Lyft Launch Legality

Will Lyft get shut down in Austin? That's a big maybe

Will Lyft get shut down in Austin? That's a big maybe

Lyft car mustang
Lyft begins operations in Austin on May 29. Lyft/Facebook

First things first. Is Lyft launching in Austin? Yes. Is operating a company like Lyft still in violation of city regulations? Yes. Is what Lyft is currently doing illegal? Maybe.

Despite the much-hyped fanfare surrounding Lyft's launch in Austin Thursday, many of the reports tout that what Lyft is doing is against city regulations, going so far as to imply that it is illegal. Not so, says Lyft co-founder John Zimmer. Currently, the service is "free for individuals to ride," Zimmer tells CultureMap, adding that Lyft is currently footing the bill for drivers. Austin-based users who download the app are entitled to 15 free days of use, or up to 50 rides worth $25 or less.

Now, just because the company foots the bill, doesn't mean it isn't violating city code. Though City Manager Marc Ott was ordered by City Council to research a potential pilot program for alternative transportation options, we must not forget that nothing has officially changed. Even when it's "free," operating a service like Lyft, Uber and Sidecar in the city limits is still punishable if the company pays more than $0.56 per mile (the Federal Reimbursement Rate).

Is Lyft paying their drivers the approved rate? "Lyft operates a donation model in Austin. Lyft suggests a donation amount after the ride, and passengers are free to increase or decrease that amount," explains Lyft spokesperson Katie Dally.

So why even take the risk and start operating in Austin? Because, look at the PR these guys just got. From Facebook posts to news articles, it seems just about everyone in Austin is talking about Lyft's decision to circumvent city code. Though Uber and Sidecar have tried similar measures, Lyft's timing to coincide with Ott's pilot program is just about perfect. If the City Council does approve an initiative to bring in these transportation companies, Lyft is already fully operational with a bevy of users and drivers.

But not everyone is happy about the news. "[Lyft] claims they are innovative, but with innovation comes the same responsibility of following the laws," says Yellow Cab Austin President Ed Kargbo. "All of the other companies have been going through the process for four years. It's not like we were unaware that we didn't need to increase cabs. We haven't been sitting around not trying. Yellow Cab and the [rest of the taxicab] industry have put forward four different proposals, and we've been patiently working through the process. But we're not going to break the law to make the law."

That process, at least according to Zimmer, just hasn't happened fast enough. Citing the unprecedented number of emails, tweets and petitions from Austinites, Zimmer says, "We've never seen this type of pull from a local community. It's been amazing the number of people [reaching out]." Zimmer also notes the City Council's May 15 resolution as a critical factor in Lyft coming into the market. "I think the city is demonstrating that this ... current structure doesn't fit."

Just because people want it, doesn't mean it's safe. Pointing to insurance issues that have plagued Uber and Lyft in states like California, Kargbo notes that drivers — and passengers — should be worried about liability insurance considering they are using their own car. Zimmer brushes that off, attributing it as another example of the old guard versus the new.

"We have a million dollar policy, for every driver, per incident," says Zimmer. "Often when things are new, there is an education process that [people] need to go through. But there is a really strong argument that what we're doing goes above and beyond what any taxi is doing."

For now, that education process continues. With Lyft remaining vague about pay rates for drivers, the City is remaining vague about potential legal consequences, instead issuing the blanket statement, "If a company in Austin operates as a ground transportation company without a permit they are operating outside of the law." Operating without a permit is a class C misdemeanor and drivers could get their car impounded as a result.

When asked if the Transportation Department has been recently contacted by a TNC (under which a company like Lyft falls) for a permit, the Department replied with a simple, "No."

Grab the popcorn, folks, cause the show is just getting started.