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Lyft and Sidecar Legal in California Under New Regulations

By Brett Snider, Esq. on September 20, 2013 | Last updated on March 21, 2019

Lyft and Sidecar can continue operating as legitimate businesses in California, but they'll have to abide by the CPUC's new regulations which were approved in a decision Thursday.

Under the newly approved rules, "rideshare" apps which allow users to summon a participating driver to get them from point A to point B are now classified as Transportation Network Companies (TNCs), a newly created regulatory category that has a whole new set of rules.

What does this decision mean for California riders and drivers using these TNC services?

TNCs Are Not "Rideshare" Services

Despite being billed as such, the California Public Utilities Commission has made it final that companies like Lyft and Sidecar do not qualify under the state's rideshare exemption (see California's PU Code § 5353(h)).

The main issue is that this kind of app-based transportation is primarily for profit, despite flimsy attempts to sidestep this by calling payments "donations." It isn't the same as a vanpool or even an agreement to share costs with co-workers in a carpool.

CPUC said as much when they issued cease-and-desist orders to these companies in December 2012, and the Commission's position hasn't changed.

New Rules for Sidecar and Lyft

What has changed is the CPUC's allowance of a new category of commercial transportation, TNCs. A TNC differs from taxis and limo services because a TNC driver cannot:

  • Drive a vehicle which is not his or her own personal vehicle or
  • Accept street hails
  • Operate anywhere near airport property

If you're wondering why we haven't mentioned Uber, it's because the new TNC regulations won't include them (they have their own fleet of non-personal vehicles).

Starting immediately, eligible Transportation Network Companies (TNCs) like Lyft and Sidecar must require drivers to:

  • Be at least 21 years of age and have one year of driving experience
  • Undergo criminal background checks
  • Have their vehicles pass a 19 point state compliant inspection
  • Provide valid copies of their California drivers licenses, personal auto insurance, and personal picture that identifies the driver
  • Have no more than two points on their DMV records
  • Have no serious criminal history (i.e. DUIs, crimes of violence, sex offenses, property crimes, vehicle-related felonies, etc.)
  • Accept no more than seven passengers per ride

Since legal squabbles over these services across the nation have focused largely on safety the CPUC also requires each TNC to implement the following:

  • A zero-tolerance substance policy (including an in-app method for calling and emailing to report a driver who appears intoxicated)
  • Some manner of trade dress that identifies the TNC service from "50 feet" (e.g. the Lyft pink moustache or Sidecar's bright orange side mirror cover).
  • Commercial liability insurance of $1 million or more for each driver

The newly approved regulations will also require reporting and monitoring of driver safety from each approved TNC, in addition to 1/3% of revenues going toward the state.

So Californians may legally continue to use Sidecar and Lyft, but without the legal ambiguity, the thrill may be gone.

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