New Texas Law Regulates Background Checks for Ridesharing Companies

By Michael Klazema on 6/8/2017
One of the biggest stories in the background check world last year was the exodus of Uber and Lyft from Austin, Texas in response to the city’s strict background check regulations. Texas’s capital city passed an ordinance requiring all ridesharing drivers to submit to fingerprint background checks. Per coverage, the ordinance also regulated ridesharing services in other ways with data reporting requirements and other limitations meant to improve passenger safety. Now, those regulations have been overturned following a new state law that puts the responsibility for regulating ridesharing in the hands of the state government.

Uber and Lyft initially fought hard against the Austin regulations, reports note. The companies argued that their existing background check policies were enough to spot red flags and keep passengers safe. They claimed that fingerprinting takes too long and could prove a major barrier to entry for drivers wishing to make money by accepting fares. Per a report from the Los Angeles Times, Uber and Lyft collectively spent $9 million in Austin trying to get voters to approve an alternative ordinance that would have eliminated the fingerprint background check requirement. Voters were unmoved, and Uber and Lyft ultimately ceased operating in Austin.

The L.A. Times notes that Texas Governor Greg Abbott has signed a bill that strips local municipalities of the right to regulate ridesharing businesses as they see fit. Going forward, the Texas state government will decide how companies like Uber and Lyft will be regulated. The law supersedes the Austin ordinance from last year, rendering those requirements unenforceable by law.

The new law doesn’t mean that ridesharing companies won’t be regulated at all. As coverage explains, ridesharing businesses wishing to operate in Texas must obtain state licensing, pay annual operations fees, and conduct background checks of all drivers at the state and national level. However, the Texas legislature—a conservative voting body—believed that Austin’s ordinance overstepped and interfered with the free market. The L.A. Times called Austin Texas’s “most liberal city” and framed the dispute as a battle of differing political party ideologies.

The issue is complicated by the fact that Austin voters approved the city’s ordinance, voting in favor of more thorough background checks for ridesharing drivers. One of the ridesharing companies that has spent the last year filling the gap left by Uber and Lyft reminded voters of this fact, urging customers to stick by them even now that the bigger fish are coming back to the pond. The company, called Fare, emailed its customers, writing, “Show your representatives that you were serious when you asked for stricter screening and background checks on drivers.”

As reports indicate, at least 40 states in the country have adopted statewide regulations for ridesharing businesses.

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