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The Uber Bumpy Ride to Catch a Lyft

At the tail end of the 2015 Legislative Session, Governor Brian Sandoval signed AB 175 into law. The legislation which permits Transportation Network Systems, like Uber and Lyft, that connect passengers with drivers through smartphone apps, came after substantial legal wrangling that preceded the legislative session and several false starts within the Legislature.

In October 2014, Uber started operating its hailing system in Nevada. Almost immediately thereafter, the Nevada Taxicab Authority and the Nevada Transportation Authority sought to terminate Uber’s activities. The Nevada Attorney General’s Office commenced legal action against Uber seeking injunctions in Washoe and Clark counties, as well as Carson City, since violations were occurring in all three jurisdictions. Given the multi-jurisdictional attack, Uber’s attorneys asked the Supreme Court of Nevada to determine which Court had jurisdiction to hear the matter. Ultimately, the Supreme Court decided that jurisdiction was with the 2nd Judicial District Court in Washoe County since that was where the first action was filed. The 2nd Judicial District Court immediately entered a preliminary injunction prohibiting Uber from conducting business within the State of Nevada

Undeterred and actively supported by off-strip businesses, the Henderson Chamber of Commerce, as well as others who have long-complained about the lack of service provided by existing taxicab licensees, Uber moved its focus to the Legislature. During the 2015 Legislative Session, the legislation that would ultimately result in AB175 was killed, revived and killed again. A herculean push at the end of the Session was eventually successful.

Ultimately, both Legislative Houses came together and presented Governor Sandoval with a bill that allowed for a “Transportation Network Company” to legally do business within Nevada, under the authority of the Nevada Transportation Authority. Among other things, every Transportation Network Company or driver is required to have insurance in varying amounts from $25,000 to $1,500,000 dependent on whether the driver is providing transportation services or is merely logged onto the system, but not transporting a customer. There are additional insurance provisions to address when the driver is using his or her private vehicle completely outside of the services of the Transportation Network Company and mandated cooperation among all insureds and insurance carriers. Beyond carrying the requisite insurance, drivers must be at least 19 years old; have a valid driver’s license, be subject to annual review of driving history, and criminal background check every three years.

The legislation includes protections, beyond insurance coverage, intended for consumers. AB 175 mandates that the Transportation Network Companies must disclose the rates charged and the method of the calculation of fares on the company’s website or App. Furthermore, the company must provide the customer with an estimate of the amount of the fare prior to the passenger’s entry into the car. The companies and drivers may only accept electronic payment and not cash. There are other protections created to prevent deceptive practices or long hauling.

The right for the Transportation Network Companies to do business comes at a price which also affects the existing common carriers within the State. The Legislature provided that the Public Utilities Commission shall issue permits to both the Transportation Network Company as well as to the drivers. There are, of course, fees associated with the issuance of such permits which are based upon the gross operating revenue derived from the Company’s operations. In a broad effort to raise additional revenue, AB 175 amended Chapter 706 of Nevada Revised Statutes to create an excise tax on all common carriers (thus the Transportation Network Companies as well as existing taxicab and limousine services) of three percent of the total fare charged to a passenger. The “total fare” includes all fees, surcharges, technology fees, convenience charges for the use of a credit or debit card and any other amount that is part of the fare. The first $5,000,000 received from the excise tax, every two years, is designated to go to the State Highway Fund. The balance is to go to the State General Fund.

The legislation takes effect October 1, 2015. Between now and then, the Nevada Transportation Authority has the daunting task of creating the regulations that will be necessary to bring the Uber and Lyft to the streets of Nevada.

Aviva Gordon, Esq. has represented businesses throughout Nevada for more than 20 years in all aspects of strategic planning, transactions, business entity formation and maintenance, employment practices and litigation. She may be reached at AGordon@GordonLawLV.com. Note: This article will appear in the October 2015 print edition.

This article was originally published in the Communiqué, the official publication of the Clark County Bar Association (September 2015).

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