Saturday, December 15, 2018

By Matt Daus

The rising popularity of TNC services among business professionals of all ages has led to a quagmire for corporate transportation and travel managers as Uber, Lyft, and their like are now pushing business-to-business (B2B) products in a market that’s been almost exclusively dominated by luxury transportation for decades. The two principal TNCs, along with their smartphone app competitors, Via, Gett/Juno, and Curb, are among the companies now providing B2B apps for use by corporate employees. Other apps, such as Scoop and the Bosch-owned SPLT, also allow co-workers to connect so they can carpool directly to and from work together. Despite the ease of use and the low price of the TNCs, concerns have been raised by many travel managers across the globe about the failure of most TNCs to adhere to the standards of care that corporate RFPs/contracts have enforced to ensure efficiency, employee safety, and reduced costs, among other goals.

Legal Ease Corporate travel managers are facing both upward and downward pressure to add TNCs to their list of vendors from a younger app-friendly workforce and a top-down desire of business executives to welcome TNCs to set the stage for “good will” involving unrelated potential deals or business benefitting the host company (e.g., legal services or IPO financing, etc.). However, the regulations for TNCs are inherently less strict than for taxicabs, sedans, and other for-hire vehicles, raising fairness issues, legal liability, and brand damage concerns.

Since the Great Recession, even before TNCs entered the market in full force, many operators lost business to taxicabs equipped with credit cards as a cheaper alternative to luxury sedans. Now, while many travel managers have defended the industry-established customs and best practices, in terms of B2B contracts or RFPs with TNCs, a substantial number have allowed TNC use by lower level employees—for reimbursement outside the vendor contract arrangements that apply to ground transportation services. This means that TNCs will soon be able to make a credible case that travel managers have been using their services for a while, opening the door for a contract for all transport services, with analytics and other tools, including white label company apps and data platforms to track trips, costs, and other information about employees. This day is coming, and ground transportation operators need to be ready to address this now, by either heading off the issues at the pass or getting ahead of the curve before it is too late.

While larger luxury transportation companies may still be in good standing with their corporate partners, they also need to keep an eye on their many smaller black car affiliates, who are hurting in their localities as a result of TNCs taking away their non-corporate and unrelated retail business. If these affiliates do not thrive, the entire system could fall apart. It is essential that operators not only protect their turf, but also the duty of care that the corporate transportation industry has worked so hard to create and maintain.

Caveat Emptor—May the U-Buyer Beware is a comprehensive report used by corporate lawyers, travel/risk management, and in-house legal counsels as a tool to identify risks of using transportation apps. This report was co-authored and peer-reviewed by the Institute of Travel Management (ITM) Reviewing Panel, the leading professional body for buyers, managers, and suppliers of business travel and meetings in the UK and Ireland. With 3,000 members, the non-profit has been supporting the business travel industry since 1956, and is currently partnered with the Chartered Institute of Procurement & Supply (CIPS) and Global Business Travel Association (GBTA). 

The report was ­released by the Institute of Travel Management (ITM) and will be previewed at the 2018 Global ­Business Travel ­Association Convention in San Diego, Calif., on August 14.

For decades, travel managers and professionals have developed processes, procedures, and due-diligence methods for ensuring the most cost-effective, efficient, secure, and safe ground transportation options for the executives and employees at their corporations and firms. Caveat Emptor addresses the TNC-related duty-of-care issues and concerns of those in the profession. Aside from identifying these risks, this report details newly recommended best practices for ensuring the use of new smartphone app technology to: (1) safeguard employees; (2) reduce costs; (3) increase service efficiencies; (4) ensure corporate data is safe and secure; (5) maintain passenger driver communication confidentiality; and (6) shield and reduce risk for corporate clients in terms of both legal liability and corporate brand damage (due to association with transportation partners who violate the law or are experiencing negative media exposure). The report highlights three regions’ regulatory approaches to for-hire regulation of smartphone app dispatch companies—New York City, California, London—along with other self-regulatory or deregulatory common jurisdictional approaches. The report also identifies the overall risks associated with allowing unregulated or loosely regulated market entry to such disruptive businesses.

Insurance Risks
Travel managers must be aware of the different insurance requirements for TNCs in each jurisdiction and set their own minimum standards to guarantee that their employees are always protected. The same levels of insurance required of government regulators for licensed black car, sedan, or limousine services currently doing business under existing protocols, should be required of any TNC vendors who wish to bid on a RFP. Businesses seeking to engage in agreements with a TNC should ensure that there are extensive rules in place requiring all of their vehicles to have comprehensive, fleet-based insurance, covering most risks associated with TNC services.

Driver Vetting
As further explained in the report, the consequences of less-than-thorough background checks can be seen in the many examples of TNC drivers attacking passengers. That is why corporate lawyers and travel managers should require biometric-based background checks for drivers associated with any business agreements between the company and the TNC. This report recommends against doing business with transportation vendors where they are in a jurisdiction which either has no such vetting process, or that utilizes name checks instead of biometrics. In the event that the travel manager elects to conduct business with TNCs by utilizing name checks, they should require that all licensees of companies submitting RFPs may, at any time, be subject to an audit, at the request of the company.

Privacy and Data Security Issues
Uber and other travel vendors have a function that the companies refer to as “God View,” which allows employees to track the whereabouts of any customer who has ordered a car. TNCs also collect information about users and their rides. However, of concern is how and why this tracking data is stored, used, and who it is shared with. Corporate lawyers and travel managers should ensure that TNCs that seek their business have enhanced data security programs implementing appropriate safeguards. The report discusses safeguards to consider, including, (1) whether the TNC imposes restrictions on access to data internally at their company and to private third parties; (2) whether security safeguards are in place and periodically tested to ensure that hackers cannot access TNC data; (3) whether TNC technology is payment card industry compliant; and (4) whether electronic trip sheet data is produced to any third party (be it a regulatory agency, by court order, or otherwise) and, if so, if companies with which a TNC engages are also subject to such production. TNCs, under a standard or special corporate travel vendor RFP issuance, should be required to share employee trip data in real-time and without limitation.

Negligent Hiring as a Corporate Legal Liability
An employer can be held responsible if an employee—or in some cases, an independent contractor—causes harm to another employee or outside third party. A higher standard of vetting and safety procedures, such as the measures discussed in this report, should be the focus of travel managers in order to protect themselves, their clients, and vendors from exposure to unnecessary litigation, avoidable costs, and brand damage. In-house corporate counsel should work closely with travel managers and regulatory counsel to ensure that the risks of liability are minimized.

Legal Ease Reputational and Environmental Harm: Higher Travel Costs
This report also discusses overall externalities, including: reputational harm, environmental and cost concerns associated with surge pricing and congestion, excessive work hours, accessible service, and tax avoidance. TNCs have made international headlines for crimes perpetrated by drivers, and travel managers must be cautious with the companies they associate with and the potential risk of reputational harm that may be incurred before contracting or allowing their employees to use their services. As further explained in the report, corporate counsel must work into vendor agreements with TNCs the right to cancel contracts under such circumstances, and to hold the TNCs responsible for any resulting reputational damage. The impact of TNCs’ proliferation on the environment is also an important concern for corporations, as the TNC business model is dependent on flooding the roads with massive amounts of vehicles, which threatens corporate sustainability policies and efforts to reduce pollution and congestion as well as overall corporate travel costs. Furthermore, TNCs’ use of surge pricing incentivizes drivers to crowd even more vehicles onto already congested areas, which may cause additional traffic and slow rates of travel, and costs to all businesses and persons negatively impacted by gridlock. It should not be an option for employees to e-hail a TNC if surge pricing is in place, and companies that do allow non-vendor TNC travel reimbursement should ban reimbursement for any surge pricing whatsoever. An alternative safeguard would be to prohibit employees from accepting e-hails from TNCs altogether if surge pricing is in effect.

Corporate travel managers are facing both upward and downward pressure to add TNCs to their list of vendors from a younger app-friendly workforce...

Wheelchair Accessibility
Travel managers are responsible for providing service for all employees, including the disabled, but TNCs may not offer equivalent service for people with disabilities. In most jurisdictions, TNCs do not offer a service for passengers with non-foldable wheelchairs. Moreover, drivers are not trained to accommodate people with disabled needs. Before contracting with a transportation provider, travel managers must ensure that TNCs are able to provide services to disabled passengers. These requirements should be set forth in the RFP with any TNC so that the travel manager is ensured that there is compliance with any disability rights laws, and that there is service available for disabled employees. Also, the brand or reputational damage that results from a non-disabled-friendly TNC being associated with the buyer is cause for concern as to whether there should even be a business relationship.

Tax Avoidance: Corporate and Social Responsibility
TNCs are known to use a complex web of tax havens and shelters to avoid paying corporation and value added tax in jurisdictions outside of the United States. These actions may be perceived as a shirking of social corporate responsibility, harming the tax base of nations around the world. As governments may work to address those loopholes, corporations doing business with them risk having their brand tarnished for associating with or tacitly condoning such behavior. The report recommends, as a pre-condition to any RFP or business arrangement, that complete tax compliance be demonstrated and that questions be permitted at any time about the tax structure.

What To Do With This Report?
If corporate buyers decide to do business with TNCs, a wide variety of professionals within the buyer company (and external regulatory and/or legal specialists) should be consulted to work together to minimize risk and to create a separate RFP for TNCs that is more stringent in the many specific ways recommended in this report. Only by having appropriate due-diligence mechanisms in place can the buyer company be adequately protected from legal liability, harm to employees and corporate brand damage. Corporate travel organizations as well as individual ground transportation companies and industry trade groups should share this report with their clients and travel managers. Travel managers, in turn, should make this report and the facts and best practices it contains, available to internal corporate travel decision-makers, including but not limited to risk managers, CEOs and other high-level executives, in-house counsel, public relations/marketing, sustainability, and Equal Employment Opportunity or diversity officers. Travel managers should take the approach of an even more alert and heightened sense of caution—best summarized by the Latin phrase: Caveat Emptor—or Let the Buyer Beware.

The report was released by the Institute of Travel Management (ITM) and will be previewed at the 2018 Global Business Travel Association Convention in San Diego, Calif., on August 14 during a session entitled International Ground Transportation Technology Innovation: Preserving the Duty of Care and Assessing Best Practices for Travel Managers. Also, a similar session will be held at the 2018 Global Business Travel Association Convention—Europe in November 2018, in Berlin, Germany. The full Caveat Emptor—May the U-Buyer Beware Report can be accessed by contacting Matt Daus at mdaus@windelsmarx.com.   [CD0718]


Disclaimer: The foregoing is provided solely as general information, is not intended as legal advice, and may not be applicable within your jurisdiction or to your specific situation. You are advised to consult with your attorneys for guidance before relying upon any of the information presented herein.

Matt Daus is a partner with the law firm Windels Marx, president of IATR, and a leading authority on ridesharing apps. He can be reached at mdaus@windelsmarx.com.