Regulating transportation network companies in Texas

In Texas, a growing number of cities have passed municipal ordinances to regulate transportation network companies (TNCs), such as Uber and Lyft. TNCs are businesses that connect paying riders to drivers, usually through smartphone apps. They compete directly with taxicabs to fill the gap between public transit and private vehicle ownership by providing on-demand transportation without the cost of owning a vehicle.

Although TNCs are subject to local rules in most of the Texas cities in which they operate, state lawmakers had enacted no specific statewide TNC regulation until 2015, when the 84th Legislature established minimum insurance requirements for TNC drivers.

As of November 2016, at least 31 states had chosen to preempt municipal regulation of TNCs and instead establish statewide regulations. The 84th Texas Legislature considered but did not enact similar proposals in 2015 and may consider them again during this year’s regular session of the 85th Legislature.

Four bills that address TNCs — HB 100 by Paddie, SB 113 by Huffines, SB 176 by Schwertner, and SB 361 by Nichols — have been filed thus far. Each of these bills would preempt most or all local regulation of TNCs. Some also would preempt local regulations on taxicabs and limousines, while some expressly would allow airports to regulate TNCs providing rides to or from the airport.

Some say TNCs should be regulated locally to ensure public safety, accessibility, and accountability to passengers and the public. Others say state government is better suited to regulate TNCs because it would create uniform standards and reduce compliance costs.

One of the TNC regulations at issue is whether drivers should be required to undergo fingerprint-based background checks. Some say that, regardless of the entity regulating TNCs, fingerprint background checks of drivers are needed to ensure the safety of passengers. Others counter that such checks are overly burdensome while providing no added safety benefits.

For more information about local ordinances on TNCs in Texas and the debate surrounding state preemption of TNC regulation, see the recent House Research Organization focus report, Texas may consider how transportation network companies are regulated.

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