As noted throughout this report, the inquiry considers that major reform is needed to the regulatory framework covering taxis and hire cars. This includes removing regulatory impediments to greater competition in the provision of booking services, lowering barriers to entry into other markets currently dominated by large NSPs, removing or minimising unnecessary and costly accreditation requirements, and removing the obligation for taxi operators to affiliate with an NSP.
The inquiry does not consider the arguments advanced in favour of retaining mandatory affiliation are sufficiently strong to override the potential benefits from removing this restriction. It is clear that mandatory affiliation is costly to taxi operators and restricts their ability to choose for themselves the services and/or equipment they need to meet regulatory requirements. The significant market power of the large NSPs not only restricts entry into the booking services market; the inquiry has heard from firms supplying equipment and services to the taxi industry that this market power has constrained entry into these markets as well. As set out in the Draft Report, the inquiry found that the practices employed by NSPs to monitor and respond to in-cab duress alarms are less than optimal and that there is no compelling argument for not allowing other providers such as security companies to enter this market, as long as they satisfy the outcomes identified in regulation.
The inquiry does not agree with the arguments advanced by the VTA and others about the need to allow new booking technologies to develop ‘properly’ before removing mandatory NSP affiliation. The next few years are precisely the time during which greater competition in the booking market is most likely to result in the development of innovative products and services. Maintaining mandatory affiliation for the next five or more years will stifle this innovation and enable the large NSPs to further entrench their market dominance using these technologies.
The inquiry strongly disagrees with the VTA’s assertion that there is a gap between the evidence of customer satisfaction with booking services and the views advanced by the inquiry. In the Draft Report, the inquiry reported the result of commissioned research indicating dissatisfaction with these services, along with many comments made in submissions and during consultations about specific problems with taxi booking companies. The inquiry also notes the evidence provided by Silvertop’s representatives during the inquiry’s hearings that it prefers customers to receive an engaged signal during busy periods rather than be told no taxi is available. This appears to reinforce one of the most common complaints raised with the inquiry by taxi users.
The inquiry also notes that the overall satisfaction rating for booking services in the survey cited by the VTA masks very low satisfaction with key elements of the service. These matters are discussed at length in the Draft Report.
Final recommendations
4.1 Persons permitted to provide taxi and/or Pre-Booked Only services should be able to choose to operate independently or affiliate with one or more approved Authorised Taxi Organisations. Regardless of this decision, all permit holders should retain responsibility directly to consumers for the services they provide and must ensure their taxis adhere to outcomes-based regulations relating to GPS tracking, safety monitoring and emergency response capability.
4.2 Entry requirements and approval for Authorised Taxi Organisations should be minimal to reduce the regulatory burden and compliance costs on these organisations and encourage new entrants and competitors to existing networks. Approval criteria for Authorised Taxi Organisations should centre on:
A minimum fleet size (of around 20 vehicles in the Metropolitan Melbourne zone with discretion to approve a lower number in Urban, Regional and Country zones) and capacity to provide 24/7 service
Identification of the responsible person or persons of the Authorised Taxi Organisation, and each person satisfying requirements of a character check (includes national police check and proof of identity)
Capacity to adhere to operating rules setting out minimum service and other requirements (see Recommendation 8.7).
4.3 The requirement for a licensed taxi vehicle to be operated under control of an approved depot physically located in their specified zone should be removed.
4.4 Authorised Taxi Organisations should be required to provide regular reports on service performance as requested by the Taxi Services Commission. The Commission should publish details of service performance in a way that is widely accessible in order to assist consumers in making informed decisions.
PART B – RESTORING CONSUMER TRUST
Better quality drivers Inquiry’s views in Draft Report
In its Draft Report, the inquiry emphasised that improving driver quality must be a top priority for the taxi industry. Noting that concerns about driver quality emerged repeatedly in submissions and consultations, research, media stories, formal complaints and regular customer satisfaction monitoring, the inquiry found that driver quality is critical to a positive taxi or hire car experience. This was also reflected by many consumers indicating they are prepared to pay a premium for a good driver or are willing to endure some inconvenience to acquire the services of a ‘regular’ trusted driver (or group of drivers).
Overall, the inquiry found that satisfaction with taxi drivers in Victoria is low. Many concerns were raised about a decline in driver quality, knowledge and standards of behavior. These findings were supported by research commissioned by the inquiry into consumer attitudes (conducted by Ipsos Social Research Institute) and sources of consumer detriment (conducted by Latitude Insights).120 The inquiry concluded that improving driver quality is critical to improving taxi services and increasing demand for these services.
The inquiry’s draft recommendations proposed a multi-pronged approach to improve driver quality that covered driver entry and training, experience, remuneration and other terms and conditions of driver engagement.
The inquiry considered that, while improving training is important, finding a way to improve the remuneration, status and working conditions of taxi drivers must be a core element in any reforms. Experience overseas has shown that moves to open up taxi markets have not been sufficient, in themselves, to improve the quality of drivers. While the inquiry’s reform package did not propose the complete removal of restrictions on entry, it did propose a relaxation of these restrictions. In the absence of a clear strategy to improve driver remuneration, there is a risk that there will be no improvement in driver quality. The inquiry viewed such an outcome as unacceptable and contrary to the industry’s need to lift demand and occupancy rates to secure its future.
Driver training and experience
The inquiry examined driver training in detail and identified a number of shortcomings in current practices. In particular, the inquiry proposed that all applicants for driver accreditation should have held a Victorian Driver Licence for at least 12 months prior to the issue of accreditation to ensure they have a minimum amount of local driving experience.
The inquiry also found that, while the current training curriculum for taxi drivers is adequate, the relevant Registered Training Organisations (RTOs) have not produced satisfactory results and that training delivered through these RTOs should be subject to greater and more regular scrutiny by training authorities. The inquiry recommended better oversight of the RTOs and the introduction of comprehensive independent testing of metropolitan taxi drivers through a new Knowledge exam.
Driver remuneration and working conditions
The inquiry agreed with observations made by a number of people and groups (mostly from outside the taxi industry) that the industry has not implemented effective strategies to build a quality driver workforce. Rather than taking strong action to improve driver pay and conditions and recruit and retain good drivers, the industry has developed an unhealthy reliance on a continual flow of temporary drivers, with little regard shown for the welfare of these drivers or for the customer service implications of such an approach.
The inquiry reported that driver remuneration is low compared to national minimum wages and that the vast majority of drivers do not receive holiday or sick pay. Existing bailment arrangements have proven to be an unsatisfactory means of engaging taxi drivers and have severely curtailed the industry’s ability to improve the pay and conditions of drivers. The Draft Report included a detailed analysis of why relying solely on fare increases to deliver increases in drivers’ incomes is wasteful and often ineffective in delivering such increases.
The inquiry noted that its proposed licensing reforms would open up the opportunity for drivers to purchase and operate their own taxi and/or Pre-Booked Only (PBO) businesses. However, for those drivers who do not become licence holders, the inquiry recommended fundamental changes to the basis under which they are engaged. After examining in detail a range of alternative approaches to address driver quality, including the legal, economic and practical considerations involved, the inquiry was convinced of the need to move away from the current bailment arrangements to a fairer system. The inquiry proposed a new mandatory Driver Agreement that must be entered into by all taxi permit holders and drivers. This agreement would replace all existing bailment arrangements and contain minimum terms, conditions, service standards and payment arrangements.
The inquiry recommended a change from the current industry arrangement of 50 per cent of the fare box revenue paid to the driver to a minimum of 60 per cent of the fare box, considering that this struck a reasonable balance between affordability and the interests of drivers – and ultimately passengers. It also sought comment on alternative proposals to establish a minimum hourly rate for driving in peak and non-peak times or allowing drivers and permit holders to choose between either a specified minimum percentage of the fare box revenue or minimum hourly rates when entering into the Driver Agreement.
While noting that lower assignment fees would provide some scope for permit holders to pay higher driver remuneration, the inquiry recognised that further cost and revenue offsets would be needed. Accordingly, the inquiry made a number of recommendations aimed at enhancing the viability of taxi operations, including lowering permit holders’ costs and giving them greater choice and flexibility in the services they provide, with the aim of boosting the demand for taxi services and making it possible for the industry to pay drivers more. The inquiry noted that this would lead to ‘a virtuous circle’: better remuneration would improve driver supply, create more competition for shifts and lead to a higher standard of driver, which would in turn help to build customer confidence and demand and the capacity of permit holders to meet the costs associated with employing better quality drivers.
The inquiry also recommended that, in year five of the reform implementation program, the TSC examine the continuing necessity of the Driver Agreement. If the reform measures have not sufficiently improved driver pay and conditions, the inquiry suggested that the Victorian Government consider the further step of requiring all drivers to be engaged under written employment contracts.
Properly insured taxis
The inquiry also made recommendations relating to insurance. While this initially became an area of investigation because the inquiry received many comments about the difficulty of obtaining taxi insurance and/or the high costs of doing so, it uncovered a number of other issues. In particular, the practices of ‘taxi clubs’ were drawn to the inquiry’s attention, with several disturbing cases reported of taxi drivers and members of the public being disadvantaged by the practices adopted by these organisations.
Issues also arose about the extent to which the industry is covered by the provisions of workers’ compensation and OH&S legislation. The inquiry recommended that the relevant legislation in these areas be amended to clarify the status of drivers. The inquiry also recommended requiring permit holders to hold an insurance policy that covers third party damage arising from the use of the permit holder’s taxi and requiring a permit holder to indemnify his or her driver/s in relation to any vehicle damage arising out of the use of the permit holder’s taxi.
Draft recommendations
The inquiry’s draft recommendations aimed to deliver better quality drivers over time and contribute to restoring the community’s confidence and trust in the taxi industry.
Driver entry and training
Taxi and Pre-Booked Only cab driver entry requirements should be adjusted to remove the ability of applicants to undertake an Independent Driving Assessment in lieu of having held a Victorian Driver Licence for 12 months. The requirement should be for all applicants for driver accreditation to have held a Victorian Driver Licence for a minimum 12 month period.
Audits of all Registered Training Organisations delivering the taxi driver training course in metropolitan Melbourne should be conducted by the training regulators, the Victorian Registrations and Qualifications Authority and the Australian Skills Quality Authority, on a regular basis, facilitated by the Taxi Services Commission to provide specialist expertise.
Examination of new drivers should be undertaken independently of the Registered Training Organisations. The new independent exam should be known as the ‘Greater Melbourne Knowledge’ and could be administered directly by the Taxi Services Commission or under contract to a third party.
The independent exam should be compulsory for all new taxi drivers intending to drive in the Greater Melbourne zone, as the final step required before obtaining accreditation. The examination should assess applicants against the competencies of the taxi driver training course.
Registered Training Organisations, the Taxi Services Commission and disability advocacy groups should work together to develop materials to enhance the current delivery of disability awareness training (within the Provide Taxi-cab Customer Service unit of the taxi driver training course) to ensure that training remains relevant and that new drivers are provided with exposure to and awareness of the needs of a wide range of customers.
The requirement for metropolitan drivers to undertake the full taxi driver training course should be replaced with a new requirement that all Greater Melbourne drivers must demonstrate competency against units of the taxi driver training course by successfully passing the independent examination.
The requirement for any driver intending to drive a wheelchair accessible taxi in any part of the state to complete the stand-alone unit of the taxi driver training course, Provide Wheelchair Accessible Taxi Services to Passengers with Disabilities, and pass an assessment of this unit conducted by an Registered Training Organisation assessor, should be continued.
The inquiry considers subsidising wheelchair accessible taxi training to be unnecessary given the range of other incentives (for example the lifting fee and higher occupancy fee) in place to ensure there are sufficient numbers of wheelchair accessible taxi drivers. However, in country and regional areas, the subsidy provided to unit assessors should continue, to support the costs of these assessors travelling to test wheelchair accessible taxi driver applicants.
Taxi driver applicants seeking accreditation to drive in the urban, regional and country zones should continue to have the option (rather than be required) to complete the taxi driver training course with a Registered Training Organisation. Taxi permit holders in these zones should be required to ensure the adequate training of their drivers, either through delivery of their own induction and training programs or by choosing to send drivers to all or part of the taxi driver training course.
The practice of the industry mentoring new drivers ‘on the job’, which currently occurs predominantly in country Victoria, should be encouraged providing the industry develops and implements appropriate guidelines for managing in-car training (for example, informing customers of the presence of a second driver who is providing in-car mentoring at the time of booking or when a customer is selecting a taxi from a rank). These guidelines should be approved by the Taxi Services Commission.
Pre-Booked Only cab permit holders should be required to ensure the adequate training of their drivers via either delivery of their own induction and training program or by choosing to send drivers to all or part of the taxi driver training course (as is the case now for holders of Special Purpose vehicle and Restricted Hire vehicle licences). The mandatory requirement currently in place for metropolitan hire car drivers to undergo the taxi driver training course should be removed and Pre-Booked Only cab drivers should not be required to sit the independent exam.
Driver pay and conditions
Driver career structure, remuneration and conditions should be improved by making new licences available at affordable prices (giving drivers the opportunity to run their own taxi business, as set out in Recommendations 1.1 to 1.5) and introducing a new mandatory Driver Agreement that provides for more appropriate terms and conditions for drivers (as set out below).
Bailment agreements should be replaced with a fairer Driver Agreement for drivers who are engaged by permit holders to drive their vehicles. New legislation should be passed to require all permit holders to engage taxi drivers under the new Driver Agreement (unless the drivers are otherwise engaged as employees).
The Driver Agreement should provide a better revenue sharing arrangement for drivers by establishing a minimum percentage of 60 per cent of the fare box revenue to be provided to the driver.
Provisions that should be included in the new Driver Agreement include:
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The driver must be paid a share of the fare box of no less than 60 per cent
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The driver must be allowed to take up to four weeks unpaid leave where she/he has worked regularly for 12 months or more for the permit holder
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The permit holder must maintain a third party property insurance policy. The driver must be indemnified by the permit holder for any vehicle damage, but if an excess is charged to the permit holder and the driver is at fault, the driver may be required to pay the excess
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The service standards with which the driver must comply
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The costs (e.g. LPG) that must be paid for by each party
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The basis on which either party may end the agreement
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Dispute resolution mechanisms including a role for the Victorian Small Business Commissioner and the Victorian Civil and Administrative Tribunal.
The inquiry also seeks feedback on a further two possible options to establish a ‘safety net’ income within the Driver Agreement:
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Introduce a minimum hourly rate for peak and non-peak hours of work. Peak time should be limited to 10pm Fridays to 5am Saturdays, and 10pm Saturdays to 5am Sundays, and all other times should be designated non-peak hours. Under this option the rate will be set at $28 per hour for peak hours and $16 per hour for non-peak hours. This arrangement does not preclude an alternative revenue share arrangement, so long as this results in earnings of no less than the minimum hourly rates.
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Allow permit holders and drivers to choose between either the minimum hourly rate for peak and non-peak hours of work, or the minimum percentage of the fare box revenue to the driver, when they enter into the Driver Agreement.
The Victorian Government should amend the Accident Compensation Act 1985 to make clear that a taxi driver engaged under a Driver Agreement is deemed to be a worker for the purposes of the Act and the Accident Compensation (Workcover Insurance) Act 1993. WorkSafe Victoria, together with the Taxi Services Commission, should implement strategies to better inform industry participants about their rights and obligations under these Acts.
The Victorian Government should amend the Occupational Health and Safety Act 2004 to ensure that taxi drivers are owed a general duty of care by any person that has engaged them in their business.
Consumer Affairs Victoria should ensure that taxi clubs comply with the provisions of the Associations Incorporation Act 1981, when they are registered under the Act. Consumer Affairs Victoria should liaise with the Taxi Services Commission in relation to the regulation of taxi clubs under the Act and other general consumer legislation.
Disputes between drivers (or representatives acting on behalf of drivers) and permit holders in relation to a Driver Agreement should in the first instance be dealt with by the Office of the Victorian Small Business Commissioner. Disputes could be referred to Victorian Civil and Administrative Tribunal for determination if they cannot be resolved by the Victorian Small Business Commissioner.
The Taxi Services Commission, at its discretion, should be able to bring proceedings before the Victorian Civil and Administrative Tribunal or a court to enforce the terms of a Driver Agreement.
The Taxi Services Commission should undertake a review in year five of the reform implementation program to examine the continuing necessity of the Driver Agreement. The review should assess the adoption of reforms by industry and the impact of these measures on driver pay and conditions. The review should specifically consider the extent and effectiveness of the use of the Driver Agreement as compared with employment arrangements, as well as growth in numbers of owner-drivers and other indicators of industry retention of drivers. If the reform measures have not sufficiently improved driver pay and conditions the Government could consider the further step of requiring all drivers to be engaged under a written employment contract.
Properly insured taxis
Legislation should be drafted and enacted to require a permit holder to have a policy of insurance covering third party damage arising out of the use of the permit holder’s taxi. The policy should:
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Be issued by a corporation authorised under the Insurance Act 1973 (Cth) to carry on an insurance business
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Provide sufficient cover in the opinion of the Taxi Services Commission.
Legislation should be drafted and enacted to require a permit holder to indemnify his or her driver/s in relation to any vehicle damage arising out of the use of the permit holder’s taxi. But if an excess is charged to the permit holder and the driver is at fault, the driver may be required to pay the excess.
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