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TNC Update & Montana & the Ride-Share Industry

February 26, 2016 09:35am

Transportation network companies (TNC’s) have become a viable part of the sharing economy. Companies like Airbnb and Uber are considered pioneers in this new era of sharing. However, as with most emerging markets there are new and unexpected risks. Some, for Uber, were addressed in a recent blog—TNC’s. Marsh, an international broker, in an article relating to what to expect in 2016 U.S. Casualty markets referred to Uber’s most recent problems in a paragraph concerning “Insurance coverage and the Sharing economy”. Marsh indicated “coverage options will remain limited. This will come as the market begins to hash out who is or isn’t an employee in the on-demand economy, and what kinds of benefits he or she is entitled to”.

The majority of Uber’s current legal problems are directly related to the “employee vs independent contractor” question. In a December 9, 2015 article in “Carrier Management”, “Uber Technologies, Inc. drivers seeking to be treated as employees won a ruling that adds tens of thousands of them to the case and may put hundreds of millions of dollars more at stake. A judge’s decision Wednesday that will likely let the vast majority of Uber’s 160,000 drivers in California join the case as it heads toward trial in June expands the company’s liability exponentially, legal experts said. A victory for the drivers threatens to upend the ride share company’s business model and cut into its more than $60 billion valuation”. Further, an article by Richard Reibstein, Pepper Hamilton LLP, in Mondaq, Ltd., dated 1/6/2016, related that, apparently a day earlier, “the court (federal court in San Francisco) issued a ruling with setback #3: invalidating the arbitration clauses in the driver’s agreements”, and in setback #4 ruled that “the drivers could also proceed on a class-wide basis with the “expense reimbursement claim” seeking damages for their transportation and cell phone costs, in addition to their “tipping claim” where they allege they are entitled to the full amount of all tips received”.

Uber is also having a problem at Wall Street. Morgan Stanley, in a 1/14/2016 Bloomberg Business article, in mentioning a future IPO, related to the independent contractor issue, said: “The Company is incurring significant costs, including legal fees, in defending the independent contractor status of drivers using its platform. Although the Company believes that it is not an employer of the drivers who use its platform, adverse determination in those matters may subject it to additional compensation expenses or taxes in certain jurisdictions, which could have a material adverse effect on its ability to operate its business.” Well,,at least Florida likes Uber! The Florida Department of Economic Opportunity says “Uber drivers are independent contractors and are not entitled to unemployment benefits when Uber revokes their app. Uber is no more an employer to drivers than is an art gallery to artists”.

Montana’s step into the ride-sharing service started when the Montana Public Service Commission unanimously approved the final version of regulations to allow ride-sharing companies to operate in Montana. Subsequently, the Montana Legislature approved Senate Bill 396, and the final rules were submitted to the Montana Secretary of State for review and became effective 8/27/2015.

Montana Code Annotated, 69-12-340. Class E Motor Carrier certificate of compliance, sets the rules for transportation network carriers. One part of the code seems to be possibly at issue with the Montana Department of Labor and industry’s “independent contractor certification”, MCA 39-71-417 provisions and requirements and Rule 24.35.111, “application for independent contractor exemption certificate. I had questioned the wording in part of MCA 69-12-340, specifically para (5)…..” a transportation network carrier “does not” own, control, operate, or manage the vehicles used by transportation network drivers…”. These two words seemed to me to be a statement of fact thus pre-establishing an independent contractor status. Changing the wording to “shall not” would have more of a warning, or as being prohibitive. I questioned the Department and was advised: “Thank you for your inquiry about transportation network carriers and drivers. To answer your question, the provisions and requirements of section 39-71-417 would apply to such drivers.” Thus, if they intend to be classified as independent contractors, they will need to file the application for independent contractor exemption stated in Rule 24.35.111, and as MCA 39-71-417(7)(a) provides: “When the department approves an application for an independent contractor exemption certificate and the person is working under the independent contractor exemption certificate, the person’s status is conclusively presumed to be that of an independent contractor”.

The new codes also allow for the insurance requirements of TNC’s. MCA 69-12-343 sets forth the coverage limits required while a driver is logged on to the TNC’s digital network or is engaged in a prearranged ride. The rules and coverage limits are quite clear. Should you have any questions regarding the Montana Codes or insurance requirements be sure to contact your legal counsel or insurance agent.

Darnielle Insurance is available to answer your questions.

We are located at 1320 28th Street West, Billings, MT 59102.

Give us a call at 406-652-4180.

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