The sharing economy

Like most trends, the “sharing economy” has moved west to east nationally and is fast becoming an accepted way of doing business in Rhode Island, although challenges are beginning to mount.

The sharing economy connects owners to consumers primarily through digital platforms. People can “share” just about anything: their home through Airbnb, seats in a car with Uber, Lyft, or Sidecar, or even used clothing with ThredUp. These are just a few of the more popular sharing-economy opportunities. And just like most trends, policy and law are playing “catch up.”

The industry occupying the more recent headlines relate to Transportation Network Companies, which include Uber, Lyft, and Sidecar. Uber, for example, has been active in Rhode Island since at least 2014. Through the Uber mobile application, everyday citizens with access to a car are able to link with customers who are in need of transportation for a fee that is paid via credit card already entered through Uber’s mobile app.

Seems simple enough and there are many who praise TNCs as convenient, quick and affordable transportation alternatives. But the myriad issues arising out of these relationships (between and among the TNC, the driver, the customer, and the government) are just now presenting themselves.

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The issues span the legal and policy spectra, such as employment status of the drivers, insurance coverage to protect the driver and customer, regulatory and licensing designed for consumer protection, and questions regarding fair competition.

Lawsuits are springing up across the country from California to Massachusetts and both statewide and municipal legislation has begun to round out policy and laws related to TNCs.

In California, several Uber drivers sued Uber claiming that the drivers are not independent contractors, as Uber claims, but employees who are entitled to certain benefits. The lawsuit was brought as a class action seeking certification of a class of drivers who worked for the company since 2009. On Sept. 1, a federal court judge certified a class of 160,000 drivers.

Uber’s presence in the Rhode Island market is no longer going unnoticed by its mainstream competitors, regulators, and legislators.

A bill seeking to regulate ride-sharing services in the state sparked debate but failed to get out of committee in the House. Among the requirements suggested, the bill would have required certain automobile liability insurance coverage for drivers.

The R.I. Department of Business Regulation – Insurance Division has also warned of potential insurance gaps for drivers and passengers of TNCs.

Within the last month, Rhode Island taxi drivers filed a complaint for declaratory judgment and application for injunctive relief in Providence County Superior Court against Uber and the R.I. Public Utilities Commission, which regulates the taxi industry. Until a final ruling is made, the taxi drivers also want the court to order Uber to cease and desist from providing services in Rhode Island.

Rhode Island is not the only place where taxi drivers are protecting their turf. There is currently a similar suit by taxi owners in Massachusetts federal court.

As these matters develop, the question will be whether the sharing-economy business model can thrive and survive in markets that have been historically heavily regulated. •

David J Pellegrino is a partner with Partridge Snow & Hahn LLP.

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