When “Disruption” Collides with Accountability: Holding Ridesharing Companies Liable for Acts of Their Drivers

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When “Disruption” Collides with Accountability: Holding When “Disruption” Collides with Accountability: Holding

Ridesharing Companies Liable for Acts of Their Drivers Ridesharing Companies Liable for Acts of Their Drivers

Alexi Pfeffer-Gillett

Washington and Lee University School of Law

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Alexi Pfeffer-Gillett, When Disruption Collides with Accountability: Holding Ridesharing Companies Liable

for Acts of Their Drivers, 104 Calif. L. Rev. 233 (2016).

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233

When “Disruption” Collides with

Accountability: Holding Ridesharing

Companies Liable for Acts of Their

Drivers

Alexi Pfeffer-Gillett*

When Uber launched in San Francisco in 2010, it took the city

by storm. Here was a high-tech transportation service that seemingly

did everything better than taxicabs: it was more convenient, more

accessible, more comfortable, and even cheaper in many instances.

Uber’s initial success inspired a number of lower-cost, non-

professional “ridesharing” options, which have flourished.

Some skeptics, including taxicab operators, have decried the

arrival of these peer-to-peer ridesharing services, now classified by

regulators as Transportation Network Companies (TNCs). While

such complaints could be easily dismissed as the dying groans of a

“disrupted” industry, a string of passenger safety incidents has

raised doubts about whether these services are ready to safely

replace traditional transportation services.

One critical gray area for consumers is whether injured parties

can recover from TNCs rather than their drivers alone. This Note

argues that TNCs should be liable for acts of their drivers, and it

provides a novel approach—the nondelegable duty rule—that has yet

to be argued by plaintiffs in existing cases. Such an approach will

place responsibility where it should be: on the companies profiting

from the drivers and passengers. More importantly, preventing TNCs

from exploiting regulatory loopholes has broader implications for the

rapidly growing “sharing economy.”

DOI: http://dx.doi.org/10.15779/Z380854

California nonprofit corporation. CLR and the authors are solely responsible for the content of their

publications.

* J.D. Candidate, University of California, Berkeley, School of Law, 2016. Special thanks to

Kathryn Abrams, Chris Hoofnagle, Joseph Lavitt, Ted Mermin, and Saira Mohamed for their feedback

and encouragement.

234 CALIFORNIA LAW REVIEW [Vol. 104:233

Introduction ...................................................................................................... 234!

I. The Challenge of Classifying TNCs and Their Drivers ............................... 239!

A.! TNCs as Online Platforms ............................................................ 240!

B.! TNCs as Employers ...................................................................... 242!

1.! The Presumption in Favor of an Employment Relationship .. 244!

2.! The Case Against Respondeat Superior Liability ................... 244!

a.! Visual Representations .................................................... 245!

b.! Accountability to Dispatcher ........................................... 246!

c.! Vehicle Ownership .......................................................... 247!

d.! Non-Competes and Other Contractual Provisions ........... 248!

e.! Termination ...................................................................... 249!

3.! Driver Victories over TNCs .................................................... 250!

II. The Promise of the Nondelegable Duty Doctrine ....................................... 252!

A.! TNC Drivers as Independent Contractors ..................................... 254!

B.! Public Franchise or License .......................................................... 255!

C.! Risk to Public Safety .................................................................... 259!

III. Policy Recommendations .......................................................................... 262!

A.! Background Checks ...................................................................... 262!

B.! Employment Status ....................................................................... 263!

C.! Public Representations .................................................................. 263!

D.! Minimum Time Requirements ...................................................... 264!

Conclusion ....................................................................................................... 266!

INTRODUCTION

On New Year’s Eve of 2013 in San Francisco, a driver for the popular

“ridesharing” service uberX failed to yield to a six-year-old girl and her family

at a crosswalk.

The driver struck and killed the little girl and left the mother

and brother injured.

The parents of the girl sued not only the driver but also

Uber Technologies, LLC, uberX’s parent company.

According to their

complaint, the uberX driver hit and killed the girl while he was logged into

Uber’s phone application and searching for customers.

The girl’s mother has

since stated that she could “see the light from the cell phone” cast on the

driver’s face immediately before the accident.

The case implicated

1. David Streitfeld, Rough Patch for Uber Service’s Challenge to Taxis, N.Y. TIMES (Jan. 26,

2014), http://www.nytimes.com/2014/01/27/technology/rough-patch-for-uber-services-challenge-to-

taxis.html [http://perma.cc/4YQT-CWRZ].

2. Id.

3. Complaint for Damages and Demand for Trial by Jury at 1, Liu v. Uber Techs., Inc., No.

CGC-14-536979 (Cal. Super. Ct. Jan. 27, 2014) [hereinafter Liu Complaint].

4. Id. at 5.

5. Brad Stone, Invasion of the Taxi Snatchers: Uber Leads an Industry’s Disruption,

BLOOMBERG BUSINESSWEEK (Feb. 20, 2014), http://www.businessweek.com/printer/articles/184857-

invasion-of-the-taxi-snatchers-uber-leads-an-industrys-disruption [http://perma.cc/QWB9-KVK8].

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 235

California’s distracted-driving law

and, more importantly for the plaintiffs,

whether Uber could be held liable for the negligence of one of its drivers.

Uber immediately attempted to distance itself from any responsibility for

the girl’s death. In a statement released the following day, Uber first extended

condolences to the family of the girl, but then noted: “The driver in question

was not providing services on the Uber system during the time of the

accident.”

In other words, the company did not consider a driver logged into

Uber’s phone application and searching for fares to be “providing services” on

its behalf. Of course, to the grieving family, this technicality was irrelevant.

The driver may not have been actually transporting or on his way to transport

anyone, but he was benefitting Uber by making himself available for passenger

ride requests.

The New Year’s Eve death may be the highest profile incident for

ridesharing services, but it is far from the only one for these companies, which

are now classified by California regulators as Transportation Network

Companies (TNCs). Uber customers have alleged numerous incidents of driver

misconduct, including driver negligence,

sexual harassment,

and even

kidnapping.

And a Chicago Tribune investigation revealed that Uber failed to

properly screen criminal records of “thousands of drivers,” letting them operate

on Uber’s service “despite not knowing whether or not they had felony

convictions.”

Meanwhile, Lyft, another TNC, experienced its first passenger

6. CAL. VEH. CODE § 23123 (West 2014).

7. See, e.g., Carmel DeAmicis, Exclusive: Uber Driver Accused of Assault Had Done Prison

Time for a Felony, Passed Background Check Anyways, PANDO (Jan. 6, 2014),

http://pando.com/2014/01/06/exclusive-uber-driver-accused-of-assault-passed-zero-tolerance-

background-check-despite-criminal-history [http://perma.cc/4LWS-SQMW]; Stone, supra note 5;

Kale Williams & Kurtis Alexander, Uber Sued over Girl’s Death in S.F., S.F. CHRONICLE (Jan. 28,

2014), http://www.sfgate.com/bayarea/article/Uber-sued-over-girl-s-death-in-S-F-5178921.php

[http://perma. cc/BNJ8-4N9B].

8. Andrew, Statement on New Year’s Eve Accident, UBER BLOG (Jan. 1, 2014),

https://blog.uber.com/2014/01/01/statement-on-new-years-eve-accident [https://perma.cc/VK3K-

BA5E]. In response to general criticisms about the Uber application’s potential to distract drivers,

Uber’s CEO stated: “[T]he technology Uber provides its partners is far safer than anything the taxi

industry offers.” Stone, supra note 5.

9. See, e.g., Complaint at 2–3, Bishop v. Uber Techs., Inc., No. 37-2014-00037935-CU-PA-

CTL (Cal. Super. Ct. Nov. 5, 2014) [hereinafter Bishop Complaint].

10. Olivia Nuzzi, Uber’s Biggest Problem Isn’t Surge Pricing. What If It’s Sexual Harassment

by Drivers?, DAILY BEAST (Mar. 28, 2014), http://www.thedailybeast.com/articles/2014/03/28/uber-s-

biggest-problem-isn-t-surge-pricing-what-if-it-s-sexual-harassment-by-drivers.html [http://perma.cc

/8JLM-VDC5].

11. Julie Zauzmer & Lori Aratani, Man Visiting D.C. Says Uber Driver Took Him on Wild

Ride, WASH. POST (July 9, 2014), http://www.washingtonpost.com/blogs/dr-gridlock/wp/2014/07/09

/man-visiting-d-c-says-uber-driver-took-him-on-wild-ride [http://perma.cc/S3C9-BU9Z].

12. Leonor Vivanco & Cynthia Dizikes, Gaps in Some Ride-Sharing Firms’ Background

Checks, CHI. TRIB. (Feb. 14, 2014), http://articles.chicagotribune.com/2014-02-14/news/ct-rideshare-

background-checks-met-20140214_1_background-checks-ride-sharing-drivers [http://perma.cc/H3TA

-8MU5]. Uber released a statement, on the same day, that it had had improved its background checks

and deactivated the driver revealed by the Tribune to have a prior felony. Nairi, Statement on Chicago

236 CALIFORNIA LAW REVIEW [Vol. 104:233

fatality on November 1, 2014.

Despite these recent incidents, there is still

scant, if any, case law addressing whether TNCs can be liable for tortious acts

of their drivers.

Given such a void, this Note addresses TNC liability in a way

that reflects the unique nature of the services these companies provide and their

distinctive employment arrangement with drivers.

The issue is an important one because TNCs, and the sharing economy

generally, are growing at a rapid—and largely unchecked—pace. When Uber

launched in San Francisco in 2010, it took the city by storm. It was a high-tech

service that seemingly did everything better than taxicabs: it was more

convenient, more accessible, more comfortable, and even cheaper in many

instances. Uber’s initial success inspired lower-cost, nonprofessional

“ridesharing” options—including uberX, Lyft, and Sidecar—which have

flourished. These services are able to operate cheaply, at least in part, because

the drivers (unlike taxicab drivers) carry noncommercial licenses and use their

personal vehicles rather than company cars.

In addition, passengers and

drivers find each other using a phone application, cutting out the need to

employ full-time dispatchers.

But harsh realities are beginning to catch up to TNCs. Taxicab operators

have rebelled against TNCs since their inception, arguing that they unfairly

benefit from loopholes and a lax, if not completely nonexistent, regulatory

framework. Many commentators initially dismissed these complaints as the

dying groans of an outmoded industry that had been successfully “disrupted,”

business speak for when a new market entrant overtakes an existing industry by

UberX Background Check, UBER (Feb. 14, 2014), https://blog.uber.com/chiuberxbackgroundcheck

[http://perma.cc/JS7Z-ZL99]. In addition to the risk of noncompliance, California and other states

require TNCs to conduct significantly less rigorous background checks than those required of taxicab

companies. See DeAmicis, supra note 7. The appropriateness of conducting pre-hiring background

checks for felonies is certainly debatable, but it is outside the scope of this Note.

13. Ellen Huet, Lyft’s First Fatality: Passenger Dies in Crash Near Sacramento, FORBES

(Nov. 2, 2014), http://www.forbes.com/sites/ellenhuet/2014/11/02/lyfts-first-fatality-passenger-death-

crash-sacramento [http://perma.cc/3HVA-GQBG].

14. The case over the Uber driver’s New Year’s Eve accident, for example, ultimately settled,

leaving the question of Uber’s legal liability unanswered. See Dan Levine, Uber Settles Wrongful

Death Lawsuit in San Francisco, REUTERS (July 15, 2015), http://www.reuters.com/article/2015

/07/15/us-uber-tech-crash-settlement-idUSKCN0PO2OW20150715 [http://perma.cc/U829-P46G].

15. See infra Part II.B.i.

16. See infra Part II.B.i.

17. See, e.g., Nick Bilton, Disruptions: Ride-Sharing Upstarts Challenge Taxi Industry, N.Y.

TIMES (July 21, 2013, 11:00 AM), http://bits.blogs.nytimes.com/2013/07/21/disruptions-upstarts-

challenge-the-taxi-industry [http://perma.cc/Y5RC-F8WH]. Indeed, ridesharing has undercut the

taxicab industry: in San Francisco, for example, the average number of rides per month dropped by

nearly 65 percent from March 2012—when ridesharing services were just starting—to September

2014. Jessica Kwong, Report Says SF Taxis Suffering Greatly, S.F. EXAMINER (Sept. 16, 2014),

http://archives.sfexaminer.com/sanfrancisco/report-says-sf-taxis-suffering-greatly/Content?oid

=2899618 [http://perma.cc/CFM9 -5DS5].

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 237

harnessing technology in novel ways or creating a new business model.

The

complaints and passenger safety incidents, though, have undermined the idea

that ridesharing services are ready to replace traditional taxi services.

Amid this uncertainty, courts will need to answer some critical questions:

If a TNC customer gets severely injured in an accident because the driver is

operating recklessly, will the company step in to cover the customer’s medical

costs beyond the driver’s insurance?

If a third-party bystander is killed while

a TNC driver is distractedly looking for fares on his cell phone, would the

company be liable to the bystander’s estate?

Both of these situations have

happened and have resulted in lawsuits.

In addressing the gray area of TNC tort liability, this Note focuses on

California law. It does so because California is the birthplace of many

ridesharing companies and remains one of their largest markets.

As the home

of Silicon Valley, California policy makers have also led the way in creating

new regulations to cover ridesharing services.

Perhaps most significantly, California has begun requiring that all TNC

vehicles carry significant accident insurance—a step that helps protect

passengers and bystanders.

Yet two problems remain: First, the insurance

coverage is inadequate. For example, even after California’s new insurance

requirements took effect on July 1, 2015, drivers who are available for rides on

the TNC application but not actually transporting anyone still carry only

$50,000 worth of insurance per person for death and personal injury.

In a case

where a bystander is killed, the potential award could far exceed the $50,000 of

insurance coverage. Second, just because TNCs now carry insurance does not

mean the TNC companies and their insurers will happily pay out every claim

18. See A.W., What Disruptive Innovation Means, ECONOMIST (Jan. 25, 2015, 11:50 PM),

http://www.economist.com/blogs/economist-explains/2015/01/economist-explains-15

[http://perma.cc/7BJE-SA66].

19. California has recently increased the minimum insurance levels that companies like Uber

are required to carry while transporting drivers. CAL. PUB. UTIL. CODE § 5433 (West 2014). But

simply possessing insurance does not necessarily keep companies like Uber and their insurance agents

from attempting to avoid paying damages. See, e.g., Answer of Defendants, Bishop v. Uber Techs.,

No. 37-2014-00037935-CU-PA-CTL (Cal. Super. Ct. Dec. 29, 2014) [hereinafter Uber Bishop

Answer] (disclaiming all responsibility for passenger injury at the hands of an allegedly negligent

driver).

20. Uber’s insurance would also cover this type of incident, but only for a fraction of the

amount available when a driver is transporting a passenger. CAL. PUB. UTIL. CODE § 5433.

21. Bishop Complaint, supra note 9, at 2–3 (passenger injury); Liu Complaint, supra note 3, at

4 (bystander death).

22. Both Uber and Lyft were founded in San Francisco. See Adam Lashinsky, Uber: An Oral

History, FORTUNE (June 3, 2015), http://fortune.com/2015/06/03/uber-an-oral-history

[http://perma.cc/5H8T-YZVN]; Nicholas Carlson, Lyft, A Year-Old Startup That Helps Strangers

Share Car Rides, Just Raised $60 Million From Andreessen Horowitz and Others, BUS. INSIDER (May

23, 2013), http://www.businessinsider.com/lyft-a-startup-that-helps-strangers-share-car-rides-just-

raised-60-million-from-andreessen-horowitz-2013-5 [http://perma.cc/P3HG-4VK7].

23. CAL. PUB. UTIL. CODE § 5433.

24. Id.

238 CALIFORNIA LAW REVIEW [Vol. 104:233

made by a passenger or bystander. Indeed, Uber disclaimed all liability after a

passenger in San Diego sued the company and its driver for negligent driving.

And Uber made this claim even though the car presumably carried the required

$1 million insurance policy.

California’s insurance requirements might help,

but they do not solve the passenger and bystander safety issues.

This Note seeks to find a path for plaintiffs to hold TNCs liable for acts of

their drivers. And it does so in a way not yet argued by plaintiff-side attorneys.

So far, injured parties have alleged that drivers and TNCs have an employment

relationship that creates vicarious liability.

Although this theory could be

persuasive—indeed, courts have found an employer-employee relationship

between drivers and TNCs in the employee benefits context

—it would be

unwise for plaintiffs to condition all their claims on establishing that TNC

drivers are employees, a complex and subjective test. As one federal judge said

of a case concerning the employment relationship presented by TNCs, “The

test the California courts have developed over the 20th Century for classifying

workers isn’t very helpful in addressing this 21st Century problem.”

Instead,

the jury in that case had been “handed a square peg and asked to choose

between two round holes.”

This Note argues in the alternative that TNCs’

responsibility for acts of their drivers need not be dependent on “20th century”

employment tests; instead, the companies can and should be held liable because

they have a “nondelegable duty” to protect the safety of passengers and the

general public.

Part I explores the common arguments advanced by both TNCs and the

plaintiffs hoping to recover from them. It then notes, with cautious optimism, a

number of employment benefits cases in which individual drivers have

successfully argued that they are employees of TNCs. Part II suggests a new

perspective through which to define the relationship between TNCs and

drivers, one that could effectively hold TNCs liable while acknowledging the

25. See Bishop Complaint, supra note 9.

26. See Insurance Requirements for TNCs, CAL. PUB. UTIL. COMM’N, http://www.cpuc.ca.

gov/PUC/Enforcement/TNC/TNC+Insurance+Requirements.htm [http://perma.cc/26V2-Z4SW] (last

modified July 6, 2015).

27. Bishop Complaint, supra note 9, at 3–4; Liu Complaint, supra note 3, at 3–4.

28. State agencies in both California and Florida have found that the specific drivers bringing

suit over employment benefits were indeed employees and therefore entitled to benefits. See Alyson

Shontell, California Labor Commission Rules an Uber Driver Is an Employee, Which Could Clobber

the $50 Billion Company, BUS. INSIDER (June 17, 2015), http://www.businessinsider.com/california-

labor-commission-rules-uber-drivers-are-employees-2015-6 [http://perma.cc/H3GB-RHPJ]

(California); Robert W. Wood, Florida Says Uber Drivers Are Employees, But FedEx, Other Cases

Promise Long Battle, FORBES (May 26, 2015), http://www.forbes.com/sites/robertwood/2015/05/26

/florida-says-uber-drivers-are-employees-but-fedex-other-cases-promise-long-battle [http://perma.cc

/C4NT-ZSTL] (Florida).

29. Ellen Huet, Juries to Decide Landmark Cases Against Uber and Lyft, FORBES (Mar. 11,

2015), http://www.forbes.com/sites/ellenhuet/2015/03/11/lyft-uber-employee-jury-trial-ruling

[http://perma.cc/9SZJ-PZZ3] (quoting U.S. District Judge Vince Chhabria).

30. Id. (quoting U.S. District Judge Vince Chhabria).

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 239

uniquely modern relationship the companies have with their drivers. The

nondelegable duty doctrine is an equitable rule that bars certain types of

employers—those that are engaged in a dangerous activity and operate under a

public license or franchise—from avoiding liability for acts of their

independent contractors.

After laying out strategies for plaintiffs, Part III

offers policy recommendations that seek to make TNCs safer and resolve

lingering ambiguities about TNC operations.

As with many disruptive industries before them, TNCs appear to be

coming to the end of their free-for-all period of uninhibited growth. It is time

for courts and policy makers to begin closing the loopholes from which TNCs

have benefitted and take a tangible step toward maintaining consumer

protections in this era of startups and deregulation. Only then will the public be

able to judge whether TNCs are the wave of the future or mere opportunists

capitalizing on regulatory carelessness.

THE CHALLENGE OF CLASSIFYING TNCS AND THEIR DRIVERS

TNCs are a novel phenomenon that will require courts to adapt existing

legal doctrines to determine liability for driver actions. With vast sums of

money at stake, it is no surprise that TNCs and regulators have already butted

heads over the extent to which the services bear responsibility for public safety.

For their part, TNCs have tried to argue that they are merely technology

“platforms” that connect drivers offering services to prospective passengers,

and therefore they should not be liable for acts of their drivers. By contrast, the

California Public Utilities Commission (CPUC) and the state’s legislature have

begun creating new TNC regulations with the express concern of protecting the

general public from the potential dangers of using the services.

It remains unclear, though, whether victims have any legal recourse

against TNCs for the acts of their drivers. TNCs have sought to minimize their

relationship with drivers

—something that would help them avoid liability. At

the other end of the spectrum, plaintiffs have argued that TNCs have strong,

employer-level relationships with their drivers,

which could lead to recovery

31. See infra Part II.

32. See infra Part II.C.

33. See, e.g., Lyft Terms of Service, LYFT (Sept. 11, 2015), https://www.lyft.com/terms

[https://perma.cc/2ANF-RZQA] (“The Lyft Platform provides a marketplace where persons who seek

transportation to certain destinations (‘Riders’) can be matched with persons driving to or through

those destinations (‘Drivers’).”); Terms and Conditions, UBER (Apr. 8, 2015),

https://www.uber.com/en-US/legal/usa/terms [https://perma.cc/HNP6-KG22] (“UBER DOES NOT

GUARANTEE THE QUALITY, SUITABILITY, SAFETY OR ABILITY OF THIRD PARTY

PROVIDERS.”); Terms of Services, SIDECAR (Dec. 12, 2014), http://www.side.cr/policies/terms-of-

services [http://perma.cc/RN9X-DN7C] (“Sidecar drivers explicitly agree that he or she is not an

employee or independent contractor of Sidecar, but a user of the Sidecar mobile app and a TNC driver

as defined by the California PUC or other regulatory agency with jurisdiction over our service.”).

34. See, e.g., Liu Complaint, supra note 3, at 3–4.

240 CALIFORNIA LAW REVIEW [Vol. 104:233

under traditional strict liability theories like respondeat superior. Both of these

portrayals are flawed. TNCs exercise far more control over vendors (drivers)

than passive buying and selling platforms like eBay and Craigslist. But the

amount of control may not fit within the traditional common law definition of

an “employer” because drivers retain significant discretion as to how, when,

and where they operate.

A. TNCs as Online Platforms

Since their inception, TNCs have clung to the argument that they are mere

platforms connecting passengers with drivers, and therefore cannot have any

liability for driver actions. Uber has been particularly audacious, arguing that it

should be exempt from the CPUC’s and any other state or local transportation

agency’s jurisdiction because it is not a transportation company at all.

The

company likened uberX to Google’s PowerMeter service, which is not subject

to normal energy utility regulations because it merely monitors energy usage

and does not require consumers to pay a fee for the service.

The CPUC

quickly shot down this analogy, noting that uberX does far more than merely

“show customers maps of available cars, without giving them a way to book a

ride and without controlling or taking a share of the fare.”

Judges have also weighed in, and their initial reactions are even less

favorable to TNCs. “The idea that Uber is simply a software platform, I don’t

find that a very persuasive argument,” said one federal judge in response to a

lawsuit concerning whether Uber had a duty to pay drivers minimum wage.

Indeed, TNCs do not operate in the same way as online platforms like eBay

and Craigslist, which passively connect buyers to sellers of goods. TNCs may

likewise connect passengers with drivers, but they do so in a far more extensive

manner than online selling websites. Whereas companies like eBay charge a

nominal flat rate for most listings,

TNCs take a significant percentage cut

35. Decision Adopting Rules and Regulations to Protect Public Safety While Allowing New

Entrants to the Transportation Industry, at 16–17, R. 12-12-011, Dec. 13-09-045, 2013 WL 10230598

(Cal. Pub. Util. Comm’n Sept. 19, 2013), http://docs.cpuc.ca.gov/PublishedDocs/Published/G000

/M077/K192/77192335.PDF [http://perma.cc/Z2JG-U4XZ] [hereinafter 2013 CPUC Order]; see also

Uber Bishop Answer, supra note 19, at 6 (“Uber warrants it is a technology company, not a

transportation company or common carrier . . . .”).

36. 2013 CPUC Order, supra note 35, at 15–16. Uber attorneys have also claimed that Uber is

an “intellectual property company” and drivers are not servants of Uber but rather customers of the

service. Karen Gullo, Uber and Lyft Drivers May Have Employee Status, Judge Says, BLOOMBERG

(Jan. 30, 2015), http://www.bloomberg.com/news/articles/2015-01-30/uber-drivers-may-have-

employee-status-judge-says [http://perma.cc/6T64-SDC9].

37. 2013 CPUC Order, supra note 35, at 16.

38. Gullo, supra note 36 (quoting U.S. District Court Judge Edward Chen). Another judge

(U.S. District Court Judge Vincent Chhabria) went even further, rejecting historical job definitions and

stating that drivers should be classified as employees. Id.

39. Traditional selling platforms like eBay generally take a flat fee for posted items. Standard

Selling Fees, EBAY, http://pages.ebay.com/help/sell/fees.html [http://perma.cc/Z7NY-AY28] (last

visited Oct. 12, 2015).

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 241

from each fare.

And TNCs, not the drivers, control the means of operation:

once hired, drivers generally use a TNC-issued phone for picking up

customers,

TNCs set the actual rates that passengers pay for each trip,

and

TNCs negotiate with customers over cancellation fees.

In other words, TNCs

have significantly more interest in and control over vendors than do typical

online selling platforms.

TNCs also play a much greater role from the perspective of the buyer of

services. Listings on eBay and Craigslist traditionally last days or even weeks,

meaning consumers have plenty of time to weigh all of their options. Buyers

can be discerning based on quality, availability, cost, uniqueness, and a host of

other subjective and objective factors. By contrast, TNC customers request

rides at the moment of need, and the TNC platform then quickly pairs the

customers with nearby drivers.

Such a system does not encourage—or usually

even allow

—consumers to extensively compare the services of each seller on

the platform. Instead, the determinative factor for a consumer is most likely

which nearby driver happens to accept the ride request first. Even if it were

possible to distinguish between drivers, doing so would be largely pointless:

TNCs require drivers to have similar cars

and maintain high minimum

customer ratings in order to use the platforms.

40. UberX, for example, recently upped its cut to 25 percent of each fare in San Francisco,

while Lyft takes 20 percent from drivers in the city. Ellen Huet, Uber Now Taking its Biggest UberX

Commission Ever – 25 Percent, FORBES (Sept 22, 2014), http://www.forbes.com/sites/ellenhuet/2014

/09/22/uber-now-taking-its-biggest-uberx-commission-ever-25-percent [http://perma.cc/47FY-

XBDX].

41. Uber is beginning to allow drivers to use personal phones, but its standard practice has

been to require drivers to use a company phone, for which drivers must pay the service $10 per week.

Luz Lazo, Uber Gives its Drivers Choice to Avoid $10 Weekly Fee for App Use, WASH. POST (Sept. 9,

2014), http://www.washingtonpost.com/blogs/dr-gridlock/wp/2014/09/09/uber-gives-its-drivers-

choice-to-avoid-10-weekly-fee-for-app-use [http://perma.cc/9G67-LNC4].

42. In San Francisco, for example, Uber sets the following standard rates for its uberX drivers:

$2.20 base fare; $5 minimum fare; $1 “safe rides fee”; $0.26 per minute; $1.30 per mile; $5

cancellation fee. San Francisco Bay Area, UBER, https://www.uber.com/en-US/cities/san-francisco

[https://perma.cc/2PAA-YQ28] (last visited Oct. 12, 2015).

43. Berwick v. Uber Techs., Inc., No. 11-46739 E, 2015 WL 4153765, at *6 (Cal. Dept. Labor

June 3, 2015). In June 2015, Uber instituted another requirement on both drivers and passengers when

the company prohibited guns in Uber vehicles. Dante D’Orazio, Uber Bans Drivers and Passengers

from Carrying Firearms, VERGE (June 20, 2015), http://www.theverge.com/2015/6/20/8818247/uber-

bans-guns-from-vehicles [http://perma.cc/P7H2-BV6E].

44. See, e.g., How Do I Request a Ride?, UBER, https://help.uber.com/h/7ef159ca-3674-4242-

bc0c-b29024958b26 [https://perma.cc/WFH6-5J67] (last visited Oct. 13, 2015).

45. Can I Request a Particular Driver?, UBER, https://help.uber.com/h/65f52320-43a1-4979-

b374-e9b7c7c36dae [https://perma.cc/269T-QLX3] (last visited Oct. 13, 2015).

46. Richard N. Velotta, Uber Brands Taxi Companies’ Memoranda Inaccurate, L.V. REV.-J.

(June 11, 2014), http://www.reviewjournal.com/business/economy/uber-brands-taxi-companies-

memoranda-inaccurate [http://perma.cc/25K3-AMHR] (“Uber drivers are required to drive a 2008 or

newer vehicle and undergo a vehicle inspection.”).

47. Uber, for example, frequently requires drivers to maintain a minimum rating of 4.5 out of

5 stars or higher in order to access the uberX application. Jeff Bercovici, Uber’s Ratings Terrorize

Drivers and Trick Riders. Why Not Fix Them?, FORBES (Aug. 14, 2014), http://www.forbes.com

242 CALIFORNIA LAW REVIEW [Vol. 104:233

Perhaps most importantly, eBay and Craigslist do not claim to extensively

vet sellers on their websites, nor are they required to do so by any laws. By

contrast, TNCs advertise their vetting procedures as effective ways of

protecting passenger safety,

and the CPUC now requires them to conduct

background checks on drivers.

Such a system puts the onus on TNCs, not the

individual drivers, to be accountable for safe operations.

Referral platforms and companies are not an invention of the Internet age,

and TNCs share some similarities with traditional referral services, such as

those established for childcare. Like TNCs, childcare referral companies have

some responsibility for vetting the background of the individuals providing

services. But in California, for example, individuals wishing to offer childcare

services must themselves undergo a state-run background check.

This means

that referral services could only hire individuals who have independently

passed background check requirements. This system is different from the

regulatory framework in which TNCs now exist because the CPUC has placed

the burden of conducting background checks on TNCs (the referrers), not on

prospective drivers (the individual service providers).

This difference

indicates an intent to make TNCs, rather than the drivers they refer, responsible

for ensuring that the services will operate safely.

TNCs simply have a much greater hand in the provision of vendor

services than online platforms like Google, eBay, and Craigslist, or traditional

referral services. It is therefore very unlikely that any court would find, for

liability purposes, that TNCs operate as mere platforms.

B. TNCs as Employers

Although TNCs present themselves as mere buying and selling platforms,

plaintiffs are bringing suits against the companies under the theory that these

companies operate as traditional employers of their drivers.

By defining the

/sites/jeffbercovici/2014/08/14/what-are-we-actually-rating-when-we-rate-other-people

[http://perma.cc/2D5W-L6MP].

48. See, e.g., Rider Safety, UBER, https://www.uber.com/safety [https://perma.cc/AJB6-5JN9]

(last visited Oct. 13, 2015). As of February 2015, Uber was advertising “background checks you can

trust.” See Safest Rides on the Road: Going the Distance to Put People First, UBER,

https://web.archive.org/web/20150217153537/https://www.uber.com/safety (last visited Dec. 21,

2015).

49. 2013 CPUC Order, supra note 35, at 3.

50. Doe v. Saenz, 45 Cal. Rptr. 3d 126, 130–31 (Ct. App. 2006) (“Before any person may

that person must obtain either a criminal record clearance or, if convicted, must apply for and obtain a

criminal record exemption from the [California] Department [of Social Services].”).

51. 2013 CPUC Order, supra note 35, at 3.

52. See, e.g., Bishop Complaint, supra note 9, at 3–4 (stating that a ridesharing driver “was

serving as the agent of” Uber and its subsidiaries, and therefore the company is vicariously liable for

the driver’s negligent driving); Liu Complaint, supra note 3, at 3–4 (stating that Uber and its

subsidiaries “were the employer of the Defendant [negligent driver], and/or his partner and/or an

agency relationship existed between them”). Although, in some contexts, there may be nuanced

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 243

TNC-driver relationship in this way, plaintiffs can argue that the TNCs are

liable through respondeat superior. Under this doctrine, “the innocent principal

or employer is liable for the torts of the agent or employee, committed while

acting within the scope of employment.”

Critically, respondeat superior only

applies if plaintiffs prove the employer-employee relationship. Although the

respondeat superior argument has succeeded when plaintiffs have brought

cases against taxicab companies for acts of their drivers,

it may be less

persuasive in regard to TNCs.

This issue was a point of contention in the New Year’s Eve lawsuit

involving the six-year-old girl struck by an uberX driver. In that case, the

plaintiffs argued that the driver was an employee of Uber, and therefore Uber

was liable under respondeat superior or a similar principal-agent theory.

Uber

countered that it was not liable because “[the driver] was not—and has never

been—an employee of [Uber or its subsidiary, Raiser LLC].”

In support of

Uber’s contention that it does not provide transportation services or employ

drivers, the company noted that it does not own the vehicles and that drivers

use their own discretion in accepting passenger ride requests.

According to

the company, at the time of the accident the driver had “no reason . . . to

interact with the Uber App.”

TNCs indeed offer a different set of facts because TNC drivers are

generally subject to less control than taxicab drivers. The remainder of this

Section explains how courts traditionally gauge employer-level control in the

differences between employer-employee and other employment relationships including principal-

agent and master-servant, this Note will not go into the weeds of those individual distinctions. Indeed,

commentators have pointed out that, in the context of tort law, the distinctions are relatively

meaningless. See, e.g., 1 MODERN TORT LAW: LIABILITY AND LITIGATION § 7:2 (2d ed. 2015) (“The

terms ‘principal’ and ‘agent,’ ‘master’ and ‘servant,’ ‘employer’ and ‘employee’ may have separate

connotations for purposes of contract authority, but the distinctions are immaterial for tort purposes. A

relationship must be established: the wrongdoer must be an employee, agent, or servant in order for a

plaintiff to invoke the doctrine of respondeat superior.”).

53. B.E. WITKIN, 3 WITKIN, SUMMARY AGENCY & EMP’T § 165, at 208 (10th ed., 2005).

54. See, e.g., Yellow Cab Coop., Inc. v. Workers’ Comp. Appeals Bd., 277 Cal. Rptr. 434,

440–41 (Ct. App. 1991) (holding that, for workers’ compensation purposes, a taxicab company

exercised employer-level control over drivers because the company controlled where drivers went,

how they behaved, driver use of radios, and—most significant—the company prohibited drivers from

operating on behalf of other companies); People v. Rouse, 249 Cal. Rptr. 281 (App. Dep’t Super. Ct.

1988) (“[T]here is substantial evidence that the driver of the taxi was an employee of L.A. Taxi.”); see

also William D. Bremer, Liability of Taxicab Company For Cabdriver’s Negligence, 41 AM. JUR. 2D

PROOF OF FACTS 239 § 5 (2014) (“The Restatement points out that one might be considered a servant

even if there is an understanding that the employer shall not exercise control over the work. As an

illustration, the Restatement notes that a full-time cook is regarded as a servant even though it is

understood that the employer exercises no control over the cooking. A typical employer of taxicab

drivers would have a similarly limited degree of control over the actions of individual drivers.”).

55. Liu Complaint at 3–4, supra note 3.

56. Answer and Affirmative Defenses of Defendants Uber Technologies, Inc., at 2, Liu v.

Uber Techs., CGC-14-536979 (Cal. Super. Ct. May. 1, 2014) [hereinafter Uber NYE Answer].

57. Id. at 3.

58. Id.

244 CALIFORNIA LAW REVIEW [Vol. 104:233

context of transportation services, and it concludes that plaintiffs should

consider alternative tactics beyond trying to create liability through an

employer-employee relationship.

1. The Presumption in Favor of an Employment Relationship

In California, plaintiffs seeking to recover from TNCs can take advantage

of a presumption that a worker is an employee rather than an independent

contractor if he is “performing services for which a license is required” or

“performing such services for [an entity] who is required to obtain such a

license.”

TNC drivers certainly perform work for which the TNC is required

to obtain a specialized license—stipulating precautions including driver

background checks and minimum insurance levels—as ordered by the CPUC in

its 2014 opinion.

As a result, drivers will be presumed to be employees and

the burden will be on TNCs to show facts that prove otherwise.

2. The Case Against Respondeat Superior Liability

Even with the presumption in favor of plaintiffs, establishing that drivers

are employees of TNCs will depend on showing that TNCs exercise a

significant amount of control over their drivers,

a complicated determination

that could weigh in the TNCs’ favor. The CPUC has grappled with the control

analysis for years, and the Commission has largely sided with TNCs in finding

that the companies do not have an employer-employee relationship with

drivers.

Initially, the CPUC seemed to assume that TNC drivers were employees.

In a 2012 published notice citing a number of TNCs for permitting violations,

the CPUC referred to the ridesharing companies as “charter-party carriers,” and

their drivers as “employee-drivers.”

The notice specifically noted the carriers’

failure to subject drivers to “pre-employment” tests before hiring them.

However, the CPUC largely sided with the TNCs on employment issues

in a 2014 rehearing of its 2013 rules and regulations. In this rehearing, the

Taxicab Paratransit Association of California argued that, because TNC drivers

59. CAL. LAB. CODE § 2750.5 (West 2014).

60. Order Instituting Rulemaking on Regulations Relating to Passenger Carriers, Ridesharing,

& New Online-Enabled Transp. Servs., at 12, R. 12-12-011, Dec. 14-04-022, 2014 WL 1478349 (Cal.

Pub. Util. Comm’n Apr. 10, 2014) [hereinafter 2014 CPUC Order].

61. See 3 WITKIN AGENCY & EMP’T, supra note 53, at 63; see also Bremer, supra note 54, § 5

(“In determining for the purposes of respondeat superior whether a person is an agent, the most

important test traditionally has been the right of control, that is, the right of the alleged principal to

order and control the claimed agent: the right to direct the work to be done, not only as to the result to

be accomplished, but also as to the details and method of performing the work.”).

62. Press Release, Cal. Pub. Util. Comm’n, CPUC Cites Passenger Carriers Lyft, Sidecar, and

Uber $20,000 Each for Public Safety Violations (Nov. 14, 2012), http://www.cpuc.ca.gov/NR

/rdonlyres/00BF2F95-21B8-4C72-A268-D8057BD16DFD/0/CPUCCitesPassengerCarriersLyft

SideCarandUber20000EachforPublicSafetyViolations.pdf [http://perma.cc/89HJ-U2AR].

63. Id. (emphasis added).

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 245

are not employees of the TNC, they should be required to obtain individual

charter-party carrier permits.

The Commission agreed that TNC drivers are

not employees, but it countered that drivers are “clearly still agents connected

with the firm” who are, therefore, exempt from individual permitting

requirements.

In this delicate balancing act, the Commission managed to

confer upon TNCs all the permitting benefits of an employer-employee

relationship without saddling the companies with any of the other duties that

normally come from such a relationship.

Courts, like the CPUC, may be reluctant to expand the definition of

employers to cover technology services like the kind provided by TNCs. In

dealing with traditional transportation companies, courts have relied on a

number of factors for determining employer-level control. Not surprisingly, no

single factor is generally dispositive; nor is there a clearly defined threshold for

when a worker becomes an employee.

And even if the test did provide bright

lines, the analysis would still depend on the factors mapping neatly onto the

TNC-driver relationship—which they don’t. The remainder of this Subsection

grapples with some of the factors courts may use when determining TNC

control over drivers.

a. Visual Representations

When taxicab and limousine drivers’ cars carry visual identifiers of the

dispatch company—such as the company’s name and telephone number—

courts and commentators have taken this as evidence that the driver is an

employee of the dispatcher.

Since its founding, Lyft has required on-duty

drivers to display a pink moustache on the grill or dashboard of their cars.

64. 2014 CPUC Order, supra note 60, at 12.

65. Id.

66. Courts and commentators have, however, weighed some factors more heavily than others.

Compare Yellow Cab Coop., Inc. v. Workers’ Comp. Appeals Bd., 277 Cal. Rptr. 434, 441 (Ct. App.

1991) (stating that a company’s prohibition on allowing its drivers to contract with other businesses

was the “most significant” factor in finding an employment relationship), with Bremer, supra note 54,

§ 7 (“Of particular importance is whether the driver was required to respond to calls . . . .”).

67. See, e.g., People v. Rouse, 249 Cal. Rptr. 281, 284 (App. Dep’t Super. Ct. 1988) (finding

an employment relationship where a taxi “displayed the name and telephone number” of the taxicab

company). Even when other factors of employer-level control are not present, it can be possible to

hold a company liable when the plaintiff reasonably assumes that the agent is an employee. See

Associated Creditors’ Agency v. Davis Eyeglasses, 530 P.2d 1084, 1100 (Cal. 1975) (“The person

dealing with the agent must do so with belief in the agent’s authority and this belief must be a

reasonable one; such belief must be generated by some act or neglect of the principal sought to be

charged; and the third person in relying on the agent’s apparent authority must not be guilty of

negligence.”).

68. Kyle VanHemert, Lyft Is Finally Ditching the Furry Pink Mustache, WIRED (Jan. 20,

2015), http://www.wired.com/2015/01/lyft-finally-ditching-furry-pink-mustache [http://perma.cc

/DV7V-SFAJ].

246 CALIFORNIA LAW REVIEW [Vol. 104:233

Uber had no comparable requirement during the company’s formative years,

so there was generally no way to distinguish between on-duty Uber drivers and

everyone else on the road. But in 2013 the CPUC ordered all TNC vehicles to

“display consistent trade dress (i.e., distinctive signage or display on the

vehicle)” when in service.

The trade dress “shall be sufficient to allow a

passenger, government official, or member of the public to associate a vehicle

with a particular TNC . . . .”

TNCs must file a photograph of this trade dress

with the CPUC’s Safety and Enforcement Division.

As a result of these new

regulations, the “visual representations” factor may tilt in favor of an employer-

employee relationship. However, the TNC signage may be much less

noticeable than taxicab or trucking company vehicles that have distinctive

colors and logos written in prominent, large letters. And visual displays are far

from dispositive evidence of an employment relationship.

b. Accountability to Dispatcher

The element of control would be further strengthened by a finding that

drivers are required to maintain communication with the transportation

company’s dispatcher and can be punished for failure to follow orders or not

work at specific times.

It is tricky to apply this factor to TNCs. On the one

69. Uber, for example, allows uberX drivers to use their own cars and has no specific

requirements for color or labeling. Vehicle Requirements, UBER, http://www.driveubernyc.com/cars

[http://perma.cc/J7NW-WJRM] (last visited Oct. 13, 2015).

70. 2013 CPUC Order, supra note 35, at 18.

71. Id.

72. Id.

73. See, e.g., Holmes v. United Indep. Taxi, No. B149582, 2002 WL 228197, at 2 (Cal. Ct.

App. Feb. 15, 2002) (finding a driver to be an independent contractor, rather than an employee, even

though the company required the driver to display a sign in the right lower corner of his car’s

windshield while transporting conventioneers). Plaintiffs could also potentially sue under a theory of

estoppel. Bremer, supra note 54, § 4 (“[I]f the injured party was a passenger in the taxicab, proof that

the target company held itself out as the operator of the taxicab may estop the company from denying

the agency of the driver.

The two elements necessary to establish this estoppel are a holding out by the

target company and a justifiable reliance on it by the injured party.”). A Lyft customer, for example,

might reasonably and non-negligently rely on a Lyft vehicle’s distinctive branding as a sign that the

company is in control of its drivers and responsible for passenger safety. Especially in a hit-and-run

scenario, if a bystander could identify Lyft as the operator, but not the specific driver, Lyft could

potentially be liable for injuries. See, e.g., Ass’n of Indep. Taxi Operators v. Kern, 13 A.2d 374, 376–

77 (Md. 1940) (holding that when an unidentified driver perpetrated a hit-and-run in a taxicab

identifiable to one company, the company could be held liable to the victim). This argument is set to

suffer, though, as Lyft is phasing out its comically oversized and very visible fluffy pink moustache

for a smaller, less noticeable glowing pink dashboard ornament. Vanhemert, supra note 68.

74. Yellow Cab Coop., Inc. v. Workers’ Comp. Appeals Bd., 277 Cal. Rptr. 434, 441 (Ct.

App. 1991) (finding the necessary element of control where drivers were extensively monitored by

radio communications and punished for not accepting radio orders); People v. Rouse, 249 Cal. Rptr.

281, 284 (App. Dep’t Super. Ct. 1988) (noting that a driver’s consistent checking in with his

dispatcher by radio, along with sanctions for refusal to accept rides referred by the dispatcher led to a

“reasonable inference” that the driver was an employee); Bremer, supra note 54, § 7 (“Of particular

importance is whether the driver was required to respond to calls; if he was, whether by virtue of

contract, lease, association rules, or by custom, then the target company had that kind of control

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 247

hand, drivers do not verbally communicate with TNC operators, or any

superior at all, during the normal course of business; their only interaction is

with the TNC phone application.

On the other hand, drivers are constantly in

virtual communication with TNCs when they are logged into the app, which

tracks things like driver ratings, ride acceptance rates, and vehicle location.

One could reasonably conclude that this level of control is actually stronger

than a taxicab company requiring its drivers to periodically radio into a

dispatcher. And at least one TNC, uberX, threatened to sanction drivers who do

not maintain minimum ratings from passengers or who refuse too many ride

requests, an indication that drivers are highly accountable to the company.

Even so, the weight of these considerations is diminished by the fact that

drivers are never actually required to work or call into a TNC dispatcher; nor

are they required to accept specific rides.

Courts are therefore unlikely to find

that this factor—GPS tracking and minimum quality standards—rises to the

level of control exercised by traditional transportation dispatchers who

communicate directly with drivers and relay affirmative demands.

c. Vehicle Ownership

The vehicle ownership factor is relatively straightforward: TNC drivers

generally use their own cars,

and this will serve as evidence that they are not

employees.

And drivers, not the TNCs, are responsible for vehicle

maintenance and fueling costs.

The analysis may become slightly more

complicated in light of Uber’s recent move to facilitate lease agreements

between manufacturers and prospective drivers.

But even this arrangement

does not change the simple fact that drivers, not Uber, lease the vehicles. Thus,

this factor tilts heavily in favor of TNCs.

generally found to evidence agency. On the other hand, if the driver was free to accept or reject any

call then the fact that dispatching services were provided is less significant.”).

75. Uber, for example, automatically assigns drivers to passengers based on algorithms

tracking driver locations. Voytek, Optimizing a Dispatch System Using an AI Simulation Framework,

UBER (Apr. 11, 2014), http://blog.uber.com/aisimulation [http://perma.cc/5D9R-5CNK].

76. James Cook, Uber’s Internal Charts Show How its Driver-Rating System Actually Works,

BUS. INSIDER (Feb. 11, 2015), http://www.businessinsider.com/leaked-charts-show-how-ubers-driver-

rating-system-works-2015-2 [http://perma.cc/GUY4-QXKW].

77. Id.

78. See Uber NYE Answer, supra note 56, at 2.

79. Ryan Lawler, Uber Study Shows Its Drivers Make More Per Hour and Work Fewer Hours

than Taxi Drivers, TECHCRUNCH (Jan. 22, 2015), http://techcrunch.com/2015/01/22/uber-study

[http://perma.cc/2MRU-LFNG].

80. See People v. Rouse, 249 Cal. Rptr. 281, 284 (App. Dep’t Super. Ct. 1988).

81. Id.

82. Ken Bensinger & Johana Bhuiyan, Flouting Law, Uber Suspends Drivers for Properly

Registering Cars, BUZZFEED (Jan. 22, 2015), http://www.buzzfeed.com/kenbensinger/ubers-auto-

registration-gambit [http://perma.cc/BVU6-2M3J]. The company has reportedly even directed some of

the drivers participating in its car purchase and lease finance programs to register their new cars as

personal vehicles rather than commercial ones and has temporarily suspended some driver accounts

whose cars were registered as commercial vehicles. Id.

248 CALIFORNIA LAW REVIEW [Vol. 104:233

d. Non-Competes and Other Contractual Provisions

Courts may also find drivers to be employees of transportation companies

based on the actual terms by which they have agreed to operate. For example,

one court found that a taxi company forcing drivers not to work for any other

companies served as the “most significant” factor in determining that the driver

was an employee.

Likewise, TNCs sometimes prohibit drivers from operating

for other services,

evidence that weighs in favor of finding an employer-

employee relationship.

On the other hand, TNCs may explicitly require drivers to acknowledge

that they operate as independent contractors, not employees, as a condition of

using the services. According to Uber, the driver in the New Year’s Eve

accident entered into contracts with the company that declared his status as an

“independent, for-hire transportation provider” for uberX and an “independent

contractor” of Uber’s subsidiary, Raiser, LLC.

The agreement’s language,

assuming it is standard for Uber and other TNCs, weighs in favor of a court

finding that TNC drivers are indeed independent contractors.

83. Yellow Cab Coop., Inc. v. Workers’ Comp. Appeals Bd., 277 Cal. Rptr. 434, 441 (Ct.

App. 1991).

84. In New York, for example, Uber sent drivers text messages that they could be deactivated

(effectively fired) if they did “trips with a base” their “vehicle [isn’t] affiliated with,” and even went so

far as to call at least one driver and tell him he could not work for Uber unless he terminated his

relationship with competitor Lyft. Erica Fink, Uber Threatens Drivers: Do Not Work for Lyft, CNN

(Aug. 5, 2014), http://money.cnn.com/2014/08/04/technology/uber-lyft [http://perma.cc/N3Z6-5BBJ].

Limiting an agent’s freedom to contract elsewhere in this manner has weighed significantly in finding

an employment relationship in the context of workers’ compensation. See Yellow Cab, 277 Cal. Rptr.

at 441. This consideration may be a moot point in California, though, where non-compete clauses are

strongly disfavored by both the legislature and the courts. See Scott v. Snelling & Snelling, Inc., 732 F.

Supp. 1034, 1042–43 (N.D. Cal. 1990); D’sa v. Playhut, Inc., 85 Cal. App. 4th 927, 933 (2000).

85. Uber NYE Answer, supra note 56, at 4. Likewise, in their public statements and terms of

service, none of the TNC companies ever refer to drivers as “employees.” Uber’s website formerly

characterized its drivers as “independent contractors”; this page was removed from Uber’s website at

some point after December 4, 2014. See Who Are The Drivers On The Uber System?, UBER,

[https://web.archive.org/web/20140524143041/http://support.uber.com/hc/en-us/articles/201955457-

Who-are-the-drivers-on-the-Uber-system-] (archived May 24, 2014 and last visited Dec. 4, 2014).

Sidecar explains that drivers are not employees but rather “independent workers who voluntarily use

our mobile platform to be matched with passengers and obtain payment cashlessly through the app.”

Terms of Services, SIDECAR, supra note 33. The company elaborates on the relationship: “It is up to

the driver to decide when he or she wishes to drive using the sidecar app, whether or not to offer a ride

to a passenger contacted through the sidecar platform, and what pricing adjustment the driver wishes

to set.” Id. Lyft, on the other hand, does not explicitly label its drivers, but the company’s Terms of

Service still maintains that the company “has no responsibility whatsoever for the actions or conduct

of drivers or riders.” Lyft Terms of Service, LYFT, supra note 33.

86. See, e.g., Lopez v. El Palmar Taxi, Inc., 676 S.E.2d 460, 464 (Ga. App. 2009) (“The

evidence does not show that El Palmar assumed control over the time, manner or method of Julaju’s

work. He was free to work when and for as long as he wanted, he was not required to accept fares

from El Palmar, he could obtain his own fares and he could work anywhere the taxi could legally be

operated. The fact that the cars he drove displayed the El Palmar logo and the fact that he received

calls from El Palmar are not sufficient to create an employer-employee relationship.”); Asplund v.

Selected Invs. in Fin. Equities, Inc., 103 Cal. Rptr. 2d 34, 49 (Ct. App. 2000) (“[T]he limitations set

forth in the sales representatives agreement, coupled with the absence of substantial evidence of

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 249

e. Termination

Finally, the right to terminate workers without cause can serve as

evidence of an employee-employer relationship.

This factor should weigh

slightly, though not dispositively, in favor of finding drivers to be independent

contractors. Uber, for example, reserves broad power to terminate its

relationship with drivers, but this power is limited to situations when “the

Transportation Company or its Drivers fail to maintain the standards of

appearance and service required by the users of the Uber Software.”

Such

qualifications, coupled with the fact that Uber’s employment agreement

contains an arbitration clause,

could serve to support the company’s claim

that drivers are independent contractors.

***

Ultimately, the weighing of employment factors is a murky endeavor.

Plaintiffs have had, and may continue to have, some success in arguing that

drivers are employees of TNCs, as discussed in the next Subsection; yet relying

on such an

argument is risky given the subjectivity and intensely fact-specific

nature of the employer-control test.

apparent or actual authority beyond that specified in the agreement, eliminates any basis upon which to

impose vicarious liability on [the defendant] under the doctrine of respondeat superior.”). An

agreement, though, is far from dispositive. See B.E. WITKIN, 2 WITKIN, SUMMARY WORKERS’ COMP,

§ 189, at 772 (10th ed., 2005) (“Signing the agreement to forgo coverage as an independent contractor

is significant but not controlling where compelling indicia of employment are otherwise present.”).

Plaintiffs could argue, however, that the contractual language declaring drivers to be independent

contractors is meaningless when the drivers are working solely for one TNC and therefore are not

freely contracting their services. This argument has been persuasive in the real estate agent and broker

relationship. See Reagan v. Keller Williams Realty, Inc., No. B192890, 2007 WL 2447021, at 10 (Cal.

Ct. App. 2007) (“[F]or purposes of tort liability, a real estate agent-broker relationship may not be

characterized as that of an independent contractor when the salesperson is acting within the scope of

employment . . . Insofar as liability to a third party is concerned, any provision purporting to change

the relationship from agent to independent contractor is invalid.”); Gipson v. Davis Realty Co., 30 Cal.

Rptr. 253, 262 (Dist. Ct. App. 1963) (finding, based on statutory provisions, that because a real estate

salesmen “can act only for, on behalf of, and in place of the broker under whom he is licensed, and that

his acts are limited to those which he does and performs,” the agent cannot be classified as an

independent contractor and “any contract which purports to change that relationship from that of agent

to independent contractor is invalid as being contrary to the provisions of the Real Estate Law”).

87. See Alexander v. FedEx Ground Package Sys., Inc., 765 F.3d 981, 988 (9th Cir. 2014)

(“The right to terminate at will, without cause, is ‘[s]trong evidence in support of an employment

relationship.’” (citations omitted)); Toyota Motor Sales U.S.A., Inc. v. Superior Court, 269 Cal. Rptr.

647, 653 (Ct. App. 1990), modified (June 5, 1990) (“Perhaps no single circumstance is more

conclusive to show the relationship of an employee than the right of the employer to end the service

whenever he sees fit to do so.”).

88. Uber Software License and Online Services Agreement at 5, O’Conner v. Uber Techs.,

Inc., No. 3:13-cv-03826-EMC (N.D. Cal Aug. 3, 2015) (on file with author).

89. Id. at 11.

90. See Alexander, 765 F.3d at 994 (“The first factor, the right to terminate at will, slightly

favors FedEx. The OA contains an arbitration clause and does not give FedEx an unqualified right to

terminate.”).

250 CALIFORNIA LAW REVIEW [Vol. 104:233

3. Driver Victories over TNCs

Though not yet heavily litigated, at least two plaintiffs have prevailed in

showing an employment relationship between TNCs and drivers. But these

cases have both been in the context of employment benefits, not tort liability.

And the decisions have merely symbolic—not precedential—value; they apply

only to the single drivers seeking benefits in each case.

In Florida, the

Department of Economic Opportunity (DEO) found that one driver, who had

been laid off by Uber, was entitled to collect unemployment benefits because

he had been an employee, not an independent contractor, of the company.

Soon after the Florida decision, another Uber driver, appearing pro per,

successfully convinced the California Labor Commissioner that she was an

employee of Uber.

As a result, the Commissioner awarded the employee

reimbursement of labor expenses plus interest, a total of $4,152.20.

Although

the ruling applies only to the single driver who brought the suit, the

Commissioner’s in-depth analysis of Uber’s operations and its control over

drivers

could provide a template for finding that all TNC drivers are

employees. In coming to a decision, the Commissioner analyzed a number of

factors that could also apply to respondeat superior liability, including Uber’s

extensive driver vetting procedures, the company’s control over the “tools”

(vehicles) drivers use, and Uber’s authority to set rates for the service.

TNCs should be nervous that the California decision might influence

future analyses of their employment relationships with drivers. The distinction

between independent contractors and employees could have far-reaching costs

for TNCs beyond simply creating tort liability; one report from the National

Employment Law Project estimated that re-categorizing drivers could cost the

companies an additional 30 percent in labor costs.

Faced with such a dire—

91. Mike Isaac & Natasha Singer, California Says Uber Driver is Employee, Not a

Contractor, N.Y. TIMES (June 17, 2015), http://www.nytimes.com/2015/06/18/business/uber-contests-

california-labor-ruling-that-says-drivers-should-be-employees.html [http://perma.cc/6YL5-NHZ2].

92. Id.

93. Johana Bhuiyan, Florida Agency Classifies Uber Driver as Employee, Says He Is Eligible

for Unemployment, BUZZFEED (May 22, 2015), http://www.buzzfeed.com/johanabhuiyan/florida-

agency-classifies-uber-driver-as-employee-says-he-is [http://perma.cc/95W9-TQUE].

94. Berwick v. Uber Techs., Inc., No. 11-46739 EK, 2015 WL 4153765, at *1 (Cal. Dept.

Labor June 3, 2015).

95. Id. at *10.

96. Id. at *11.

97. See id. at *9.

98. Id.

99. Ben Popper, Making Drivers Into Employees, Not Contractors, Could Hurt Uber’s

Business, VERGE (June 17, 2015), http://www.theverge.com/2015/6/17/8797021/uber-california-

lawsuit-labor-employee-contractor [http://perma.cc/32ZG-6KEA]; see also People ex rel. Harris v. Pac

Anchor Transp., Inc., 329 P.3d 180, 183 (Cal. 2014), cert. denied, 135 S. Ct. 1400 (2015) (recognizing

a number of requirements unique to the employer-employee relationship: “(1) pay unemployment

insurance taxes . . . ; (2) pay employment training fund taxes . . . ; (3) withhold state disability

insurance taxes . . . ; (4) withhold state income taxes . . . ; (5) provide worker’s compensation . . . ;

(6) provide employees with itemized written wage statements . . . and provide employees with certain

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 251

and potentially even existential—threat, TNCs have begun expending

significant resources to maintain the status quo. Uber has already appealed both

the California and Florida decisions,

100

and the company is fighting similar

issues “on multiple fronts across the country.”

101

And even though the narrow

decisions in California and Florida could be a sign of future trouble for Uber

and other TNCs, at least five other states have gone the opposite direction and

accepted Uber’s argument that drivers are independent contractors.

102

TNCs are also undertaking major lobbying efforts, which could burnish

public and legislative support and ultimately lead to greater statutory

protections for the companies. Uber, for example, now employs 250 lobbyists

and twenty-nine lobbying firms in state capitals around the nation—and these

figures do not even count the company’s many lobbyists at the municipal

level.

103

The companies do not look to be exhausting their war chests any time

soon: Uber has attracted billions in private financing, bringing its valuation to

over $50 billion,

104

and Lyft recently received $100 million in financing from

legendary investor Carl Icahn.

105

And TNCs enjoy widespread support among

consumers. For example, Uber received nearly a million signatures on petitions

supporting the company.

106

In other words, TNCs have the political clout and resources to make sure

that plaintiffs will not easily prevail in any battle over categorizing drivers as

employees.

Lastly, the issue is not static: although some or even most courts might

find an employer-employee relationship based on TNCs’ current arrangements,

these nimble, well-financed companies have the means to adapt to and

circumvent employer-specific regulations. Uber, for example, has already

records that California’s Industrial Welfare Commission wage order No. 9–2001, section 7,

requires . . . ; (7) reimburse employees for business expenses and losses . . . ; and (8) ensure payment at

all times of California’s minimum wage”).

100. Celia Ampel, Uber Appeals State’s Treatment of Drivers as Employees, DAILY BUS. REV.

(June 29, 2015), http://www.dailybusinessreview.com/id=1202730834966/Uber-Appeals-States-

Treatment-of-Drivers-as-Employees?slreturn=20150620124626 [http://perma.cc/K5X2-G8W8]; Isaac

& Singer, supra note 91.

101. Douglas Hanks, For Uber, Loyal Drivers and a New Fight for Benefits, MIAMI HERALD

(May 21, 2015), http://www.miamiherald.com/news/business/article21599697.html [http://perma.cc

/ZCW9-F9LV].

102. Isaac & Singer, supra note 91.

103. Karen Weise, This Is How Uber Takes Over a City, BLOOMBERG BUSINESS (June 23,

2015), http://www.bloomberg.com/news/features/2015-06-23/this-is-how-uber-takes-over-a-city

[http://perma.cc/T7KC-MM5S]. In Portland, Oregon, alone, the company deployed at least ten people

to lobby on its behalf in a recent battle to enter the city—a battle that Uber ultimately won. Id.

104. Pui-Wing Tam & Michael J. de la Merced, Uber Fund-Raising Points to $50 Billion

Valuation, N.Y. TIMES (May 9, 2015), http://www.nytimes.com/2015/05/09/technology/uber-fund-

raising-points-to-50-billion-valuation.html [http://perma.cc/5D79-5RCD].

105. Mike Isaac & Alexandra Stevenson, Carl Icahn Invests $100 Million in Lyft, N.Y. TIMES

(May 15, 2015), http://www.nytimes.com/2015/05/16/technology/carl-icahn-invests-100-million-in-

lyft.html [http://perma.cc/4HPQ-83CD].

106. Weise, supra note 103.

252 CALIFORNIA LAW REVIEW [Vol. 104:233

shown great flexibility in modifying contractual arrangements with drivers, as

illustrated by a chart the company submitted in opposition to certifying a class

of drivers

107

Uber used this chart to argue that drivers were not similarly situated

and therefore no individual plaintiff could represent the class.

108

But the chart

also shows the potential ease with which TNCs could skirt the employer-

employee relationship: with courts weighing a multitude of factors to determine

the existence of an employment relationship, TNCs can and likely will make

marginal tweaks to their contracts in the hopes of ever-so-slightly tilting the

scales in their favor.

II.

THE PROMISE OF THE NONDELEGABLE DUTY DOCTRINE

TNCs have had little success arguing that they are mere platforms for

connecting buyers and sellers. And although a few drivers have succeeded in

obtaining employment benefits from TNCs, the separate question whether

107. Amended Ex. 41, O’Conner v. Uber Techs., Inc., No. 3:13-cv-03826-EMC (N.D. Cal

Aug. 3, 2015) (on file with author).

108. Davey Alba, Judge: California Drivers Can Go Class-Action to Sue Uber, WIRED (Sept.

1, 2015), http://www.wired.com/2015/09/judge-california-drivers-can-go-class-action-sue-uber

[http://perma.cc/2L9S-76E8]. Uber failed to persuade the judge, who ultimately certified the class on

the question of employment classification. Amended Order Granting in Part and Denying in Part

Plaintiffs’ Motion for Class Certification, O’Conner v. Uber Techs., Inc., No. 3:13-cv-03826-EMC

(N.D. Cal. Sept. 1, 2015).

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 253

drivers are employees of TNCs for liability purposes remains unsettled. Amid

so much uncertainty, this Note proposes a means of holding TNCs liable that

will recognize their unique employment structure while also confronting the

not-so-unique dangers that TNC services pose to passengers and bystanders.

Rather than relying exclusively on respondeat superior, plaintiffs may be

better served by arguing an alternative route to liability—that in the absence of

an employee-employer relationship, TNCs are liable for their drivers because

they have a nondelegable duty to operate safely.

In general, an employer cannot be held liable for the acts of an

independent contractor.

109

This is likely one of the reasons that TNCs have

gone out of their way to describe their drivers as “independent.”

110

But the rule

is not absolute; it is limited by public policy concerns.

111

The nondelegable

duty rule alleviates the problem of entities contracting away their rightful

responsibilities: a company cannot avoid liability by delegating work to an

independent contractor when it is publicly licensed or franchised and its work

presents a safety concern to the public.

112

Courts sometimes break the nondelegable duty rule into two disjunctive

parts, either of which can create a nondelegable duty: (1) where a company is

liable when it is subject to public franchise, or (2) where a company undertakes

an activity that is inherently dangerous to others.

113

But California courts

frequently conflate these two criteria based on a pragmatic rationale: “The

effectiveness of safety regulations is necessarily impaired if a carrier conducts

its business by engaging independent contractors over whom it exercises no

control.”

114

109. B.E. WITKIN, 6 WITKIN, SUMMARY TORTS § 1253, at 642 (10th ed., 2005) (noting “the

general rule of nonliability for negligence of an independent contractor”).

110. There are in fact a host of additional costs that come from re-categorizing workers as

employees rather than independent contractors; the National Employment Law Project estimated that

making the switch could amount to an additional 30 percent in labor costs for ridesharing companies.

Popper, supra note 99; see also People ex rel. Harris v. Pac Anchor Transp., Inc., 329 P.3d 180, 183

(Cal. 2014), cert. denied, 135 S. Ct. 1400 (2015) (as quoted supra note 99).

111. Barry v. Raskov, 283 Cal. Rptr. 463, 467 (Ct. App. 1991).

112. 6 WITKIN, SUMMARY TORTS, supra note 109, § 1247, at 634, 636, 642. The rule is

grounded in a sense of fairness. See Maloney v. Rath, 445 P.2d 513, 515 (Cal. 1968) (“To the extent

that recognition of nondelegable duties tends to insure that there will be financially responsible

defendant available to compensate for the negligent harms caused by that defendant’s activity, it

ameliorates the need for strict liability to secure compensation.”).

113. Francis M. Dougherty, Liability of Employer with Regard to Inherently Dangerous Work

for Injuries to Employees of Independent Contractor, 34 A.L.R. 4th 914, § 3 (1984) (“Nondelegable

duties, in context of exceptions to general rule that employer is not liable for acts of independent

contractor, arise from: (1) affirmative duties that are imposed on employer by statute,

contract, franchise, charter, or common law and (2) duties imposed on employer that arise out of work

itself because its performance creates dangers to others, i.e., inherently dangerous work; if work to be

performed fits into one of these two categories, the employer may delegate the work to an independent

contractor, but he cannot delegate the duty.”).

114. See Eli v. Murphy, 248 P.2d 756, 757 (Cal. 1952).

254 CALIFORNIA LAW REVIEW [Vol. 104:233

Plaintiffs would therefore be wise to argue that TNCs both operate under

a public franchise and engage in an activity that is inherently dangerous to the

public. Such a theory will be particularly effective in California, where the

CPUC and the state legislature have implemented a variety of regulations—and

a new licensing requirement—with the explicit goal of making TNC operations

safer for passengers and the general public.

115

This Section first makes the case

that drivers are, at least, independent contractors of TNCs. From there, it

explains the purpose of the nondelegable duty rule and why it should apply to

TNCs.

116

A. TNC Drivers as Independent Contractors

As a threshold issue, TNCs can only have a nondelegable duty insofar as

they carry out their operations through independent contractors.

117

The

nondelegable duty rule would not apply, for example, were TNCs acting as

mere platforms, like eBay or Craigslist, on which vendors peddle their services

with little oversight.

118

In other words, plaintiffs need to prove that TNC

drivers are independent contractors before they can proceed with a

nondelegable duty claim.

It would be difficult for TNCs to argue that drivers are anything less than

independent contractors. An independent contractor is “one who, in exercising

an independent employment, contracts to do certain work according to his or

her own methods, without being subject to the control of the employer, except

115. See infra Part II.C.

116. It is important to note, at the outset, that all of the TNCs include exculpatory language in

their terms of service. See Terms and Conditions, UBER, supra note 33 (“[T]he entire risk arising out

of your use of the services, and any service or good requested in connection therewith, remains solely

with you.”); Lyft Terms of Service, LYFT, supra note 33 (“[Lyft] does not and does not intend to

provide transportation services or act in any manner as a transportation carrier, and has no

responsibility or liability for any transportation services voluntarily provided to any rider by any driver

using the Lyft platform.”); Terms of Services, SIDECAR, supra note 33 (“We reserve the right, but have

no obligation, to monitor and facilitate the resolution of disputes between you and other users. Sidecar

shall have no liability for your interactions with other users, or for its or any user’s action or

inaction.”). But these waivers certainly do not create a hopeless situation for plaintiff-customers.

Indeed, courts routinely strike down exculpatory language. See C. Connor Crook, Validity and

Enforceability of Liability Waiver on Ski Lift Tickets, 28 CAMPBELL L. REV. 107, 120–21 (2005)

(“Courts are generally reluctant to enforce exculpatory clauses, especially those that include the

negligence of the party attempting to enforce the clause. However, . . . courts can take very nuanced

approaches . . .”); see also Vanessa Katz, Comment, Regulating the Sharing Economy, 30 BERKELEY

TECH. L.J. 1067 (2015). Particularly in California, plaintiffs can make a strong argument that

exculpatory waivers for a transportation company violate public policy and are therefore

unenforceable. See Gardner v. Downtown Porsche Audi, 225 Cal. Rptr. 757, 760 (Ct. App. 1986)

(finding a car garage’s exculpatory provision invalid because it was against public policy, reasoning

that, in part, access to automobile transportation is a practical necessity for “nearly all” members of the

public). Furthermore, the waivers would not cover bystander-plaintiffs who have no contractual

agreement with the TNC or its driver.

117. See Dougherty, supra note 113.

118. See id.

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 255

as to the product or result of the work.”

119

This is a low bar for plaintiffs. In the

context of transportation companies, it is helpful to look at three factors to

determine independent contractor status: “(1) [the driver’s] recompense was

specified . . . (2) the result was specified . . . and (3) it was left to [the driver] as

to how he carried out his mandate to provide courtesy transportation.”

120

Where

these factors are met, a transportation company would be unlikely to prevail in

claiming that it “merely undertook to screen” potential drivers.

121

Applying the factors to TNCs, the companies (1) set the pay drivers

receive,

122

(2) dictate the result, meaning that drivers must take passengers to

their requested location in order to earn their fare,

123

and (3) allow drivers to

decide the means (the route) by which to accomplish that goal.

124

Strengthening

the case for independent contractor status, TNCs themselves have frequently

labeled their drivers as independent contractors or workers.

125

B. Public Franchise or License

TNCs meet the first criteria for nondelegable duty because they operate

“under a license or franchise granted by public authority subject to certain

obligations or liabilities imposed by the public authority.”

126

This element of

the nondelegable duty rule has been satisfied in regard to common carriers like

trucking companies and taxicab companies,

127

and it likewise applies to TNCs.

The CPUC began regulating TNCs in a manner similar to common

carriers and has imposed regulations resembling those that govern taxicab

services. These requirements have culminated in the CPUC requiring every

119. See Karen L. Schultz, Definitions and Nature of Term, 41 AM. JUR. INDEP. CONTRACTORS

2D §1 (2015).

120. Holmes v. United Indep. Taxi, No. B149582, 2002 WL 228197, at 2 (Cal. Ct. App. Feb.

15, 2002).

121. Id.

122. Huet, supra note 40.

123. See Lydia Emmanouilidou, Drivers, Passengers Say Uber App Doesn’t Always Yield Best

Routes, NPR (Sept. 21, 2014), http://www.npr.org/2014/09/18/349560787/drivers-passengers-say-

uber-app-doesnt-always-yield-best-routes [http://perma.cc/TJ3S-AYTY].

124. Drivers can use a TNC’s GPS navigation software, but they are also free to use their own

GPS software. Id.

125. See, e.g., Terms of Services, SIDECAR, supra note 33 (stating that Sidecar’s drivers are

“independent workers who voluntarily use our mobile platform to be matched with passengers and

obtain payment cashlessly through the app”); Who Are The Drivers On The Uber System?, UBER

supra note 85 (until at least December 2014, stating that “drivers on the Uber system are independent

contractors”).

126. See Serna v. Pettey Leach Trucking, Inc., 2 Cal. Rptr. 3d 835, 839 (Ct. App. 2003); see

also 6 WITKIN, SUMMARY TORTS, supra note 109, § 1253, at 642 (“If a carrier or other public service

corporation operates under a public franchise, it is liable for the negligence of an independent

contractor engaged to act.”).

127. See, e.g., Serna, 2 Cal. Rptr. 3d at 844–45 (applying the nondelegable rule to a trucking

company because it must operate under a public franchise or authority); Gamboa v. Conti Trucking,

Inc., 23 Cal. Rptr. 2d 564, 564–65 (Ct. App. 1993) (similarly applying the nondelegable rule to a

highway carrier).

256 CALIFORNIA LAW REVIEW [Vol. 104:233

TNC to obtain a license to operate in California.

128

In 2012, the CPUC issued

citations to Uber, Lyft, and Sidecar for failing to obtain authority from the

CPUC to operate as “charter-party carriers,” which are prearranged services

like limousines and shuttles.

129

The CPUC later carved out a new category for

the ridesharing companies, creating a middle ground between taxicabs and

traditional charter-party carriers. In 2013, the Commission defined the

ridesharing businesses as “Transportation Network Companies,” a subset of the

broader “charter-party carriers” category, which brought the companies under

the CPUC’s jurisdiction.

130

In doing so, the CPUC flatly rejected Uber’s

argument that it is simply an online platform and not a transportation company:

“Uber is the means by which the transportation service is arranged, and

performs essentially the same function as a limousine or shuttle company

dispatch office.”

131

The fact that customers relied on a cell phone application

rather than a human dispatcher was of little significance to the CPUC.

132

The

CPUC’s decision turned instead on the fact that Uber makes a profit from its

services. As a result, Uber “should also be held responsible if the driver is

negligent or not applying Uber safe practices.”

133

The CPUC took further steps toward making TNCs accountable for their

drivers through a set of 2013 regulations, which created new standards for TNC

licenses, background checks, driver training programs, and liability insurance

that are “equal to” what the San Francisco Municipal Transportation Authority

(SFMTA) requires of taxicab drivers.

134

In 2014, the CPUC considered both

insurance requirements for taxicabs in Los Angeles and the Commission’s own

insurance requirements for limousines, and it chose to impose the taxicab

insurance requirements on TNCs.

135

Although the CPUC declined to “meddle”

with the TNC business model by forcing the companies to designate each

driver as an employee or contractor,

136

its regulations have closed the gap

between TNCs and taxicabs. By purposely regulating TNCs in a manner

128. See 2013 CPUC Order, supra note 35, at 27.

129. Press Release, Cal. Pub. Util. Comm’n, supra note 62. Because the companies did not

damage insurance coverage” and workers’ compensation insurance, as well as “failing to enroll drivers

in the Department of Motor Vehicles Employer Pull Notice Program” and “failing to pre-employment

test and enroll drivers in the Controlled Substance and Alcohol Testing Certification Program.” Id.

130. 2013 CPUC Order, supra note 35, at 23–24. According to the Order, “[t]his Commission

defines a TNC as an organization whether a corporation, partnership, sole proprietor, or other form,

operating in California that provides prearranged transportation services for compensation using an

online-enabled application (app) or platform to connect passengers with drivers using their personal

vehicles.” Id. at 2.

131. Id. at 12.

132. Id. at 12–13.

133. Id. at 17.

134. Id. at 62–63.

135. The state legislature has since increased the amount of insurance required. CAL. PUB.

UTIL. CODE § 5433 (West 2014).

136. 2013 CPUC Order, supra note 35, at 63.

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 257

similar to their taxicab counterparts, the CPUC has implicitly acknowledged

that TNCs and taxicabs serve essentially the same role for consumers, and

TNCs should therefore not have a drastically lower bar for safe operations.

137

This regulatory environment meets the first nondelegable duty factor

because it imposes, through public license, affirmative duties on TNCs. Courts

have found that such licensure from the CPUC can make carriers liable for acts

of their drivers. In Gamboa v. Conti Trucking, for example, a man was struck

and killed by a truck operated by Alberg Trucking, which had been subhauling

for Conti Trucking at the time of the accident.

138

Both companies were licensed

by the CPUC and held valid insurance, in compliance with CPUC rules, at the

time of the accident.

139

The man’s widow and family brought suit against Conti

Trucking for wrongful death, and the appellate court concluded that merely

meeting the CPUC’s requirements did not extinguish Conti Trucking’s

nondelegable duty for the negligence of its independent contractor, so the

plaintiffs’ suit could proceed against both companies.

140

Using the same logic,

a TNC could not shirk its nondelegable duty merely by complying with state

regulations; it would still be liable for an act of its driver because it, like

trucking companies, is subject to public licensing requirements.

There is precedent for extending this element of nondelegable duty to

personal transportation companies. Indeed, a number of state courts have used

the nondelegable duty doctrine to hold taxicab companies liable for acts of

independent contractor drivers. A New Jersey Superior Court held that a lease

between a taxicab company, Red Top, and an independent contractor created a

source of vicarious liability by which a plaintiff could recover for the driver’s

negligence.

141

The lease was for both a company car and Red Top’s “special

privilege to use the public streets [of Newark] for private profit granted by a

governmental agency pursuant to statutory authority.”

142

Because this privilege

required a special license, the court held that Red Top could not delegate its

authority and avoid liability for the driver’s actions, regardless of whether the

driver was an independent contractor or employee.

143

California courts should follow the model set by other jurisdictions that

have applied the nondelegable duty doctrine to the taxicab industry. Like

taxicab operators, TNCs operate under “special privilege” provided by a

137. The license application packet lists multiple steps carriers must take in regard to “Safety of

Operation.” CAL. PUB. UTIL. COMM’N, 13-09-045, APPLICATION PACKET: TRANSPORTATION

NETWORK COMPANIES (TNC), at 3 (2013) [hereinafter TNC Application Packet]

http://www.cpuc.ca.gov/NR/rdonlyres/3DEDC5A3-7151-4991-93F4-2AC17499853F/0/TNC_App_

Form20131106.pdf [http://perma.cc/YC7H-KT5Z].

138. Gamboa v. Conti Trucking, Inc., 23 Cal. Rptr. 2d 564, 564 (Ct. App. 1993).

139. Id.

140. Id. at 564, 566.

141. Paige v. Red Top, Inc., 255 A.2d 279, 281–82 (N.J. Super. Ct. App. Div. 1969).

142. Id. at 281.

143. Id. at 282.

258 CALIFORNIA LAW REVIEW [Vol. 104:233

license to use city streets for profits.

144

Although TNC drivers do not lease their

cars from the companies, as the driver in the Red Top decision did,

145

they do

effectively lease the TNC license and the ability to pick up customers in

exchange for giving TNCs a percentage cut of each fare. Such an arrangement,

in the taxicab context, has been sufficient to create liability for taxicab

operators for acts of their drivers, even for acts that were unrelated to driving.

For example, a Massachusetts appellate court, relying extensively on the Red

Top decision in New Jersey, found a taxicab company vicariously liable when

the company’s independent contractor driver assaulted a passenger.

146

Unlike

in Red Top, the driver leased only a license from the taxicab company, not his

vehicle.

147

Nonetheless, the court held that the taxi company’s medallion—both

a visual identifier and an actual license to operate—represented a nondelegable

duty to protect its passengers, and the driver’s assault could therefore constitute

a breach of this duty by the company.

148

TNCs, similarly, must obtain a permit

to operate in California

149

and other states.

150

And California now also requires

TNC vehicles to display the visual identifier of their company.

151

The mandatory licensing requirements also distinguish TNCs from many

other types of referral services. For example, when a foster care referral

company connected a client with a daycare service, the referral company did

not have a nondelegable duty to the client because the daycare service was

independently licensed through California’s Department of Social Services

Community Care Licensing.

152

TNC drivers, on the other hand, are not

independently licensed or insured; they operate under the commercial license

144. See id. at 281.

145. See id.

146. Teixeira v. Car Cab Three, Inc., 1994 Mass. App. Div. 154, 1 (Dist. Ct. 1994) (finding that

a company that leased its taxicab medallion did not extinguish its nondelegable duty to operate safely).

147. Id. at 3–4.

148. Id. at 4; see also Tinkham v. Groveport-Madison Local Sch. Dist., 602 N.E.2d 256, 259

(Ohio Ct. App. 1991) (holding that a driver’s status as employee or independent contractor was

irrelevant, as was the fact that the driver’s tortious act occurred outside of his taxicab; the taxicab

company entered into a contract with a school district to safely transport a child, and the company

breached this nondelegable duty when its driver kidnapped and raped a child passenger).

149. 2014 CPUC Order, supra note 60, at 12.

150. See, e.g., Christopher Koopman, Opinion, Koopman: Expensive Licensing Can Drive

Away Entrepreneurs, RICH. TIMES DISPATCH (July 18, 2015), http://www.richmond.com/opinion

/their-opinion/guest-columnists/article_96795208-2fde-566d-8293-9fed157ec3e2.html

[http://perma.cc/TLH2-QMPT] (Virginia); Richard N. Velotta, Licensing Open to Uber, Others, But

Hailing a Ride Months Away, LV. REV.-J. (June 29, 2015), http://www.reviewjournal.com

/news/traffic-transportation/licensing-open-uber-others-hailing-ride-months-away

[http://perma.cc/77UE-489C] (Nevada).

151. 2013 CPUC Order, supra note 35, at 18.

152. See J.L. v. Children’s Inst., Inc., 99 Cal. Rptr. 3d 5, 16 (Ct. App. 2009) (“This

[nondelegable duty] principle has no application here, given that Yglesias [the daycare service] was

independently licensed through CCL. Thus, neither she nor CII [the referral company] can be

considered the licensee subject to any nondelegable duty.”).

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 259

and commercial insurance of their parent TNC companies.

153

And the current

framework requires TNCs, not drivers, to conduct criminal background checks

and vehicle inspections, and to carry accident insurance.

154

In some instances, defendants have managed to avoid nondelegable duty

liability because the law governing their industry was too general to create

affirmative duties. But those cases are distinguishable from TNCs in California

and other states in which the companies operate under specific safety

guidelines. In Felmlee v. Falcon Cable TV, a California Court of Appeal held

that an ordinance requiring a defendant cable company simply to maintain

“good service” and “safe conditions for its employees” did not create a breach

of nondelegable duty when the plaintiff, an employee of the cable company’s

independent contractor, sustained an injury while repairing a cable television

line.

155

Following Felmlee, another court found that a mandate to “‘frequently

and thoroughly’ inspect the cable lines to ensure that they are in good condition

constitutes a mere general duty to maintain safe conditions, to which the

nondelegable duties doctrine is inapplicable.”

156

Here, by contrast, the CPUC

and California legislature have laid out specific requirements that are directly

tailored to TNCs. Beyond a mere duty to operate safely, the California

regulations of TNCs touch on nearly every possible source of danger, including

insurance coverage, driver safety checks, vehicle inspections, and drug use.

157

Because California has implemented licensing requirements to place

affirmative and specific duties on TNC safety in transporting passengers,

plaintiffs can succeed on the first nondelegable duty factor.

C. Risk to Public Safety

The previous Section established that TNCs are subject to public licensing

requirements. This Section explains that TNC operations, coupled with express

statements from the CPUC and state legislators, pose an inherent risk to both

passengers and bystanders. Duties under a public license are nondelegable

because the licenses are administered “to ensur[e] accountability of licensees to

safeguard the public welfare.”

158

In other words, where the purpose of licensing

is to protect public safety, a licensee cannot avoid its duty to the public by

delegating the license to independent contractors.

Although TNCs downplay their responsibility for public safety, the recent

history of state regulations and statutes in California tells a different story. Both

153. See 2014 CPUC Order, supra note 60, at 11–12 (license); CAL. PUB. UTIL. CODE

§ 5433(b) (West 2014) (insurance).

154. 2013 CPUC Order, supra note 35, at 26–28.

155. Felmlee v. Falcon Cable TV, 43 Cal. Rptr. 2d 158, 158, 162 (Ct. App. 1995), modified

(July 28, 1995).

156. Mejia-Gutierrez v. Comcast of Cal. III, Inc., No. A132933, 2013 WL 314751, at *9 (Cal.

Ct. App. Jan. 28, 2013).

157. See generally TNC Application Packet, supra note 137.

158. 6 WITKIN, SUMMARY TORTS, supra note 109, § 1248, at 636.

260 CALIFORNIA LAW REVIEW [Vol. 104:233

the CPUC and the California legislature have repeatedly explained that they are

regulating TNCs out of safety concerns. Jack Hagan, director of the CPUC’s

Consumer Protection and Safety Division, noted the need to protect passengers

from the dangers of TNCs: “This is a matter of public safety . . . if something

happens to a passenger while in transport with Lyft, SideCar, or Uber, it is the

responsibility of the CPUC to have done everything in its power to ensure that

the company was operating safely according to state law.”

159

The CPUC confirmed that its primary focus is public safety and,

“secondarily,” adapting regulations to changing technology.

160

The CPUC’s

new rules evince this emphasis on public safety. For example, the CPUC now

requires that TNCs obtain an operating permit certifying, in part, that their

proposed service will be “financially able to operate safely.”

161

As part of the

licensing process, the TNCs must also conduct background checks of drivers,

establish a driver-training program, inspect drivers’ vehicles, implement a zero-

tolerance policy on drugs and alcohol, and hold commercial insurance for their

drivers.

162

In passing these new requirements, the CPUC has shown a clear

recognition that TNCs pose a danger to the public.

While the CPUC dealt with licensing, the state legislature took on the task

of defining “adequate insurance” for TNCs. The legislature, like the CPUC,

grounded its approach in protecting public safety. Assembly Bill 2293 requires

minimum levels of insurance coverage both for when TNC drivers are

transporting passengers and when they are online and available to pick up

passengers.

163

In passing the bill, the legislature made clear that its goal was to

protect consumers and drivers from harm by TNCs by setting a floor, rather

than a ceiling, on liability. Although the bill ensures that TNCs will carry

insurance, it expressly avoids insulating TNCs from additional liability: “This

article shall not limit the liability of a transportation network company arising

out of an automobile accident involving a participating driver in any action for

damages against a transportation network company for an amount above the

required insurance coverage.”

164

The author, State Senator Susan Bonilla,

stated that the bill “ensures both drivers and consumers are protected.”

165

And

159. James R. Hood, Lyft Hires its First Lobbyists to Clear the Way for Its Ride-Sharing

Service, CONSUMER AFF. (Apr. 17, 2014), http://www.consumeraffairs.com/news/lyft-hires-its-first-

lobbyists-to-clear-the-way-for-its-ride-sharing-service-041714.html [http://perma.cc/U6H7-UVVB].

160. 2013 CPUC Order, supra note 35, at 22.

161. TNC Application Packet, supra note 137.

162. 2013 CPUC Order, supra note 35, at 3.

163. CAL. PUB. UTIL. CODE § 5433 (West 2014).

164. Id.

165. ASSEMBLY FLOOR ANALYSIS, A.B. 2293, 2013–2014 Reg. Sess. (Cal. 2014). The Act

passed seventy to zero in the House and thirty-four to six in the Senate. AB-2293 Transportation

Network Companies: Insurance Coverage, CAL. LEGISLATIVE INFO,

https://leginfo.legislature.ca.gov/faces/billHistoryClient.xhtml?bill_id=201320140AB2293

[https://perma.cc/PA7P-JSGA] (last visited Oct. 13, 2015). Governor Jerry Brown signed it into law

on September 17, 2014, and it took effect on July 1, 2015. Id.

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 261

the assembly floor summary notes that the bill “[e]stablishes guidelines for

insurance coverage for Transportation Network Companies (TNCs) to ensure

personal and financial safety of consumers.”

Courts have relied on this type of legislative and regulatory action to

apply the nondelegable duty to other transportation services that implicate

public safety. In 1952, the California Supreme Court held in Eli v. Murphy that

a truck company—as a common carrier franchised by the CPUC (formerly the

PUC)—could not escape liability even if it used independent contractors as

drivers.

166

The legislature had indicated its intent to protect public safety by

creating special regulations for highway common carriers like the trucking

company,

167

and the court held that this legislative intent created a

nondelegable duty for trucking companies because “the effectiveness of safety

regulations is necessarily impaired if a carrier conducts its business by

engaging independent contractors over whom it exercises no control.”

168

The safety concerns expressed in Eli similarly apply to common carriers

operating under permit from the CPUC. In Klein v. Leatherman, plaintiffs

brought suit against a non-franchised trucking company whose subhauler (an

independent contractor) had neglected to obtain the proper insurance as

required under the California Public Utility Code.

169

In holding that the

trucking contractor had a nondelegable duty, the court noted that the

nondelegable duty rule would not be diminished based on technicalities.

Instead, the court approached the issue practically: “One truck upon the

highway tends to be like any other. It is difficult to discern wherein

classification of the operation on the highway as a privilege under franchise, or

as a right under a permit, changes the degree of protection required.”

170

Such

logic is important for heading off the potential that TNCs will try to distinguish

their permit from those that have been applied to trucking companies and taxis.

Courts should be aware that, where TNCs fill the same role and present the

same dangers as traditional transportation services, minute regulatory

differences are of little importance.

171

The key similarity between TNCs and taxicabs is that both supply rides at

the moment they are needed and give the driver no control over the rate

charged.

172

This means that passengers are unlikely to spend time vetting

drivers, prices, or car options. Instead, consumers put their faith in operators—

166. Eli v. Murphy, 248 P.2d 756, 757–58 (Cal. 1952).

167. Id. at 600.

168. Id. at 600–01; see also Gamboa v. Conti Trucking, Inc., 23 Cal. Rptr. 2d 564, 565–67 (Ct.

App. 1993) (extending Eli’s reasoning to a case in which the CPUC, rather than the legislature,

imposed permitting requirements on a trucking company).

169. Klein v. Leatherman, 76 Cal. Rptr. 190, 191–92 (Ct. App. 1969).

170. Id. at 192.

171. See James Surowiecki, Uber Alles, NEW YORKER (Sep. 16, 2013),

http://www.newyorker.com/magazine/2013/09/16/uber-alles-2 [http://perma.cc/K3HK-PPWX].

172. See id.

262 CALIFORNIA LAW REVIEW [Vol. 104:233

taxicab companies or TNCs—to provide safe services. Consumers are therefore

entitled to expect the same level of protection and recourse from a TNC as a

taxicab.

173

If the goal of vicarious liability is to protect consumers and the

general public from harm, TNCs should be treated no differently under the law

than taxicab companies and other publicly licensed transportation services.

* * *

California regulators and officials have made their intent very clear: they

wish to mitigate the public safety risks TNCs pose. As a result, TNCs must

follow an array of regulations and permitting requirements in order to operate

in the state. Given this regulatory landscape, courts should allow plaintiffs to

hold TNCs liable for acts of their drivers under the nondelegable duty rule.

III.

POLICY RECOMMENDATIONS

In California, the CPUC and the state legislature have already taken some

steps to head off safety problems before they occur but both entities can do

more.

174

And at the national level, sharing economy abuses have become a

wedge issue between presidential candidates.

175

This Part details potential

measures that California, and any other state, could take to reduce the

likelihood of negligence and intentional torts by TNC drivers.

A. Background Checks

The legislature has already enacted specific requirements for “adequate”

insurance that bring TNCs to similar levels as taxicabs; its next step should be

to do the same with driver background checks. Whereas taxicab companies are

173. Id. (“[TNCs] are actually piggybacking on the trust that consumers feel in what is typically

a highly regulated economy.”).

174. Indeed, the CPUC, like regulators in other states, has imposed some new rules on TNCs,

like the background check requirement, but it has left regulatory oversight of drivers to the companies

themselves. Emily Badger, What Happens When Uber and Airbnb Become Their Own Regulators,

WASH. POST (Feb. 4, 2015), http://www.washingtonpost.com/blogs/wonkblog/wp/2015/02/04/what-

happens-when-uber-and-airbnb-become-their-own-regulators [http://perma.cc/MW7C-BSL6]. It

remains to be seen whether TNCs have the will, or even the ability, to effectively monitor their drivers.

175. In her first major economic policy speech, Hillary Clinton said that while the sharing

economy “creat[es] exciting opportunities and unleash[es] innovation . . . it’s also raising hard

questions about workplace protections and what a good job will look like in the future.” Claire

Zillman, Hillary Clinton: I’ll Crack Down on Sharing Economy Abuses, FORTUNE (July 13, 2015),

http://fortune.com/2015/07/13/hillary-clinton-uber-sharing-economy-workers [http://perma.cc/ZET6-

4VAB]. Meanwhile, Jeb Bush promoted the startup economy by using Uber for his transportation to a

San Francisco conference, fellow Republican hopeful Ted Cruz declared himself the “Uber” of

candidates, and Rand Paul blasted Hillary Clinton in a tweet, saying her ideas about Uber and Lyft are

“out of touch.” See Zeke J. Miller, Jeb Bush Hails Uber In San Francisco, Doesn’t Win Driver’s Vote

(July 16, 2015), http://time.com/3961288/jeb-bush-uber-san-francisco [http://perma.cc/W9TX-

CVPQ]; Michelle Quinn, Forget the Iran Nuclear Deal. What’s your Position on Uber?, SILICON

BEAT (July 14, 2015), http://www.siliconbeat.com/2015/07/14/forget-the-iran-nuclear-deal-whats-

your-position-on-uber [http://perma.cc/9VYS-U98T].

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 263

generally required to perform a “LiveScan” background check that provides

detailed—and continuous—updates on drivers, the regulatory vagueness

applying to TNCs allows the companies to purchase significantly less

comprehensive checks.

176

Consumers deserve to feel secure that their driver

has not been convicted of a DUI or rape since the initial hiring background

check, regardless of whether that driver is operating on behalf of a taxi

company or a TNC. The legislature can better protect passengers and the

general public by requiring TNCs to conduct more comprehensive background

checks of drivers.

B. Employment Status

Courts and juries can grapple with whether a TNC driver is an employee,

an independent contractor, or something else using a fact-specific inquiry on a

case-by-case basis. But such an approach will be inefficient and will likely lead

to non-uniform results. A driver who is a TNC employee in Anaheim should

not become an independent contractor merely because she crossed the county

line into Los Angeles. By creating a statewide, or even nationwide, definition

of TNC responsibilities toward drivers, regulators could alleviate this issue. As

it has done with other industries, for example real estate brokers and their

agents, the legislature could require that TNCs maintain adequate levels of

supervision and control over their drivers.

177

Such a statutory provision would,

in turn, encourage courts to hold TNCs responsible for acts of drivers.

178

C. Public Representations

Uber, Lyft, and Sidecar continue to publicly represent themselves as

online networking platforms, not transportation services—even though

California regulators have already clearly defined them as such.

179

Likewise,

each company includes in its terms of service exculpatory language minimizing

176. DeAmicis, supra note 7. Negative publicity may also pressure TNCs to improve

background checks. In the wake of allegations that an Uber driver raped a passenger in India, the

company pledged that it was “initiating research & development on biometrics and voice verification

to build custom tools for enhanced driver screening.” Casey Newton, Uber Will Use Biometric Scans

to Improve Background Checks on Drivers, VERGE (Dec. 17, 2014), http://www.theverge.com

/2014/12/17/7411153/uber-will-use-biometric-scans-to-improve-background-checks-on-drivers

[http://perma.cc/SV5P-8A8V]. However, the company did not offer a timeline for when or where to

expect the improved background checks. Id.

177. See CAL. BUS. & PROF. CODE § 10177(h) (West 2014) (allowing a real estate broker’s

license to be suspended or revoked based on failure to “exercise reasonable supervision over the

activities of his or her salespersons”).

178. See Gipson v. Davis Realty Co., 30 Cal. Rptr. 253, 262–63 (Dist. Ct. App. 1963) (finding

the statutory provisions governing real estate brokers and agents to be evidence that agents are always

employees for tort purposes).

179. Compare San Francisco Bay Area, UBER, https://www.uber.com/en-US/cities/san-

francisco [https://perma.cc/P7JH-TVUX] (last visited Oct. 14, 2015) (“Uber is not a transportation

provider.”), with 2013 CPUC Order, supra note 35, at 50 (“TNCs are clearly designed to provide a car

service for compensation.”).

264 CALIFORNIA LAW REVIEW [Vol. 104:233

their role in, and liability for, the transaction.

180

Not only are these statements

inaccurate but they also may mislead consumers into wrongly thinking that

they have no claims against the companies for acts of TNC drivers.

181

States,

and perhaps even the federal government, should crack down on these

misleading statements; consumers cannot provide effective oversight of TNCs

unless they know their rights.

D. Minimum Time Requirements

Public Utility Code section 5360.5, the standard distinguishing limousines

and shuttles from taxicabs, does not define “prearranged.”

182

And the CPUC

declined to interpret a minimum waiting time requirement into the code, which

would have recognized that passengers do not “prearrange” TNC transportation

in the same way they do limousine or shuttle services.

183

But, in perhaps a

subtle hint to legislators, the CPUC did acknowledge that other jurisdictions,

such as Washington State, have created minimum passenger waiting time

requirements.

184

If the CPUC will not create a minimum time requirement, the

legislature should. There is little difference between a passenger who waits on

the street with his hand out for a few minutes until a taxicab passes by and a

person who requests a ride from uberX and waits for a few minutes until a

driver uses an iPhone to accept the request.

185

Acknowledging that TNCs

180. Uber’s waiver, for example, requires customers to acknowledge that the company “does

not provide transportation or logistics services or function as a transportation carrier.” Terms and

Conditions, UBER, supra note 33. The waiver also states that Uber “does not guarantee the quality,

suitability, safety or ability of third party providers. You agree that the entire risk arising out of your

use of the services, and any service or good requested in connection therewith, remains solely with

you, to the maximum extent permitted under applicable law.” Id. The waiver releases Uber from

liability “related to, in connection with, or otherwise resulting from any use of the services.” Id. Lyft

and Sidecar make similar statements to distance themselves from liability. See Lyft Terms of Service,

LYFT, supra note 33 (“LYFT DOES NOT PROVIDE TRANSPORTATION SERVICES, AND

LYFT IS NOT A TRANSPORTATION CARRIER . . . Lyft is not responsible for the conduct,

whether online or offline, of any User of the Lyft Platform or Services.”); Terms of Services, SIDECAR,

supra note 33 (“We reserve the right, but have no obligation, to monitor and facilitate the resolution of

disputes between you and other users. Sidecar shall have no liability for your interactions with other

users, or for its or any user’s action or inaction.”).

181. District Attorneys in San Francisco and Los Angeles have already taken action against

Uber and Lyft for making misleading statements in regard to the quality of background checks and

need for certain fees. Press Release, L.A. Cty. Dist. Att’y, San Francisco and Los Angeles County

DAs Announce Settlement with Lyft, Filing Against Uber (Dec. 9, 2014), http://da.lacounty.gov

/sites/default/files/press/120914_San_Francisco_and_Los_Angeles_County_DAs_Announce-

Settlement_With_Lyft_Filing_Against_Uber.pdf [http://perma.cc/V2XK-575B].

182. 2013 CPUC Order, supra note 35, at 20.

183. See id.

184. Id. at 20 n.30.

185. Washington’s law requires that chauffeured for-hire rides must be arranged at least fifteen

minutes in advance. WASH. ADMIN. CODE. § 308-83-200(1)(c) (2012). Recognizing that TNCs often

operate as electronic street hails, the International Association of Transportation Regulators (a group of

taxi regulators) proposed model regulations under which such services would only be considered

prearranged if made more than thirty minutes in advance. Tomio Geron, Taxi Regulators Want To

Shut Down Uber—And Mobile App Usage, FORBES (Dec. 3, 2012), http://www.forbes.com/sites

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 265

operate more like taxicabs in the eyes of consumers would encourage the

CPUC and legislators to continue to bring TNC safety requirements up to the

level of the taxicab industry.

* * *

Ultimately, it will take a combination of plaintiffs’ lawyers, regulators,

and legislators to make sure that TNCs operate safely. Public policy measures

have various costs and risks, not least of which is the difficulty of passing

regulations amidst heavy lobbying and public relations efforts by TNCs. A

January 2015 dispute between TNCs and the California Department of Motor

Vehicles (DMV) over classification of the vehicles used for TNC operations

exemplifies this challenge. On January 5, 2015, the DMV issued a

“clarification” memo instructing that “any passenger vehicle used or

maintained for the transportation of persons for hire, compensation or profit is

a commercial vehicle,” and “even occasional use of a vehicle in this manner

requires the vehicle to be registered commercially.”

186

Registering a

commercial vehicle is inconvenient and costly, and Lyft, Uber, and Sidecar all

quickly released statements decrying the DMV’s requirement.

187

Within a

month, the DMV issued a retraction.

188

According to the DMV’s director, “The

matter requires further review and analysis which the department is

undertaking immediately.”

189

The DMV kerfuffle illustrates a key point about

the regulatory landscape for ridesharing services: TNCs have significant sway

over regulators, and they are more than willing to exercise it the moment new

restrictions appear.

190

Thus, policy measures may be less viable in the short

/tomiogeron/2012/12/03/taxi-regulators-want-to-shut-down-uber-and-mobile-devices-in-cars

[http://perma.cc/PG4S-4W6T]. TNCs would likely oppose such requirements; if drivers had to wait

fifteen to thirty minutes before picking up passengers, they would certainly lose many fares to

taxicabs.

186. See Lydia O’Connor, Uber, Lyft, and Sidecar Win Latest Regulation Battle Against

California, HUFFINGTON POST (Jan. 26, 2015), http://www.huffingtonpost.com/2015/01/23/california-

rideshare-commercial-plates_n_6535332.html [http://perma.cc/76S2-FAPD].

187. Id. Among other things, the companies argued that the CPUC’s decision that drivers could

use personal vehicles effectively preempted the DMV from requiring otherwise. Lyft even pointed out

that the commercial registration requirement “would essentially treat peer-to-peer transportation the

same as a taxi,” something the company apparently views as self-evidently unfair. Id.

188. Id. The web address where the DMV’s memo originally appeared now features a single

page that reads only “VIN 2015-01 Converting From Auto to Commercial Plates had been retracted.”

CA. DEPT. OF MOTOR VEHICLES, http://apps.dmv.ca.gov/vehindustry/vin_memos/vin2015

/15vin01.pdf [http://perma.cc/J5T9-8VNZ] (last visited Oct. 14, 2015).

189. O’Connor, supra note 186.

190. The January 2015 incident with the DMV serves as one example of TNCs fighting

regulations. But some have begun to theorize that the largest of the TNCs, namely Uber and Lyft, may

actually support some new regulations that would provide higher barriers to entry into the ridesharing

market and thereby reduce threats from new startups. See Jeff Guo, Uber Might Actually Want

Regulation. Here’s Why., WASH. POST (Feb. 3, 2015), http://www.washingtonpost.com/blogs/govbeat

/wp/2015/02/03/uber-might-actually-want-regulation-heres-why [http://perma.cc/MD5U-HUCM]. On

the other hand, the TNC business model owes a great deal to lax regulations, which keep driver costs

down and allow TNCs to take 20–25 percent cuts from every ride. See Jack Newsham, Uber, Lyft Save

Big by Avoiding Regulations, BOS. GLOBE (Dec. 25, 2014), http://www.bostonglobe.com/business

266 CALIFORNIA LAW REVIEW [Vol. 104:233

term. Given the TNC industry’s lobbying power and the timidity with which

policy makers have acted to protect public safety, the plaintiff’s bar can and

should act to hold TNCs accountable.

CONCLUSION

There have already been many incidents of TNC driver negligence and

assaults,

191

and the implications of the vicarious liability issue could be far-

reaching. For one thing, TNCs are growing rapidly. Uber, for example, claimed

in 2014 that the company is employing twenty thousand new drivers per

month.

192

One can expect that an increase in TNC usage will lead to a

somewhat proportional increase in tortious incidents. And to the extent that

transportation service is a zero-sum game, consumers will continue to shift

from heavily regulated taxicabs to TNC services that have far fewer safety

requirements.

Holding TNCs liable for the acts of their drivers will help protect both

passengers and the general public. It will make the companies accountable and

encourage them to be more proactive in ensuring drivers operate safely.

Perhaps even more importantly, TNCs and other sharing services like AirBnB

have been lauded as part of a movement of “disruptive” startups that will bring

the American economy into a new age of prosperity.

193

But allowing TNCs and

other sharing services to exploit a variety of loopholes, including avoiding

liability for vendors, distorts and obscures the actual value of such services.

194

At the moment, it is not clear whether such companies are a true panacea for

inefficient, outmoded services or merely opportunists with slick web design

teams. It is time to find out.

/2014/12/25/uber-lyft-save-big-avoiding-regulations/pQAMk1KMOavlyZhWi4XIaJ/story.html

[http://perma.cc/WL3Y-ABKG].

191. For a few notable examples, see Olivia Nuzzi, The Ten Worst Uber Horror Stories, DAILY

BEAST (Nov. 19, 2014), http://www.thedailybeast.com/articles/2014/11/19/the-ten-worst-uber-horror-

stories.html [http://perma.cc/DE66-VTLW].

192. Craig, An Uber Impact: 20,000 Jobs Created on the Uber Platform Every Month, UBER

BLOG (May 27, 2014), http://blog.uber.com/uberimpact [http://perma.cc/V7JM-8V36]. Uber does not

specify how many of these new employees are working as drivers for uberX, the company’s TNC

operation, but it seems safe to assume that such drivers represent a sizeable portion of the twenty

thousand.

193. For a biting critique of the “disruption” theory, see Jill Lepore, The Disruption Machine,

NEW YORKER (June 23, 2014), http://www.newyorker.com/magazine/2014/06/23/the-disruption-

machine [http://perma.cc/4CDB-THQW].

194. In other words, TNCs benefit from a regulatory framework that generally does not force

them to pay for externalities.

2016] WHEN “DISRUPTION” COLLIDES WITH ACCOUNTABILITY 267

268 CALIFORNIA LAW REVIEW [Vol. 104:233