Local Governments Preempted from Regulating Taxicab, Limousine and Ride-Sharing Services

Uber, Lyft, and other ride sharing services continue to develop a more significant presence throughout the State of Michigan, providing convenient access to transportation opportunities in regions where transportation services were limited. However, ride sharing services have also provided headaches for local leaders, as they work to determine the most appropriate manner in which to regulate such services. To a significant extent, this concern has been lifted from local governments with the passage of the Michigan Limousine, Taxicab, and Transportation Network Company Act, now known as Public Act 345 of 2016, by which the State has largely usurped local control in the regulation of limousines, taxicabs, and ridesharing services (referred to as transportation network companies within Public Act 345).

Previously, local governments retained the prerogative to create licensing schemes and impose taxes or fees on taxicab services if they wished to do so through ordinances. Public Act 345 explicitly prohibits local units of government from imposing a tax, fee or license to the extent the same is related to the provision of pre-arranged rides. In other words, licensing requirements, taxes, and fees can only be applied for the standard types of purposes for which they are generally applied to businesses within a local jurisdiction and not for purposes which are related to the passenger transportation services offered by those companies.

Public Act 345 also explicitly prohibits a local government from enacting or enforcing an ordinance to regulate limousines, taxis and ride sharing services except for the purposes for which they are permitted to impose a tax, fee or license. Thus, most ordinances previously enacted by local governments in Michigan to regulate limousines, taxis and ride sharing services are no longer enforceable.

Public Act 345 does give local governments some enforcement powers. Most notably, local governments are permitted to issue civil infractions to drivers of limousines, taxicabs, and ride sharing services for certain violations of the Act, including failure of a driver to display an emblem which is approved by the State, large enough to be seen from 50 feet away, reflective, and sufficiently identifies the carrier or company with whom the driver is affiliated. Additionally, civil infractions may be issued for a driver’s failure to carry proof of insurance, or the election of a driver for a ride-sharing service to accept a request for transportation that was not placed through the ride-sharing service, and discriminating against passengers or potential passengers, including those with service animals or disabilities. Beyond these limited enforcement powers, airports retain the ability under the Act to continue enacting ordinances and regulations to govern limousines, taxicabs and ride sharing services on their property, provided that such ordinances are consistent with industry standards, do not unreasonably impede service, and do not duplicate or contradict the requirements of Public Act 345.

Some requirements of the Act exist at a more regional level, as opposed to applying statewide. For example, applicants for a registration under the Act apply at the County level in the event they are a sole proprietorship or general partnership. Thus, as a result of the Act, county governments need to be prepared to process applications from certain transportation services providers within their respective jurisdictions.

Public Act 345 standardizes the requirements of transportation services providers in several ways. First, all transportation service drivers in Michigan will now be required to complete a criminal background check on an annual basis. Individuals with certain convictions, such as fraud, driving under the influence of drugs or alcohol, or sexual offenses will not be permitted to provide transportation services. The law requires the imposition of a zero-tolerance policy regarding operation of a motor vehicle under the influence of drugs or alcohol by a limousine carrier, taxicab carrier, or ride sharing service. The complete prohibition on driving under the influence is an important policy, which has existed in Michigan for years. It is known as a “Red Wing Law,” arising out of the crash that injured popular Detroit Red Wings players Vladimir Konstantinov and Slava Fetisov when they were riding as passengers in a limousine that was being driven by a drunk driver.

Second, the Act imposes specific insurance requirements for limousine drivers, taxicab carriers and drivers for shared ride services (such as Uber). As a result, it is more likely that damage claims may be paid to individuals who are injured or incur damages as a result of an action by a driver, although it is worth noting that comprehensive and collision coverages may be excluded while a motor vehicle is carrying customers in exchange for payment.

Third, the Act includes requirements as to fee disclosures, including that the formula or fee used to calculate the rate, so that passengers know what charges to expect.

Fourth, the Act includes a robust vehicle safety inspection provision, so passengers will have increased assurances the vehicles operated by limousine services, taxi services and ride sharing programs are safe. Every car that is five years old or older must be inspected by a licensed mechanic on an annual basis. The inspection requirements include an examination of the vehicle’s brakes, steering mechanism, windows, wipers, lights, doors, adjustment mechanisms, turn signals, speedometer, bumpers, muffler and exhaust system, tires, mirrors, safety belts and defrosting system. The State reserves the right to audit the inspection records of limousine services, taxi services or ride sharing services at any time to incentivize compliance.

Despite the laudable goals of Public Act 345, local governments which have enacted ordinances to regulate transportation services providers and have funded enforcement of limousine, taxi and ride-sharing regulations through licensing and permitting schemes, may face hardships in having to yield their authority in this area to the State.

If you have questions regarding the applicability of Public Act 345 or need further counsel regarding its implications, contact your municipal attorney at Mika Meyers at 616-632-8000.