Uber-complex: regulating ride-hail services

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May 31 2017

Shipping & Transport Finland

Ride-hail services such as Uber and Lyft generally offer a cheaper and more convenient alternative to standard taxi services, but have disrupted the transport market and generated a myriad of complex issues in terms of regulation. Authorities must consider how best to regulate this growing sector to address the concerns of government, unions and taxi operators and avoid potential disputes.


Have ride-hail services such as Uber and Lyft gained a foothold in your jurisdiction?

Uber began operating in Helsinki in November 2014. Uber claims that 100,000 Finns have downloaded its application. However, the police soon began investigations against Uber drivers and in April 2016, possibly for the first time, the district court fined an Uber driver for illegal taxi driving and ordered the driver to forfeit his earnings as criminal gain. Thereafter, in 2016 the Helsinki Appeal Court passed a judgment (ie, upholding the lower court's judgment) and now an important precedent is pending before the Supreme Court. It is unlikely that the Supreme Court will disagree with the lower courts; nevertheless, the outcome will determine whether and how Uber can continue to operate in Finland.

There are no signs on the horizon to indicate that the law will be changed in Uber's favour. Parliament has passed a law which will deregulate the taxi licence system, but for businesses such as Uber it is unlikely to increase anything other than obligations.

If the European Court of Justice confirms the opinion of the advocate general delivered on May 11 2017 in C‑434/15 Asociación Profesional Elite Taxi v Uber Systems Spain SL, Finland will naturally follow the ruling. However, the ruling is unlikely to bring any changes to Finnish law.

There are also other types of ride-share service, such as Kyydit.net, which is a service for finding a travelling companion. Further, there are several car-share providers, which offer alternatives to owning a car.

What are the main regulatory issues for transportation authorities concerning ride-hail services in your jurisdiction?

In Finland, the Uber product allows unlicensed drivers to use their own cars to chauffeur passengers around. Uber performs background checks on the drivers before they can participate, and ensures that the cars are up to a certain standard and insured. However, the main problem is that even though Uber services are considered to be legal today, the driving itself is not. To provide a taxi service a driver must have a taxi licence – which, according to the police, few drivers have. This is why the Uber application remains available in Finland for the present, unlike in some other cities across the world. However, drivers still risk fines if they provide illegal taxi services.

Ride-hail drivers are generally classed as independent contractors, making them ineligible for employment benefits such as minimum wage and holiday pay – do such services need to comply with employment, social security and tax regulations in your jurisdiction?

Finnish labour regulations applicable to taxi drivers as employees inlcude the Employment Contracts Act and the Working Hours Act. There is also a collective agreement for taxi traffic, but few licence holders are organised.

In contrast, self-employed licence holders are not subject to the Employment Contracts Act or the Working Hours Act. There are no other statutory provisions regulating the working hours of self-employed licence holders.

Due to the undefined nature of Uber and other ride-hail services, implications in relation to social security and employment matters have not yet been considered. However, when Uber driving is not a driver's full-time job and is conducted on a non-employment basis as self-employment, the driver is not entitled to employment benefits.

The tax authorities have issued a comment on the taxation of income derived from the non-professional carriage of persons. The tax authorities have no competence to decide whether providing ride-hail services requires a taxi licence, but they have assumed that this is not the case. Accordingly, when a non-professional carriage of persons is typically a small-scale and occasional activity, the earnings are not taxable as business income, but instead as personal income in accordance with the Income Tax Act. A person who purchases such transport services for over €1,500 per year must carry out a tax withholding. A driver is liable to pay value added tax if the sales are more than €10,000 a year.

What are the insurance implications for passengers using ride-hail services in your jurisdiction? Are passengers covered by the driver's personal insurance policy or the company's insurance policy?

The insurance industry is considering issues relating specifically to Uber cars and ride-hail services, as well as to shared cars generally. No uniform answer is available for the present.

Insurance depends on the type of use stated in the vehicle register. A change of use requires an alteration inspection before a car that is registered for private use can be used for transport subject to licence. For the present, there is no separate classification for ride-hail cars and shared cars.

Insurers have their own, more expensive insurance products for professional drivers (eg, taxi drivers). Ride-hail cars are usually registered for private use and therefore have cheaper insurance. Insurers might be of the opinion that ride-hail drivers are a bigger risk and should therefore pay more for their insurance.

In Finland, statutory and compulsory motor liability insurance safeguards the innocent party's legal protection and compensation by compensating personal injuries and material damage caused by the use of a motor vehicle in traffic. Therefore, passengers and third parties are covered irrespective of the type of use of the car, including ride-hail services.

According to the information available on Uber's website, UberPOP services booked in Helsinki are covered by liability insurance in addition to the drivers' own insurance. The liability insurance covers personal injury and material damage up to $5 million.

Ride-hail services may disrupt the standard taxi market, but also be beneficial to the public. What measures can transport authorities take to protect the public, unions and taxi operators, while encouraging greater choice and innovation on the market?

The government is promoting deregulation, digitalisation and new innovations in the transport sector through its legislation project. The essence of the project is customer orientation. The biggest changes are proposed to the inflexible and old-fashioned taxi system, particularly as limits on the number of taxi licences will be removed. The idea is to make it easier to access the taxi sector, develop new services and increase competition, encouraging renewal in the traditional taxi sector. Pricing would become more flexible, but the Transport Safety Agency could step in and specify a maximum price if prices were to rise unreasonably.

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