are variations on speed, convenience, and low pricing. Weighing the evidence, I predict that TNCs will eventually cause the taxi industry to go the way of the dinosaur. Despite the odds, traditional taxicabs do have the power to stay competitive as long as changes are made. Unfortunately, the odds of such change being made is minimal, if at all. The elected leaders in NYC and New York State are heavily in favor of TNC’s and governor Cuomo’s budget bill that legitimized Uber all across New York State will cause the demise of taxis throughout the state. Time will tell, but one thing I believe for sure is that while the needs and desires of the marketplace created an opportunity for TNC’s, the elected leaders of NYC and New York State have turned their backs on traditional FHV operators. And remember, these FHC operators in NYC who are now facing foreclosure and extinction are the ones who provided transportation in NYC at a time and place in history when it was not so pleasant to do so. (i.e. remember the crack epidemic of the 1980’s and the scene on 42nd Street before Rudy Giuliani came to town). Also, many traditional FHV operators are immigrants who came to this country to live out the American dream. For decades, immigrants lived out the American dream and used their taxi medallions to pay for their kids to go to college. Now, these same immigrants are facing foreclosure of their taxi medallions and financial ruin, all because the NYC regulators failed to do what they were supposed to do in the first place, which is to regulate for-hire vehicles, including Uber. The regulators failed in their jobs and the effects of such failure, whether good or bad, will not be fully known for decades to come.

The Night Shanker saved NYC from Bankruptcy- 1975

On October 16, 1975, New York City was deep in crisis. At 4 p.m. the next day, four hundred and fifty-three million dollars of the city’s debts would come due, but there were only thirty-four million dollars on hand. If New York couldn’t pay those debts, the city would officially be bankrupt.

At the Waldorf-Astoria, in Midtown, seventeen hundred guests were gathering for the Alfred E. Smith Memorial Foundation benefit dinner, a white-tie fund-raiser for the Catholic charities named in honor of Al Smith, a former governor and the first Catholic candidate on a major-party Presidential ticket. As day turned to night, the bad news continued to come in. Banks were refusing to market the city’s debt, which left New York unable to borrow. Federal help was repeatedly refused by President Gerald Ford and his advisers. The only hope left was pension funds. And the only one that had committed to buying the city’s bonds—the Teachers’ Retirement System—was now pulling back.

The mood was grim as New York’s financial and political élite settled in at the hotel to hear the evening’s featured speakers, Robert Moses and Connecticut’s first female governor, Ella Grasso, try their hands at political comedy.

Abraham Beame, who was in his second year as the mayor of New York, was no stranger to the city’s budget and its challenges. During two stints as comptroller, he had seen the drop in manufacturing jobs, the wave of middle-class families moving to the suburbs, and the massive growth of the city’s labor force. He was aware of, and at times condoned, the gimmicks that were used to mask widening budget gaps, such as borrowing against city pension funds to run operating deficits for the city’s buses and subways.

Yet while Beame was described by allies and adversaries alike as kind and honorable, he also seemed paralyzed by the intensifying challenges of his office. Ed Koch, who was serving in Congress at the time and would go on to succeed Beame as mayor, later said “Abe Beame is an accountant, you know, but it’s hard to understand that he has that title.”

A few months before, in mid-April, the city had run out of money for the first time. Governor Hugh Carey was willing to advance state funds to allow the city to pay its bills under the condition that the city turn over its financial management to the state. This led to the creation of the Municipal Assistance Corporation, which was authorized to sell bonds to meet the city’s borrowing needs. (Its detractors referred to it as “Big mac,” because of its authority to overrule city spending decisions.)

The mac, which was chaired by the financier Felix Rohatyn, insisted on significant reforms, including a wage freeze, a subway fare hike, the closing of several public hospitals, charging tuition at the previously free City University, and tens of thousands of layoffs.

But the financial picture continued to deteriorate. Koch remembers hearing testimony before Congress about the city’s fiscal situation and thinking that “it was like somebody escaping from the Warsaw ghetto and saying they’re killing people there. Nobody believed it.”

At the Al Smith dinner, diners were working their way through what was being called a “bicentennial menu,” featuring Maryland terrapin soup and baskets of Colonial sweets. Speeches that had been loaded with humor in past years sounded notes of gloom.

Mayor Beame used his turn on the five-tier dais to excoriate Washington for refusing to bail out New York: “The problems were simpler and less complex in Smith’s day, and there even seemed to be a greater sense of responsibility on Washington’s part.” He then left the dinner to return to the debt negotiations.

Robert Moses, who had previously referred to the city’s leaders as “third-rate men,” simply paid tribute to Governor Smith. Only Governor Grasso tried to infuse some humor, joking that she must have been chosen to speak to the dinner because she was Italian, and that the cardinal and all the bishops “have been working for my people for many, many years.”

By ten o’clock, Rohatyn and others had learned that the Teachers’ Retirement System wouldn’t invest in more mac bonds. The Teachers’ trustee, Reuben Mitchell, said, “We must watch that investments are properly diversified, that all our eggs aren’t put in one basket.” Governor Carey left the dinner and phoned state and federal leaders with a simple message. Default was imminent.

The governor placed another call that night, summoning to his office a developer named Richard Ravitch, who had been serving as a minister without portfolio for the governor. When Ravitch arrived at the governor’s office, Carey was still in white tie. He told Ravitch to find Al Shanker, the powerful head of the teachers’ union, and convince him to buy the bonds that would save the city. A car and driver were waiting outside.

In his memoir, Ravitch would later write that when he got to Shanker’s apartment, Shanker “was genuinely distressed by his decision not to buy mac bonds. He knew the risks to the city, but he believed his primary obligation was his fiduciary responsibility to his teachers. As city employees, they had already been put at risk by the city’s fiscal crisis. It was no small thing to make their pension money subject to the same risk.” They talked until five o’clock that morning, but reached no consensus.

At the same time, Mayor Beame, convinced that there would be no stay of financial execution, had assembled a small team in the basement of Gracie Mansion. Ira Millstein, then a young lawyer at Weil, Gotshal, & Manges, prepared the legal filing.

Sid Frigand, the mayor’s press secretary, recalled the point at which the conversation turned not from if the city would go under but how. “We needed to figure out which services were essential, and which weren’t,” he said. “It was an interesting exercise because when you think of what is essential and what is not essential that there are functions of public service that we don’t know about that are very essential. Bridge tenders who raise and lower bridges were essential. Teachers weren’t life-or-death. Hospital services and keeping the highways open were essential.”

As the mayor’s team was making the list, Sid remembers looking over and seeing Howard Rubenstein writing on a pad of paper. Rubenstein was a sort of unpaid booster for New York City who was making his living doing public-relations work for many of the city’s real estate developers and unions. This magazine would later describe him as “ubiquitous, trusted, a kind of gentle fixer for those who run New York.”

Rubenstein and Beame were friends. At one point in the late sixties and early seventies, Rubenstein had lived across the street from Beame, in Belle Harbor, Queens. One of Rubenstein’s more vivid memories is seeing Beame on the beach, tucking a series of folded papers into his bathing suit. Rubenstein asked what they were, and Beame showed him that each was covered with tiny handwriting: he was writing a platform for his mayoral run. Here’s my program,” Beame said. Rubenstein’s response: “What happens if you go in the water?”

In 1974, on the power of that platform, Beame became mayor. And now, less than two years later, Beame was about to announce the bankruptcy of America’s richest and largest city.

As October 16th became October 17th, the mayor’s team was in constant contact with the mayor’s Contingency Planning Committee as they sought to determine how, exactly, a bankruptcy would play out. Police, fire, sanitation—those were essential. Hospital and emergency care were, too. But what would the mayor say? Rubenstein was working on the mayor’s statement. Even in the moment of crisis, there was some score settling. Beame had no love for the comptroller and wanted him implicated in the bankruptcy. The first words of the statement read, “I have been advised by the Comptroller that the City of New York has insufficient cash on hand to meet debt obligations due today.…”

Rubenstein handed Beame the statement after many hours of work. The mayor looked at it, said nothing, and nodded. Rubenstein had it typed up. At 12:25 a.m., Beame attempted to call President Ford to advise him that default was imminent. Ford was asleep.

On the morning of October 17th, New Yorkers woke to a series of grim headlines. (“Balk by UFT pushing city to default,” in the Staten Island Advance; “Teachers Reject 150-Million Loan City Needs Today,” in the New York Times.)

The city ordered the sanitation department to stop issuing payroll checks, and one bank said it would not cash city payroll checks unless they were drawn on an account held by the bank itself.

New York City’s bonds, issued by the mac, plunged to between twenty dollars and forty dollars per thousand-dollar face value, and city note-holders began to line up at the Municipal Building in an attempt to redeem whatever they could. That morning, Rohatyn told the press that everything hinged on the teachers’ union: “The future of the city is in their hands.”

It was more than just the future of one city. New York’s bonds were held by banks throughout the United States and around the world. By some estimates, New York’s default would bring down at least a hundred banks, and expose others to liability for selling suspect or fraudulent products.

Economists warned that New York’s default would hurt the dollar abroad. The Dow dropped ten points at the opening bell, the price of gold began to rise, and, as reported by the United Press International wire service, “trading of bonds of other cities and states slowed to a near standstill, and even the prices of most credit-worthy bonds fell.” One newspaper in North Carolina ran a cartoon of a bum lying on trash, under the Brooklyn Bridge, with the caption, “We’re going down, America, and we’re taking you with us.”

President Ford began hearing from leaders around the world about the dangers of a New York default. His press secretary, Ron Nessen, said that Ford would continue to monitor the situation throughout the day, but wouldn’t change his mind about granting assistance to the city. In Nessen’s words, “This is not a natural disaster or an act of God. It is a self-inflicted act by the people who have been running New York City.”

Al Shanker, just a few hours removed from his meeting with Dick Ravitch, now went to Gracie Mansion to meet with Mayor Beame and former Mayor Robert Wagner. That meeting, too, yielded no consensus.

In the late morning, with the city’s 4 p.m. deadline looming, Shanker asked Governor Carey for another meeting. But since Carey’s office was swarmed with reporters, Shanker asked if they could meet somewhere private. Ravitch’s apartment, at Park Avenue and Eighty-fifth Street, was between Gracie Mansion and the governor’s office.

Ravitch still remembers how unprepared he was to host such a high-level meeting. There was so little food at his apartment that Harry Van Arsdale, the head of the New York Central Labor Council, began eating matzo he had found in the cabinet.

The teachers’ union was in a bind. Shanker later called it blackmail. If the city went bankrupt, a judge could order thousands of teacher dismissals, undo the raises the teachers had recently negotiated, and override any pension laws, stripping retirees of their pension checks.

Three hours into the meeting, Shanker left to meet with the Teachers’ Retirement System. Ravitch remembers that the only evidence of the momentous decision that had just taken place in his apartment was a trail of matzo crumbs.

At 2:07 p.m., the teachers’ union announced that it would reverse course and would make up the city’s hundred-and-fifty-million-dollar shortfall with their pension funds. “No one else was coming forward to save the city,” Shanker said.

The mayor’s statement, prepared by Rubenstein, was never read. Published for the first time here, it speaks in a workmanlike way to how grim a bankruptcy could have been. Only at the end is there a rhetorical flourish, referring to New York’s “great and continuing promise.”

The entire original article written by Jeff Nussbaum can be found here https://www.newyorker.com/news/news-desk/the-night-new-york-saved-itself-from-bankruptcy

When will the Elected Leaders of the State and City of New York Learn from Its Past Mistakes?

During the 1920s and 1930s, easy entry into the taxi cab industry led to an oversupply of taxis, resulting in traffic congestion, fare-cutting wars, low driver wages and other unsafe and sometimes illegal activities. The Great Depression created an influx of unemployed workers which worsened these problems, with the number of cabs spiraling to 21,000 in 1931.

To address problems of oversupply, in 1937 the City of New York enacted the “Haas Act” (sponsored by City Alderman Lew Haas) in order to freeze the number of taxi medallions. In 1996, 2004 and 2006, the City auctioned off a total of 1450 medallions. Thus, by 2012 the total cap was set at 13,237. While being a passenger in a taxi was not always the most pleasant of experiences, it was just another option for the millions of New York City residents and the multi millions of City visitors to obtain transportation for-hire on demand. Of course, demand always exceeded the supply of available taxis. That is why the value of the yellow medallion soared from $10 in 1937 to approximately $1,000,000 (one million dollars) in 2012. The purchase of the yellow medallion was one the best, if not the best investment in the world. It also provided many immigrants with the ability to realize the “American Dream”.

While the yellow taxis have traditionally served those persons who live and seek transportation in Manhattan, the non-medallioned “livery” industry has always served the residents of the 4 outer boroughs of New York City. The residents of Brooklyn, Queens, the Bronx and Staten Island always had a reliable car service to call to obtain transportation by pre-arrangement. By 2012, the livery industry has some 38,000 licensed drivers in 23,000 vehicles that were affiliated with approximately 450 bases.

As far back as January 2011, Mayor Bloomberg first proposed allowing non-medallioned livery vehicles to accept street hails (i.e., a person standing on the street waving to vacant taxicabs to be picked up, as opposed to a trip pre-arranged by telephone or other means) outside of Manhattan. With the help of the Mayor Bloomberg and then TLC Commissioner Yassky, the State legislature created a law, later known as the “Street Hail Law” that allowed the Mayor to issue up to 2,000 new taxicab medallions and allowed the TLC to issue 18,000 “HAIL licenses,” valid for street hails outside the Manhattan Central Business District. Thus, the creation of the green taxicab. These granny apple green cabs were supposed to provide the residents of the 4 outer boroughs of New York City with more transportation options.

Those who had been heavily involved in the for-hire transportation industry and knew much more than the elected leaders in Albany about what was good and what was bad for the transportation industry in New York City were essentially ignored. The leaders of the taxi and livery industry knew that the Mayor’s proposal and the state’s new law was a bad idea and vigorously fought it all the way to the New York Court of Appeals, New York State’s highest court. The Court of Appeals upheld the law as it is required to give great deference to enactments of the State Legislature when it comes to matters of health, safety and welfare of its citizens. Of course, transportation always involves the health, safety and welfare of the citizens of New York State and New York City.

On the implicit promise from the City of New York that these green cabs would be money makers, similar to the yellow medallions, and because the City was offering incentives for green cabs retrofitted to accommodate passengers in wheelchairs, many small time investors bought into this bad bill of goods. A new generation of immigrants who were looking for the same “American Dream” that their predecessors did via the yellow medallion, bought into the green cabs. All the while, there was this little know company named Uber that was lurking in the background.

The leaders of the taxi and livery industry knew at the time that Uber was operating illegally. They surely complained to the City Council, the TLC, the New York State Attorney General and even the Federal Trade Commission. All elected leaders and those in power ignored the pleas of the leaders of the taxi and livery industry to stop Uber from operating illegally. It was not a matter of Uber taking away business from the yellow taxis and the livery bases, but a matter of fairness. Two entities that provide the same service were being treated differently. The taxi and livery industry have always been heavily regulated, but Uber was not being regulated. This created an unfair playing field that is the antithesis of our American way of life that has thrived on fair play and substantial justice. This was the seed of the downfall of the industry. The City’s failure to regulate Uber created a vacuum that allowed it to expand in ways that Uber surely planned, but the City’s leaders refused to acknowledge.

The elected leaders of the City and the TLC took no action to regulate Uber. They all bought into Uber’s claim that they were not a transportation company, but a technology company. While I believe that Uber’s technology was surely excellent, I also believe in the old saying of don’t pee in my ear and tell me it is raining. By the time the City and the TLC got around to regulating Uber, it had become a behemoth with money, political power and influence. In no time at all, Uber’s fleet of vehicles eclipsed the number of yellow taxis….and then some.

I and many of my friends and colleagues in the for-hire vehicle industry pled to the City Council Transportation Committee and the Mayor to place a temporary cap on the growth of Uber until all interested parties could get a handle on what the effects of Uber were likely to be. The City’s leaders took no action and the City’s transportation regulators even took affirmative action to let Uber thrive. Before Uber’s explosive and unchecked growth, the yellow taxi industry was still doing well and the livery industry too. Then the TLC allowed a driver of a for-hire vehicle to accept dispatches form more than one base. This old requirement that a livery or black car vehicle be affiliated with only one base and its driver only be allowed to accept dispatches from that base was created for the safety of the public. All of a sudden, without any real reason or justifiable explanation, the TLC allowed drivers to accept dispatches from bases in which there was no affiliation. This was the equivalent of the ability to mint 18 carat gold bars for Uber because it allowed them to send dispatches to virtually anyone it wanted and thus expand its fleet in ways that few, except Uber, ever imagined.

Today, Uber and other companies such as Lyft, have an army of nearly 50,000 licensed vehicles that transport hundreds of thousands of people across the city every day. Uber and Lyft are rapidly transforming transportation in New York. They not only threaten the existence of the taxi industry, but they siphon passengers away from subways and buses, all while raising concerns over worsening street congestion. According to city data, the proliferation of Uber and Lyft appear to be contributing to increasingly gridlocked streets. Average travel speeds in the heart of Manhattan dropped to about 8.1 miles per hour last year, down about 12 percent from 2010. Uber and Lyft are also succeeding at the expense of others. The Metropolitan Transportation Authority has taken a hit to its budget because it receives financing from a 50-cent surcharge on taxi trips. Officials at the MTA say the shift from taxis to Uber has cost the MTA about $28 million since 2014.

So back to the taxis industry. Many of those who invested in yellow or green cabs have seen their investments wiped out. For-hire vehicle drivers are flocking to Uber with their false promise of making large sums of money all while being your own boss. Since 2013, approximately 5,000 taxi drivers have thrown in the towel. Those who own yellow medallions are either barely paying their loans back or are in foreclosure. Last month Queens-based Melrose Credit Union, one of the largest lenders of money to those who purchased taxi medallions, was seized by state after delinquent taxicab loans soared tenfold in just 18 months. The stock price of another one of the City's taxi lenders, Medallion financial Corp., has fallen so far that one share of its stock now costs less than a ride on a NYC subway. And lets not forget that the City itself has a financial interest in the sale of medallions as it takes a 5% transfer tax on each sale/transfer. This is much less money to go to the City coffers.

Moreover, the drivers that have flocked to Uber and Lyft are not looking at the big picture. Uber has made its plans to develop a self-driving vehicle very clear. In other words, the day will come very soon, when Uber will no longer need drivers. Then the for-hire vehicle drivers will have no work. The taxi industry will be on life support or dead and the out of work drivers will then cause the unemployment lines to swell.  Worst of all, the public just does not see the ills inherent in Uber and Lyft. Their explosive growth was made possible by luring riders away from taxis and the traditional modes of for-hire vehicle transportation (livery/community car services) with artificially low prices because they are being subsidized by a massive influx of cash by large pocketed investors. Uber has engaged in anti-competitive conduct since its inception. Competition has always been good for the consumer as it keeps prices low and the incentive to innovate high. This is why the law prohibits monopolies. So all while Uber and Lyft take all measures necessary to kill off the competition, they continue lure the public to their apps.

The public and the elected leaders of the City and State need to wake up and realize that at some point in the near future, the combination of significantly reduced competition with the eventual need for Uber to turn a profit, will lead Uber to drastically increase prices. When Uber has little or no competition, what options will the public have? Taxis may very well be gone, community car services will slowly be wiped out and the MTA is always in disarray, financial and otherwise. Uber will then be in the position to raise prices to whatever it wants and will be able to fleece the pockets of anyone with a smartphone. If we stay on this path, the public will have two options. One is to walk to their destination or be financially raped by Uber. Neither sounds like a very good option to me. And what will the elected leaders do then? Will they seek to regulate the prices of Uber trips? Will they create further regulations to stagnate the vitality of for-hire transportation in the City? Will they do nothing and just let the public deal with the problems? At this point in time, all I know is that the City and State have not learned the lessons from their past errors and mistakes. Someone needs to force the elected leaders of the City and State to open their eyes…or perhaps the public should just vote those with blinders on out of office.  

So at this point in time, what can the public do, short of voicing their opinion through the power of the ballots? The public can support their tried and true local car service. Don’t turn your backs on the liveries that provided transportation to the City during a past time in recent history, such as the late 80‘s and early 90s, when it was unsafe and unpopular to so, especially in the outer boroughs. Car services such as Carmel Car and Limousine Service and Dial 7 Car and Limousine Service have been in business since the late 1970's/early 1980’s and have apps that are just as good as the one created by Uber and Lyft. Carmel and Dial 7 have been there for the public in its time of need and now the public should return its loyalty to Carmel and Dial 7, and other livery bases, by refusing to utilize Uber and Lyft. Support your local car service is akin to only buying American made goods. Sometimes it may be hard to do so, but in the end, who will be the loser by continuing to use Uber which will allowing Uber to kill off the competition. The public will suffer. I speak my peace not because I have the magic 8 ball that allows me to see into the future, but because I care. I take the time to think about the future of our City, the needs of the public and the path to destruction that the transportation industry is now on. I hope that some elected leaders take a good long look at history, think about what I am saying/preaching in this article and give my opinions its due consideration and not let campaign donations and the desire to stay in office cloud their judgment. I also hope that members of the public think about what I am saying and use your good sense to realize that Uber is not the solution, but is the problem. 

The Reign of the Yellow Cabs is Surely OVER...but What Will the Riding Public Do When Uber is the Only Game in town?

The reign of the yellow cab in NYC is surely over. While the yellow cab itself may be a symbol of the city itself, the actual number of yellow taxis on the road is dwindling. The yellow cab may be as synonymous with New York as pizza, Broadway and the Empire State Building, but for more and more people, it is no longer the ride of choice. The yellow cab was once the main alternative to subways and buses, hailed by rich and poor alike. Cabdrivers were a kind of ambassadors of the streets. But the Yellow cab owners did not see what havoc that was going to be caused a few years back by a new form of technology. Now, fleets of cars are summoned by an army of "ride-hailing apps" like Uber and Lyft.

The yellow cab numbers are comparatively bleak: today, there are 13,587 yellow cabs on New York City streets. The total number of black cars: 60,000, more than 46,000 of which are connected with Uber, though they may be hooked up to other car services as well. Back in the pre-Uber days (the good ole days) around 2010, yellow cabs made 463,701 daily trips and brought in $5.17 million in fares during the month of November alone. Six years later, the numbers have not just dropped, but yellow cabs are on a fast downward trajector.

Uber and Lyft have flooded neighborhoods where taxis once flourished. And they appeal to a new generation of tech-skilled riders who live on their phones, ordering everything from groceries to books and movies. Uber and Lyft  (the so called “Ride-hailing apps) have gained a huge market share in a short period of time. They have expanded the market tremendously, but have also stolen market share from taxicabs and all other for-hire vehicle services alike. Yes, I said stole because they entered the market and operated illegally for so long that by the time the NYC Taxi and Limousine Commission got around to regulating them, it was too late to do anything. The means by which the public can obtain for-hire transportation has changed along with the expectations of the riding public. The new generation of tech-skilled riders want pretty much what everyone else wants, transportation on demand. 

Black cars have long served Wall Street banks and law firms, but they were not for casual or last-minute users because they had to be prearranged. Traditional livery services primarily provide transportation to those in the people who live in the outer boroughs of NYC. Both the liveries and the black cars have been hit hard  by the rise of Uber. Many of the long standing car services, like Carmel Car and Limousine Service, have been able to overcome the "Uber challenge" and adapt by having an app of its own that provides pre-arranged transportation and what also amounts to transportation on demand.  

While the yellow taxis have ben hit hard, the livery and the black car bases have been harmed as well and such harm to the car services has caused harm to the public in ways that most people are not aware. Since traditional livery services primarily provide transportation to those in the people who live in the outer boroughs of NYC, the rise of Uber has caused many drivers to deflect from the traditional car services in order to drive for Uber. This has caused those people who live in Queens, Brooklyn and the Bronx to have less means available for transportation. Unlike in Manhattan, not everyone who lives in Queens, Brooklyn and the Bronx (and Staten Island too) have quick access to the subway or other public transportation. These residents have always relied upon livery bases to provide reliable transportation. Contrary to popular opinion, Uber is not so readily available in Queens, Brooklyn and the Bronx. So what are those residents supposed to do to get to work, to the doctor and to the food store. 

Fortunately, some car services, like Carmel, have been able to adapt to the changing needs of the public and continue to provide the arrangement of safe and reliable transportation for the riding public. But this is not true of all livery bases. Many have either died or are dying a slow death. They don't have the money or technology to compete with Uber. Just like the taxi's, some car services have been rendered irrelevant. 

While most people will take a hands off approach and say that if Uber is winning the transportation game by having a better product and service, then so be it. But the problem is that it is not that Uber's service is better than anyone else, but that Uber has gotten to where it is by competing on a unfair playing field. Uber has engaged in many underhanded tactics in order to lure drivers away from other car services and to get people to use their service rather than the service of the long standing car services. The Federal anti-trust laws were set in place in the late 1800's in order to prevent illegal monopolies and unfair competition. The problem is that the NYC government and the NYC Taxi and Limousine Commission let Uber operate in an unregulated manner for so long, that it expanded in ways that those who are properly regulated, were not permitted to do so. This is tantamount to improper favoritism by a municipal entity. This is not competition on the merits, but an un level playing field that the City of New York was instrumental in causing.  

 In the old days, taxis were the only ones allowed to pick up people on the street. But now, with smartphone apps that can dispatch cars in minutes, there is little practical distinction between taxis and Uber. This is the whole point....while there is little practical difference between the means by which Uber and other for-hire vehicles operate, the New York State government, and particularly the governor, is trying to push legislation forward that will allow Uber to essentially operate throughout the state with very little if any regulations. It is important to keep in mind that compliance with regulations is a large cost of doing business for the for-hire transportation industry. If Uber does not have to be regulated or regulated in the same manner as other for-hire transportation providers, then the State Government is also seeking to become complicit in creating an unloved playing field between Uber and all other for-hire transportation providers. 

In the end, this un level playing field is going to be detrimental to the riding public. Most people do not see it just yet, but consider this: what will the riding public do when Uber is the only game in town? and what will the riding public do when Uber decides to no longer subsidize the cost of trips for the public. When Uber becomes a true monopoly and there is no other service available, do you think Uber will still charge competitive prices. Of course not. They will squeeze every last nickel from the riding public and there will be nothing anyone can do about it. Then the public will have no choice but to pay the high prices Uber will demand. This is true because the public has become so heavily reliant on obtaining transportation on demand that they will pay the high costs, but what about those who previously relied on the car services in the outer boroughs for transportation. Livery services that used to be the low cost means by which those in the outer boroughs relied upon, will not get transportation because the car services they used will be gone and this sector of the public will not be able to afford to use Uber. 

So service expands in Manhattan but severely contracts in the outer boroughs. Isn't this what happened with the yellow cabs? They became a government backed monopoly that provided service primarily only in Manhattan and had no incentive to innovate and provide better service. So what will Uber do when it is the only game in town. They will not only charge high prices for transportation, but will have less incentive to make their app more user friendly to the public....and once again the cycle continues.... with the public having little choice in service providers and being forced to pay high prices. The difference here is that the City and State Government have taken away the government backed monopoly of the yellow cabs and made Uber a defacto government backed monopoly.  

Lets face it, the yellow cab industry is in sharp decline and long standing car services being forced from the market because Uber pays politicians to write laws that are favorable to them....and the politicians are all too happy to take campaign contributions from Uber. That’s it. End of the game. Politicians who make the laws are favoring one company over another and are seeking to change the laws to allow Uber to operate essentially how Uber sees fit. The best thing that the riding public can do is to contact their local City Council member and the elected officials in the Assembly and Senate in order to express frustration and outrage over what the state is proposing. Write a letter to your elected official, make a call or do anything to bring awareness to the public of the ills that Uber is causing. 

Remember, it is you, the riding public, that elects the officials that are allowing Uber to wreak havoc on the for-hire transportation industry. You have the right to call them up and tell them your opinions. You have the right to vote for someone else who does not so obviously favor Uber. You can do many thing, but the option to do nothing is not a good option because doing nothing now will only cause problems later on. Remember the old saying...you can ignore your problems, but ignoring them will not cause your problems to go away. 

Take a look into the future and think for a moment what will happen when Uber is the only game in town. In the 1800's, Standard Oil was essentially the only game in town and look how they caused harm to the public. This is why the US Supreme Court ordered Standard Oil to be broken up into many smaller entities. Because consolidation of power in the hands of one is a danger to the public that is anathema in our democratic society. 

How risky is your Uber ride? Much More than you think

An Uber ride is different from hopping into a taxi or a traditional car or limousine service. When you download Uber's app and get into a car summoned with the mobile reservation system, you agree to a host of terms and conditions by default. Uber claims it puts potential drivers through a background check so that they can become an impromptu taxi driver using their own car and Uber's tech platform. The incidents, injuries, assaults and accidents involving Uber drivers and the riding public are too numerous to detail. But the real issue is that the public should understand Uber's responsibility to passengers (or lack thereof).

What exactly do passengers agree to when they use Uber? That depends on whom you ask. Most people don't know what they're getting into when they get into one of these Uber cars and they surely don't know what they're getting into when they download the app. The public is essentially giving Uber a free pass -- up to and including possible death.

Uber's terms and conditions are a way for the company to absolve itself of any liability in cases of injury or accident and to avoid responsibility for a driver's actions. It is a way for Uber to attempt to cover their ass and claim they are not responsible for anything that happens to you. Uber's public statements on safety contradict its terms and conditions. It is akin to an outright deception on people. They surely do not in any way seek to warrant that their product/service is safe.

The fine print of Uber's  terms and conditions clearly says that passengers accept a risk by using the service. "You understand, therefore, that by using the application and the service, you may be exposed to transportation that is potentially dangerous, offensive, harmful to minors, unsafe or otherwise objectionable," Uber's terms and conditions read, "and that you use the application and the service at your own risk." Lyft essentially operates the same way as Uber.

In essence, Uber and Lyft are basically trying to show through their terms of use that they are ride-matching services, rather than transportation companies. No one is really buying that they are merely tech platforms, but people continue to use these services without knowing the true potential dangers

While there are some Uber and Lyft drivers that are safe, courteous and competent, several incidents have occurred during the past few years that have called into question the safety of the services. The most severe incident was the death of 6-year-old Sophia Liu, who was  struck and killed by an Uber driver on New Year's Eve in San Francisco. There have also been more than a dozen allegations of sexual assault and gropingkidnapping; and physical assault, according to several media stories.

Uber claims its drivers are independent contractors rather than employees, which if true, it protect Uber from liability. But the company's terms and conditions can be trumped in court if it's shown that Uber exercises a certain amount of direction and control over its drivers and they more are akin to employees. Such factors of control include the ability to hire and fire drivers, decide where their services are performed, or provide them with specialized equipment, along with other considerations -- many of which, some would argue, including myself, Uber has.

Soon enough, the time will come when the issue of whether Uber's drivers are independent contractors or employees will hit the appellate courts and if it goes bad for Uber, then their entire business model may be placed in grave danger...the same type of grave danger that Uber often places its customers.....the danger of death.