THE BLOG
06/13/2014 06:27 pm ET | Updated Aug 13, 2014

Uber and the Failing Taxi System

During the past few days, the world has seen taxi drivers demonstrate against Uber, an online service that links passengers with private car owners rather than traditional taxi companies. Through Uber, with a smartphone a passenger can contact the nearest available vehicle in the area, obtain a ride and pay by phone. Licensed cab drivers say Uber's smartphone app is pushing them out of business. If they are to confront Uber, cities must decide whether to preserve their traditional taxi systems.

In San Diego, like Los Angeles and most cities in the United States, taxi drivers do not own the vehicles they drive; almost all lease a cab from the holder of the medallion, the city permit to operate a taxi. Driving a cab is dangerous and very low paying work. A recent survey conducted by San Diego State University Center for Policy Initiatives found that taxi drivers in San Diego toil under nearly serf-like conditions where workers are obliged to perform dangerous work for long hours with low pay under an ever-present threat of being blackballed should they dare to complain. Because cab drivers are mostly immigrants who cannot find other work, they put up with the unsafe conditions, long hours and low pay.

Drivers fear retaliation if they report any dangerous or unfair practice. While dangerous and unfair practices could be monitored and sanctioned by a regulatory agency, the practices happen daily without any government awareness because drivers fear job loss if they report the practices; they choose to remain silent when taxi owners cut corners fearing blacklisting or increased weekly lease rates. San Diego taxi driver Mikaiil Haji Hussein raised concern over vehicle safety and the fairness of leasing practices. He was fired and blacklisted from the taxi industry after voicing these concerns in a City Council meeting.

In California, it is unlawful for an employer to prevent an employee from disclosing information to a government agency and it is unlawful for an employer to retaliate against an employee who has reasonable cause to believe that the information discloses a violation of state or federal law. (Labor Code section 1102.5) However, the court of appeals in San Diego has ruled that taxi drivers are not employees of the company they drive for, they are independent contractors. As independent contractors, taxi drivers lack protection against blacklisting, failure to hire or rehire, unfair discipline and intimidation. Providing an avenue for drivers to raise concerns over safe practices without fear of retaliation is fundamental to establish a safe and fair taxi industry.

Aside from retaliation against drivers who complain about a permit holder's conduct, the largest hole in San Diego, like most cities' taxi structure, results from resale or transfer of the permit. Owners claim they must receive exorbitant lease payments to recover a fair profit on their investment in the permit. However, San Diego has set the cost to obtain a permit to operate a taxi at $3,000. But, an analysis filed by the San Diego's Public Safety and Neighborhood Service Committee reports that in 2011 medallion cost ranged from $35,000 to $110,000. The driver pays the medallion holder between $420 and $920 a week to drive the taxi. The driver spends around 70 hours a week behind the wheel and pays for gas for about $30,000-a-year earnings, less than $5 an hour, while the medallion holder who does no taxi driving takes home more merely for investing in what economic analysts say is a better investment than Microsoft or Intel. If San Diego did not allow transfer or resale of a $3,000 permit to operate a taxi for up to $110,000, drivers could pay lower lease payments and earn at least the minimum wage. If the city bans transfer of the permit that gives birth to immense profits for the speculators, there will be no justification for the high lease payments.

Unless you believe that the rich should get richer and the poor should get poorer, something is wrong.

Many cities across the United States such as New York, Chicago and San Francisco are modifying their taxi systems to end the exploitation of taxi drivers. Many are fighting Uber to preserve their taxi systems. However, rather than proceed with an effort to improve the life of taxi drivers and the safety of our streets claimed to be reduced by Uber's absence of a taxi permit, the city council has just passed an ordinance barring Metropolitan Transit System (MTS) from resolving disputes between permit holders and drivers while continuing delegation of supervision over the taxi industry to the MTS, the identical body that has refused to do anything to improve the desperate lives of those who first meet visitors to San Diego.

So what can cities like San Diego do to save their taxis?

The purpose of requiring that taxis and their drivers be licensed is to provide safe, insured cabs for tourists and residents. The courts will decide whether Uber is violating this well-established principle. In the meantime, if San Diego wants to save its taxi system, it could pass an ordinance like that in New York barring a medallion holder from retaliating against a taxi driver for making a good faith complaint against the owner, that guarantees taxi drivers a minimum wage for the hours they work, and that bars transfer of a permit to operate a taxi for more than the amount paid for the permit, $3,000, instead of $100,000 or more, eliminating the justification for charging exorbitant fees to lease a taxi from the permit holder.

If San Diego is to provide safe taxis and continue as America's Finest City, the city council must, for the taxi drivers' livelihood and passenger safety, evaluate and improve its taxi system.