SAN FRANCISCO (CN) - The city of San Francisco on Thursday asked a state judge to block a new law that lets Uber and Lyft drivers avoid paying local fees to operate on the city's congested streets.
“Uber and Lyft need to play by the same rules as every other business in San Francisco,” City Attorney Dennis Herrera said in a statement Thursday after filing suit in San Francisco County Superior Court.
The lawsuit seeks to invalidate Senate Bill 182. Signed into law last year, the statute exempts drivers living outside of San Francisco from complying with the city's business registration requirements.
Herrera says the law unconstitutionally undermines the city's authority to license businesses and "shows that well-financed, politically connected industries can write their own rules at the state level."
Not surprisingly, the ride-sharing companies see the issue differently.
“SB 182 allows California rideshare drivers to hold one streamlined business license with predictable costs and reasonable privacy protections,” Lyft spokeswoman Chelsea Harrison said in an email. “Lyft drivers and the overwhelming majority of legislators from both parties supported these improvements to modernize the law and preserve the benefits and economic opportunities ridesharing provides.”
Because Uber and Lyft drivers are considered independent contractors and not employees, each driver is a sole proprietorship that must register its business with the city.
Senate Bill 182 exempts drivers that work for "transportation network companies," or TNCs, like Uber and Lyft from complying with local business registration rules.
The city estimates about 45,000 TNC drivers operate within the city, contributing to traffic congestion and road maintenance problems. Ride-hailing companies account for 570,000 miles driven in San Francisco on a typical weekday, or 20 percent of the total miles driven, according to a June 2017 study by the San Francisco Transportation Authority.
"Out-of-town drivers are choking our streets as their corporate overseers design ways to stiff city taxpayers when it comes to congestion, road repair and traffic safety costs," Herrera said.
Last year, 21,000 drivers had registered with the city, generating about $1.9 million in fees, according to the city attorney's office. Herrera said the process for registering a business online takes less than 10 minutes and costs $90.
“Many local business licenses, including those from the City of San Francisco, require the public posting of drivers' personal information online, creating serious safety and privacy concerns for Californians who use Lyft to earn extra income,” Harrison said.
Herrera dismissed both privacy concern and burdensome registration arguments on Thursday. He said San Francisco and San Jose are the only two Northern California cities that require drivers to pay a registration tax.
"That's hardly a labyrinth of onerous regulations," Herrera said.
The city attorney added that drivers can easily provide a post office box or business address, instead of using their home address, when registering with the city.
"If Uber and Lyft are so concerned about the burden of registration on their drivers, they could hire them as employees, or push the state to create a statewide licensing system," Herrera said.
Classifying drivers as contractors rather than employees allows the companies to avoid paying overtime wages and providing other employment benefits, such as health insurance and paid time off.
The city seeks a permanent injunction to stop the state from enforcing the part of SB 182 that blocks San Francisco from requiring out-of-town drivers to register with the city and pay taxes.
Uber did not return emails seeking comment Thursday afternoon.
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