Lyft and Uber announced that they were shutting down operations in Austin following a disappointing defeat in a special election held Saturday. The election was held to vote on the TNC-sponsored Proposition 1, which would have replaced regulations enacted by the Austin City Council in February 2016 (see ORDINANCE NO. 20151217-075) with a revised set of regulations. The Proposition was placed on the ballot after TNCs submitted more than 25,000 certified signatures on a petition supporting a revised ordinance, forcing City Council to either adopt the proposal or place it on the ballot.

Proposition 1 would have largely kept intact the Council-passed regulations with a handful of significant exceptions. The most significant and hotly contested change would have been to replace §13-2-527, which prohibited anyone from driving for a TNC without first being cleared by a fingerprint-based background check administered by the Austin Transportation Department (“ATD”). Under the existing, yet-to-be-implemented ordinance, prospective drivers will be required to provide a set of fingerprints to the ATD, which will share them with the Texas Department of Public Safety to be checked against the Texas state criminal history database, as well as the FBI, for a national criminal history check. Once the results are returned, the ATD will be charged with determining each driver’s eligibility before the driver can be cleared to provide any rides. Proposition 1 would have still required a national criminal history background check for drivers, and utilized the same criteria for qualifying drivers, but would have preserved the ability of TNCs to conduct background checks using third party background check providers such as Sterling, Accurate, and RedRidge, and would not require the use of fingerprints.

Supporters of Proposition 1, including the TNCs, argued that a city takeover of the background check process would not improve driver safety while introducing burdensome additional costs and delays in driver onboarding, among other detrimental impacts. The TNCs spent heavily on ads and canvassing in support of Proposition 1, however, the seeds of Prop 1’s defeat may have sown as soon as the official ballot summary was issued. That summary read:“Shall the City Code be amended to repeal City Ordinance No. 20151217-075 relating to Transportation Network Companies; and replace with an ordinance that would repeal and prohibit required fingerprinting, repeal the requirement to identify the vehicle with a distinctive emblem, repeal the prohibition against loading and unloading passengers in a travel lane, and require other regulations for Transportation Network Companies.” Prop 1 was also the subject of an intense opposition campaign led by certain Austin Council members and Democratically aligned groups, who portrayed the pro-Prop 1 effort as a corporate takeover by TNCs.

It remains to be seen whether Lyft and Uber will return to Austin, but given the importance of the issue of fingerprint background checks to TNCs and prospective drivers, an eminent return seems highly unlikely. Although advocates of fingerprint-based background checks claim — or perhaps assume — that they are superior to third-party background checks utilized by TNCs, which typically use SSNs, prior addresses, and other factors to verify identity, these arguments gloss over the serious flaws in the state-managed and FBI criminal history databases. Among the problems created by a fingerprint-based background check requirements are substantial delays in processing, increased costs and incomplete or erroneous criminal history information that can result in false positives or false negatives. See, e.g., FBI Announces 13 Week Processing Time for Fingerprint Background Checks; Faulty FBI Background Checks ;The Facts About Background Checks; Myths and Myth Busters about Background Screening and Fingerprinting; GAO Report on Issues with Background Checks.

As a result of voters’ rejection of Proposition 1, ridesharing is effectively shuttered in Austin for now. And because of the widespread publicity this election has garnered, the impact of the election results is sure to reverberate to other cities considering new background check requirements. Because the ADT has not yet implemented a process for conducting fingerprint background checks in Austin, it is difficult to predict the impact of the new requirement on TNCs, drivers, and those who had come to rely on ridesharing to get around. It is clear, however, that to the extent other rideshare companies attempt to fill in the gap, they will face significant new barriers to participation in ridesharing which are sure to impact availability and reliability of the services.