Thursday, February 3, 2011

A First Look At SFMTA's Draft Uniform Lease Agreement. By John Han.

The agenda item for the next Taxi Advisory Council meeting, to be held Monday, February 14th Valentine’s Day, will be “Uniform Lease Agreements”.  SFMTA has already put out a preliminary draft version at the last meeting of a lease agreement that can be viewed in full here. 

What will define a uniform lease agreement as either good or disastrous for drivers will depend upon what’s in it.  And SFMTA has offered a public preview of what’s in it, and what’s likely to come.

First off, the draft is titled “Uniform San Francisco Taxi Medallion Lease Agreement”.  A one size fits all? 

Oddly enough, it would appear to focus closely on a four layer system in which medallion holders or owners should affiliate with a color scheme, and then lease the medallion to a primary driver/long-term lessee (but not for more than three years), who would then lease shifts to ordinary taxi drivers as “secondary” drivers via a “shift agreement”… but the contents of the shift agreement not being viewable, because it’s not included in the draft.

This is how it would appear, but I’m not certain, since this is a draft version, and still in rough, rough form.  One important thing already evident though, is that the SFMTA is attempting to allow owner affiliates to lease to only one primary long-term lessee driver, and then lay the burden of hiring the rest of the drivers to fill the Vehicle’s shifts onto that primary lessee driver.

Note the SFMTA's proposal to define affiliates.  This excerpt is from the “Council Liaison Report to the SFMTA Taxi Advisory Council (TAC) Medallion Sales Pilot Program – Impacts of Leasing vs. Gas and Gate Operation September 27, 2010” .  (Click here to view the full document.)

SFMTA is attempting to define "affiliates" as...

Operation: medallion operated independently of a company except for the right to use the company name and dispatch service.

Vehicle: owned by, and all insurance, repair and other operating costs are borne by ‘primary’ lessee driver (typical) or medallion owner pursuant to the particular lease agreement for that medallion.

Drivers: ‘Secondary’ drivers scheduled through ‘primary’ lessee driver (typical) or medallion owner.

Payments: Medallion owner pays the company a flat monthly fee in return for dispatch and a variable selection of other services from the company.”

(Council Liaison Report to the SFMTA Taxi Advisory Council (TAC) Medallion Sales Pilot Program – Impacts of Leasing vs. Gas and Gate Operation September 27, 2010).

It would appear as if the draft uniform lease agreement is structured around this proposed definition for "affiliate".  

One great flaw in this method of drafting an agreement though, is that the draft lease seems to entitle the medallion holder/owner to command any shift they want non-negotiable, even if the primary long-term lessee were to be the owner of the vehicle and would be paying a significant portion, if not all, of the maintenance, repairs, and insurance.  I like to think that would be an unlikely reality.  But the lease agreement allows for it.  Note this excerpt of Section V(c) of the draft lease agreement…

This clause seems to say that the Lessor need not negotiate the shift change with the lessee, but would only need to inform the lessee of the change in a timely manner.  Albeit, I'm not a lawyer, and we don't know what's in Appendix B.   But it doesn't seem fair.  

It would seem that the right way for owner affiliates to operate would be that they purchase the vehicle and pay for its maintenance, repair, and insurance, then lease the company color scheme and dispatch service from the company, and then hire their own drivers directly to fill the rest of the shifts.  And those drivers would be gate and gas drivers.  The intermediate step of first hiring a primary driver as the lessee would be skipped, since the owner/affiliate is also the primary driver.  

But if a medallion holder and a non-medallion driver went in as partners, so that the non-medallion driver agrees to purchase and maintain the vehicle as a primary lessee, and the medallion holder were to provide the medallion, then the lease agreement should not unequivocally entitle the medallion holder to the choice of shifts.  Shifts should be negotiated between the two parties, and no change to the schedule should be allowed to occur without consent of the primary lessee.  

The other thing I noticed right off is that there is very little mention of the ordinary taxi drivers themselves that would be involved in this version of a lease agreement.  The regular taxi drivers are what's necessary for any type of lease agreement to work, yet regard for their well-being is nearly non-existent (as usual).  There is one clause that does clearly protect ordinary taxi drivers under this lease, but that's all.  It is in Section V(b).  It reads...

It's good that SFMTA is proposing that long term lessees should not be allowed to charge their "secondary" drivers more in gate fees than what an affiliated color scheme would charge its gate and gas drivers.  It's bad that that's essentially all the consideration the SFMTA has given to its most numerous, and arguably most important drivers throughout the industry.  The key word here is "gates", which brings us to the next key area of concern for now. 

Ordinary taxi drivers under this agreement would still be "gate and gas" drivers.  It doesn't matter how many different word games you try to play.  They could be called "secondary drivers", or "sub-lessees" instead.    

But there is little room, if any, to wiggle around the fact that the taxi drivers at the bottom bracket of this agreement will still pay gate fees to someone other than to themselves.  They are still gate and gas.  The only difference would be that they pay them to the "primary driver/long term lessee" instead of to the color scheme.  

This potentially could cause whatever controversies that could someday arise around the EDD, and independent contractor vs. employee status, to shift from being a cab company's problem, to being the affiliates' or primary drivers' problem.  I'm not saying whether this is good or bad.  I'm simply saying that conceivably, it could happen.  

Meanwhile, ordinary drivers at the bottom end of the lease agreement would not likely be their own true bosses in every way.  They would be, to a considerable degree, subject to the control of either the affiliate or the primary driver, or both.  The primary driver typically would still own the vehicle and either he, or the medallion owner, or both, would dictate the shifts. Because this likely would be the case, these unrecognized people who are simply referred to by the SFMTA as, "... drivers of the Vehicle" should be equally recognized, and protected as gate and gas drivers.  Because in reality, that is what they are.  There is no escaping that fact.  

Now, there aren't many laws that actually protect San Francisco gate and gas taxi drivers.  But there are three key protections that do exist under California precedent law - 1) Workers' Compensation  2)  Unemployment Insurance  3)  Prohibiting the collecting of security deposits as a condition of hire.  (Joseph Tracey Vs. Yellow Cab Co-operative 1996).  

These three protections must extend to all San Francisco gate and gas taxi drivers, whether they work for a cab company, an affiliate, or a primary driver/lessee.  Pencil that into the draft, please!


  1. Good article.

    It appears that Director Hayashi is unfamiliar with the prohibition against collecting security deposits. Be sure to bring it up the TAC meeting.

    Also the fact that the drivers need a lease of their own since they have few protections under this lease.

    I like your sidebars with the photos and such.

    Ed Healy

  2. So Ed,

    what has been done since the note you left on Feb 9th 2011? regarding the security deposits. I am just curious if drivers still have to pay them after Chris was told.


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