Jan 31, 2016

A Service Industry

The issue of the quality of service provide by taxis to the public has long been a vexed issue, but has been brought to the forefront recently.  As with many service industries, in the absence of a customer, there is no service to provide.  Therefore, a service industry is always beholden to the customer.  If they provide a service of value and utility, they are rewarded with increased customers.  If not, they suffer the consequences of customers choosing other forms, in this case, of transport.

It is imperative that each member of the taxi industry, from network to operator to driver, takes responsibility for delivering a quality service to passengers.  There are clearly a number of facets of the industry that deal with the customer, notably the driver, but also the operator, who is responsible for the state of the vehicle, and the telephone operators who take the public's calls.  It is important that each person that takes a part in delivering that service is held to account, and that the industry is able to demonstrate this accountability to the public.

In the past, networks have imposed fines on drivers for breaching the network's rules, or for other inappropriate conduct. 

Prior to the taxi industry inquiry led by Alan Fels, the Department of Transport enforced Minimum Business Service Standards.  These Standards allowed networks to issue fines to drivers for inappropriate behavior or a breach of the network's affiliation rules, but such fines were limited to $100. 

However, the Minimum Business Service Standards no longer apply.  

The Transport (Compliance and Miscellaneous) Act 1983 (as amended by the Transport Legislation Amendment (Further Taxi Reform and Other Matters) Act 2014) gives the TSC the power to introduce regulations relating to a network's ability to implement disciplinary procedures if a driver does not comply with the network agreement. However, to date of writing, no such regulations have been introduced.

Because the requirement for operators to affiliate to a network has also been removed following the industry reforms of 2013 and 2014, there is no longer a requirement that the regulator approve relationships between networks and operators or between networks and drivers.

Today, we look to the principles of contract law to determine the rights and obligations of networks, operators and drivers in these situations. 

Subject to applicable laws, a party to a contract may agree to accept a fine or make payments of liquidated damages to the other party if there is a breach of the contract.  This may include breaches of imposed standards regarding cleanliness or behavior such as talking on a mobile phone.

The level of any payment for a breach of contract, or fine, if you like, must represent a genuine pre-estimate of the loss likely to flow from the breach.  This is described as "liquidated damages".  If the amount payable under the contract is excessive, disproportionate or unconnected to the likely loss suffered, it will be considered to be a penalty provision – and will most likely be unenforceable.

In the case of a breach of the behavioral standards set, it is likely that this will be brought to the attention of the operator and/or network by a customer complaint.  It is worth remembering that a complaint can be a valuable tool for the industry, as it is often born from a commitment by the customer to help the industry improve.  For a network, or an operator, there will inevitably be administrative costs arising from the handling of any complaint.  While the exact amount will depend on the network's personnel and procedures, and the gravity and complexity of the complaint, administrative costs are capable of being quantified and therefore estimated. 

In addition to administration costs, the network may also potentially lose the individual customer, and/or suffer a loss to its reputation.  These losses may be more difficult to quantify.

In many cases the network will have an agreement with drivers directly, under which drivers agree to comply with the rules of the network.  In other cases, the network will have a contract with operators (being its rules of affiliation), but no direct relationship with drivers.  In the latter case, as well as outlining the prohibitions and including a liquidated damages clause in the network rules or contract (in this case with the operator), the bailment agreement (between operator and driver) will need to contain a back-to-back requirement for the driver to reimburse the operator if the operator is required to pay any amount to the network as a result of a breach of any of the behavioral rules on account of driver's behavior. 

It's also important that the contract (or network rules) clearly sets out any code of conduct applicable to drivers (which may be amended from time to time), and sets out behaviors that will constitute a breach of the rules or contract.  These may change over time, and should be circulated to all relevant parties.  For example, this may include a prohibition on making or receiving phone calls and text messages while carrying a passenger (even if the taxi is stationary), and a requirement that the driver's phone is switched to silent mode. 

It is important to note that any fine cannot be deducted from the 55% fare split to be paid to a driver.  The contract (or network rules) should therefore deal with non-payment of liquidated damages.  One example might be giving the network the right to suspend services to the relevant operator/driver until the damages are paid.

As an aside, we note that depending on the corporate structure of the network, further restrictions may apply if the rules seek to impose fines on members (whether they be operators or drivers).  Incorporated Associations may only fine members up to $500 (see regulation 19 of the Associations Incorporation Reform Regulations) and fines issued to members of Co-operatives must be no more than $1,000 under section 2.1(a) of the Co-operatives National Regulations.

Networks should also ensure they have in place uniform procedures for dealing with customer complaints.  This could include appointing a Complaints Officer and adopting a Complaints Checklist that is routinely followed any time a complaint is received.  This will help to ensure that costs of the network flowing from the driver's breach are quantifiable (and consequently that the contractual provision relating to liquidated damages is enforceable).  Remember, any claim must be for an amount equal to a genuine pre-estimate of the loss suffered, as opposed to an arbitrary penalty amount.

These issues reiterate the importance of networks having a clear and up-to-date set of Affiliation Rules.  The Rules should be referred to and revised regularly.  Network managers should be familiar with the Rules, and should encourage all operators and drivers to read and understand the Rules.

Networks should also undertake regular reviews of their Affiliation Rules, driver codes of conduct and any other direct agreements with drivers.  It may be appropriate to update these documents from time to time, in response to complaints received or general customer feedback and public opinion.

It is imperative that all those engaged in a service industry take responsibility to ensure that they deliver exemplary customer service.  It is only through such delivery that the industry attracts more customers.  Without customers, the industry cannot survive.  Ensuring proper service standards is the responsibility of all members of the taxi industry.  The key is to ensure that all industry players take responsibility and pride in the service provision, and that responsibility, accountability and pride within the taxi industry are demonstrable to the public.

 Brought to you by Logie-Smith Lanyon Lawyers.