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Uber facing a gamut of legal challenges

|Written By Tali Folkins

In the wake of the City of Toronto’s unsuccessful attempt this spring to get a court injunction against ride-booking service Uber, many people will be waiting to see a report on a public consultation process that could lead to a new bylaw regulating it.

Governments need to balance how much of Uber’s business model relies on skirting regulatory burdens and how much it benefits consumers, says Adrian Myers.

The drafting of such a bylaw, however, seems unlikely to end the legal wrangling around Uber, at least given the opposition the service has stirred up among taxi drivers. According to Marc Andre Way, president of the Canadian Taxi Association, the company or its drivers are flouting a range of laws.  “At a minimum, there are four levels where something is not properly done,” he says.

The City of Toronto, Way notes, failed to get a court injunction requiring Uber to apply for a licence to operate as a taxi or limousine company. However, Toronto has been laying charges against individual Uber drivers for failing to have the proper licence to own a limousine and failing to have their vehicles approved by the city’s licensing and standards division. Other Ontario cities have been laying similar charges.

Way also contends that Uber drivers are wrongfully avoiding paying the harmonized sales tax.

“Your [Uber] receipt will indicate only the amount on the trip” and not include tax, he says. By riding with Uber, he says, “you’re basically in a sense facilitating an underground economy.”

Way also believes Uber drivers lack adequate insurance, a concern shared by the Insurance Bureau of Canada, which has said it’s unclear whether they have commercial coverage, a more expensive and comprehensive offering that taxi drivers must carry. Finally, says Way, Uber drivers also risk charges under Ontario’s Highway Traffic Act that forbids drivers of vehicles other than buses from picking up passengers for a fee unless they have either a public vehicle licence or a municipal licence to operate a taxi.

In response to Way’s allegations about Uber or its drivers violating bylaws and the Highway Traffic Act, Uber spokeswoman Susie Heath says Superior Court Justice Sean Dunphy’s decision on Uber this July shows the company “is a legitimate model operating legally and is a unique business that is distinct from [a] taxi.” As for the insurance carried by its drivers, Heath says: “Every ride on the UberX platform in Canada is backed by $5 million of contingent auto liability insurance covering bodily injury and property damage.

“In the event of an accident during an UberX trip, passengers, pedestrians, other drivers, and the community at large can rest assured knowing that ride-sharing partners are well covered by commercial auto insurance in addition to any insurance coverage maintained by the driver.”

Uber, Heath insists, pays all of its applicable taxes and instructs its drivers to do so as well.

However, she says as UberX drivers are independent contractors, it’s their responsibility to remit the tax as applicable once they reach the $30,000 minimum threshold required by the Canada Revenue Agency.

Adrian Myers, a commercial lawyer with Torkin Manes LLP and a professed Uber customer, says the company may soon be facing another legal challenge. A ruling this June in California in which a court found Uber drivers are really more employees of the company than private contractors “could open the door to a larger class action by Uber drivers who think they should be given the same legal protection as employees,” he says.

Whatever the result of these legal disputes, the ball is now in the court of governments to decide what sort of policy they should adopt around a type of company that wasn’t on the radar when they drew up existing laws and regulations, says Myers. It’s a decision, he says, that should involve balancing how much of Uber’s business model depends on skirting the regulatory burdens facing its competitors and how much its service benefits consumers.

“I think the two things that legislatures have to weigh when thinking how to regulate Uber is how much of Uber’s business model is premised on avoiding the costs of regulation . . . and how much of the business model is successful because there’s an artificial restriction on the supply of taxicabs in the city,” he says.

“We should be sympathetic to a government that wants to make sure that everybody who gets into a taxicab or a vehicle that’s driving them somewhere is going into a safe vehicle. . . . People are less sympathetic to the idea that if somebody can get insurance, if they can get licensed, they should not be allowed to do so because there’s a supply restriction being placed on this industry by the government.”

Days after Dunphy’s decision, representatives from Uber and the taxi industry met in Toronto and agreed they were willing to compromise on the issue of ground transportation in the city. Two days later, Toronto city council voted to launch a review of the city’s bylaws with the intention of drafting regulations that would cover traditional taxis and limousines as well as companies like Uber. Already, the Region of Waterloo has provided a potential way forward with a new proposed bylaw to regulate drivers for companies like Uber.

A consultation process involving members of both the public and the industry is now underway, says City of Toronto spokeswoman Tammy Robbinson.

“City staff will bring a comprehensive report to licensing and standards on Sept. 9, 2015, to provide the background necessary for an informed debate and decision-making process,” she says.

“After that, if required by council, draft regulations would be written.”   

For more, see "Analysis of Uber's insurance implication reveals serious issues."

  • Business

    Dectar Apps
    This is a very interesting read. There is something that just doesn't ring right with Uber either from a technical or legal perspective
  • Director, Council and Administrative Services

    Kris Fletcher
    Trying to determine what to regulate and what not to regulate is the dilemma facing Ontario municipalities. The Region of Waterloo is currently in a by-law review process that would regulate a safe/good driver and safe vehicle and potentially deregulate license limits and fares. For more information about our draft by-law and review process visit www.regionofwaterloo.ca
  • Marketing

    Daniel Haven
    Susie Heath is incorrect about her statement. Under Canada Revenue Agency anyone who drivers a car for compensation ( which is the Uber X driver) must submit HST regardless of the $30,000, meaning the $30,000 does not apply to anyone carrying people for compensation.

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