The Black Car Industry in New York City: A Regulatory, Economic, and Social History

Part I: The Regulatory and Legal Framework

New York City and State have structured the for-hire transportation industry as a regulated system, composed of three types of operators. First, the State has capped the number of taxis that can pick-up passengers from the sidewalk; second, the City has established an agency to regulate the for-hire transportation market place; and third, the City has created a licensing scheme that permits and authorizes the operation of pre-arranged ride services, however, these services do not enjoy the same advantages that made yellow taxi service so successful, such as having the exclusive right to hail passengers on the streets.

The regulatory architecture of the for-hire transportation industry creates three durable facts that continue to organize the industry at its core:

1. Exclusive access to hailing passengers on the street became the defining characteristic of yellow taxicabs (and of designated "outer-borough" hailing pilot programs) and turned what was once a permit into a scarce, price sensitive commodity.
2. Access to pre-arranged rides became the defining constraint of Non-Medallion Vehicles, which forced them to adopt dispatch-based business models first in an informal manner, and then in a formalized way through "bases."
3. Ambiguity about the employment status of vehicle owners/drivers became structurally embedded: Regulators licensed vehicles and bases, yet labor law continued to ask whether drivers were employees or independent contractors, creating ongoing litigation instead of providing a stable designation of employee versus contractor.

Part I describes the development of this structure and the stabilization of an otherwise market-driven industry.

A. The Haas Act of 1937 and the Creation of Artificial Scarcity

1. Great Depression chaos and the political logic of a cap

In the early 1900s, taxicab markets in large American cities had low barriers to entry, which caused price wars and intense competition for curb pickups. New York City was not alone with its fundamental dilemma: When there are too many drivers trying to get too few fares, erratic profits, dangerous operation, and spotty quality of service can result. During the Great Depression, those issues were exacerbated. Fewer people had money to spend on rides, and many new individuals entered into the taxi business due to job loss. The high visibility, noise, and potential for confrontation at curb pickups attracted the attention of regulators.

The Haas Act of 1937 is better understood as a way for the state to facilitate a resolution between competing interests (incumbent taxi companies who sought relief from unreasonably competitive conditions, local governments that needed to create order and generate revenue, and the general public who wanted consistency and safety) than it is as a technically designed transportation policy. One thing is clear about the Haas Act: it provided a simple but very effective regulatory device to limit the number of legal street hail taxis.

2. The medallion cap at 13,595 vehicles and what it set in motion

The cap at 13,595 did two things at once. First, it stabilized the street-hail sector by limiting entry. Second, it transformed the right to accept street hails from a routine license into a scarcity asset. Once the number of legal taxis is fixed, access to that market becomes tradable, explicitly or implicitly, and the permit begins to behave like a quasi-property right. Even before the later financialization of medallions, the core economic reality was established: the most lucrative segment of the market was governed by a hard numerical constraint, and the constraint itself became the source of value.

This matters for the black car industry because the black car sector did not arise as a mere "alternative service." It arose within a regulated ecosystem where the most flexible form of for-hire work—cruising and taking spontaneous street passengers—was legally rationed. The cap concentrated legal street-hail capacity in Manhattan's core and along high-demand corridors. That concentration did not automatically produce universal citywide service, particularly when drivers' revenue incentives were shaped by dense trip demand, tipping norms, and short wait times.

In effect, the Haas Act helped create a two-part market:

• a scarcity-protected street-hail market, and
• a residual market for everyone else: trips that were inconvenient, low margin, geographically dispersed, or socially "undesirable" under prevailing norms.

The second market did not disappear; it reorganized itself.

3. Outer-borough transportation deserts as a regulatory artifact

The phrase "transportation desert" can imply an absence of infrastructure, but here it also reflects an absence of service incentives produced by the legal structure. When a limited number of vehicles are legally allowed to take street hails, drivers allocate themselves to where hails are plentiful and profitable. In New York, that often meant Manhattan's central business districts, airports, and major hotels—places where demand density and fare predictability reduce downtime.

Outer-borough neighborhoods, by contrast, presented a different calculus: longer distances between fares, greater uncertainty about return trips, and historically uneven policing and passenger-driver trust. These are not solely "market failures" in the abstract; they are predictable outcomes when a city allocates a fixed number of flexible vehicles and relies on driver discretion for spatial coverage.

The result was a durable pattern: legal street-hail taxis became ubiquitous in some spaces and scarce in others, creating a service gap that would later be filled by informal operators and then by licensed livery and black car fleets. The Haas Act did not "intend" to create the black car industry, but it created the condition under which a parallel sector could become both necessary and profitable: a large city with significant demand for rides that the capped street hail system did not reliably supply.

B. The "Gypsy Cab" Era and Regulatory Response (1960s–1970s)

1. Service refusal patterns and the geography of exclusion

By the mid-twentieth century, New York's taxi market was not only capped; it was also socially stratified in ways that were widely recognized by residents of underserved neighborhoods. Refusals—whether based on race, destination, neighborhood stigma, or a combination—functioned as an informal allocation mechanism layered on top of the formal scarcity regime. The net effect was a pronounced mismatch between citywide need and the actual distribution of service.

In neighborhoods such as Harlem, Bedford-Stuyvesant, and the South Bronx, residents and visitors frequently encountered difficulty hailing yellow cabs, particularly at night or for trips perceived as low-revenue or high-risk. The key point is not merely that discrimination existed—though it did—but that, in a system where taxis are scarce, discretionary refusal becomes more consequential. Scarcity increases the power of the provider to pick and choose among customers and destinations.

2. Unlicensed vehicles as a market response: why "illegal" service persisted

Into this gap stepped the "gypsy cab": unlicensed for-hire vehicles that provided rides for cash outside the legal taxi system. This was not a marginal phenomenon. It was a functional response to unmet demand in neighborhoods effectively excluded from reliable street-hail service.

The persistence of gypsy cabs illustrates an important regulatory lesson: when a city caps and concentrates legal service without creating viable legal alternatives, informal markets will often appear and stabilize. Riders tolerate informal systems when the alternative is unreliable mobility; drivers tolerate enforcement risk when the alternative is unemployment or entry barriers in the legal market.

These vehicles also foreshadowed the later logic of the livery and black car sectors:

• rides were prearranged (through local knowledge, street corner routines, or informal dispatch),
• payment was typically cash-based, and
• vehicles often operated in socially defined territories rather than citywide networks.

Gypsy cabs were not officially part of the taxi system, but they were effectively integrated into neighborhood transportation. They created informal knowledge systems where people knew "who to call" and "where to wait." The informality also meant limited insurance, no fare predictability, and uneven driver accountability—all of which would later justify a regulatory response.

3. Legitimation through licensing: converting informal demand into formal operations

The City's eventual response was not to eliminate these informal operations but to regularize them. Beginning in the 1960s and solidifying through various reforms, New York's regulators allowed for the licensing of "livery" vehicles—cars that could legally provide rides as long as those rides were prearranged through a "base" (a dispatch operation or service center).

This regulatory compromise was essential to the emergence of the black car industry:

• It acknowledged that demand existed beyond what yellow cabs served.
• It permitted service but constrained it: no street hails, no cruising.
• It created a new regulatory category—vehicles linked to a base—that would later evolve into the modern TLC (Taxi and Limousine Commission) framework.

Importantly, this was not a "legalization" in the sense of making previously illegal activity acceptable without change. It was a transformation: operators gained legitimacy, access to insurance, and regulatory protection in exchange for adhering to dispatch-only rules and maintaining ties to licensed bases. The resulting system created a three-tier structure: yellow taxis (street hail), livery cars (prearranged, community-focused), and black cars (prearranged, corporate focused).

C. The Rise of the "Black Car" Niche (1980s–1990s)

1. Corporate accounts and the demand for predictability

If livery cars emerged to serve neighborhoods, black cars emerged to serve businesses. In the 1980s and 1990s, as New York's financial and corporate sectors expanded, a new form of demand crystallized: employers and high-income professionals wanted reliable, prearranged transportation with predictable billing, insurance guarantees, and professional presentation.

Yellow cabs served this market imperfectly. They were available for street hails, but corporate clients often needed advance scheduling, consistent quality, and the ability to bill rides to company accounts. Black car services filled this gap by offering:

• Account-based billing: Rides could be charged to corporate accounts rather than paid in cash.
• Advance reservation: Pickups could be scheduled days in advance.
• Driver professionalism: Black car drivers were often expected to maintain higher standards of dress and vehicle cleanliness.
• Insurance and safety: Corporate clients demanded verifiable insurance and safety records.

The term "black car" itself reflects the branding: dark sedans (typically black Lincoln Town Cars or similar vehicles) that conveyed professionalism and discretion. Unlike yellow cabs, which were highly visible and marked, black cars were unmarked or subtly branded, signaling that the service was prearranged and exclusive rather than publicly available.

2. The base structure and its economic logic

The regulatory requirement that livery and black car rides be prearranged through a base had a profound economic consequence: it centralized demand allocation. Unlike yellow cabs, where drivers cruised and competed for curb pickups, black car drivers received ride assignments from dispatchers at bases.

This created a specific market structure:

• Bases controlled access to rides. Drivers affiliated with a base, and the base matched drivers to customers.
• Bases could specialize. Some bases focused on corporate accounts, others on neighborhood livery service, and still others on airport runs.
• Bases bore coordination costs. They needed dispatchers, phone systems (later, software), and reputations with customers.

The base system also meant that black car operations were inherently more scalable than independent cruising. A single base could coordinate hundreds of drivers, manage multiple corporate contracts, and invest in technology (like computerized dispatch) that individual drivers could not afford.

3. Differentiation from livery: serving different demand segments

Although black cars and livery cars were regulated under similar frameworks, they served distinct markets:

• Livery cars primarily served neighborhoods underserved by yellow cabs. Their customers were typically individuals paying in cash or using informal credit arrangements. Rides were often local or to/from airports.
• Black cars primarily served business travelers and corporate accounts. Their customers were expense-account users or companies paying invoices. Rides were often to/from airports, hotels, or business meetings.

This differentiation was not absolute, but it was significant enough that the two sectors developed distinct operational norms, pricing structures, and cultural identities. Black car drivers often saw themselves as providing a premium service, while livery drivers were more embedded in local communities.

The distinction also had regulatory implications. Black car bases tended to be larger, more formalized, and more visible to regulators. They were more likely to have insurance policies that met corporate client demands, and they were more likely to invest in dispatch technology and driver training programs.

4. The workers' compensation gap and the creation of the Black Car Fund

One of the most consequential regulatory innovations in New York's black car history was the creation of the Black Car Fund in 1999. This fund emerged from a specific problem: workers' compensation.

Most black car drivers were classified as independent contractors, not employees. This meant they were not covered by workers' compensation insurance, which is typically an employer obligation. If a driver was injured on the job, they had limited recourse. At the same time, passengers injured in accidents with black cars faced uncertainty about whether adequate insurance existed.

The Black Car Fund solved this problem through a legislative mandate: all black car rides would include a small surcharge (initially $0.30 per ride, later adjusted), and this surcharge would fund a workers' compensation program specifically for black car drivers. The fund was administered by the state, not by individual bases or insurance companies, and it provided benefits to injured drivers regardless of their employment classification.

This was a significant regulatory innovation for several reasons:

• It acknowledged contractor status while providing benefits: The fund did not require reclassifying drivers as employees, but it still provided a safety net.
• It was transaction-funded: Rather than being tied to wages or hours, the fund was financed by a per-ride fee, which scaled naturally with work volume.
• It was industry-wide: All black car bases and drivers participated, creating a pooled-risk system rather than relying on individual bases to provide coverage.

The Black Car Fund became a model for how to provide benefits to gig-economy style workers without resolving the underlying employment classification debate. It suggested that certain worker protections could be designed around transactions rather than employment status, a principle that would later become relevant in debates over platform-based work.

D. The TLC Regulatory Framework and the Codification of a Three-Tier System

1. The creation of the Taxi and Limousine Commission (TLC)

New York City's Taxi and Limousine Commission (TLC) was established in 1971 to regulate the for-hire vehicle industry. Its creation reflected a recognition that the industry had grown complex enough to require specialized oversight beyond general business licensing.

The TLC's mandate included:

• Licensing drivers: All drivers of yellow cabs, livery cars, and black cars needed a TLC license.
• Licensing vehicles: Vehicles had to meet safety and insurance standards.
• Licensing bases: Livery and black car bases needed TLC licenses to operate legally.
• Enforcing rules: The TLC could issue fines, suspend licenses, and shut down non-compliant operations.

The TLC's existence formalized the three-tier system: yellow cabs (street hail), livery cars (prearranged, community-focused), and black cars (prearranged, corporate-focused). Each sector had distinct rules, but all operated under TLC oversight.

2. Base licensing as a control point

One of the TLC's most important regulatory tools was base licensing. Because livery and black car rides had to be prearranged through a base, the TLC could regulate the industry by regulating bases rather than trying to monitor every individual driver.

Base licensing created several effects:

• It centralized accountability: If a base allowed unlicensed drivers or unsafe vehicles, the TLC could sanction the base itself.
• It created barriers to entry: Starting a new base required meeting insurance, recordkeeping, and facility requirements.
• It enabled data collection: Bases had to maintain records of trips, drivers, and vehicles, which the TLC could audit.

Base licensing also reinforced the power of bases within the industry. Drivers depended on base affiliation to receive ride assignments, and bases depended on TLC licensing to operate legally. This mutual dependence created a stable, if hierarchical, industry structure.

3. The persistent ambiguity of driver status

Despite the TLC's comprehensive regulatory framework, one question remained unresolved: were black car drivers employees or independent contractors?

The TLC's rules did not directly address employment status. They focused on licensing and operational requirements, not on the relationship between bases and drivers. This left the question of employment status to be determined by labor law and court cases, which produced inconsistent results.

Some factors suggested drivers were employees:

• Dispatch control: Bases assigned rides, and drivers had limited ability to refuse.
• Training and standards: Many bases provided driver training and enforced dress codes.
• Fixed fee structures: Some bases set fares or took a fixed percentage of fares.

Other factors suggested drivers were independent contractors:

• Vehicle ownership: Most drivers owned or leased their own vehicles.
• Flexible hours: Drivers could choose when to work.
• Multiple base affiliation: Some drivers affiliated with multiple bases.

This ambiguity was not accidental. It reflected genuine complexity in how the industry was organized. Bases did not want to be classified as employers because it would increase their labor costs and regulatory obligations. Drivers had mixed incentives: employee status meant benefits and protections, but contractor status meant flexibility and the ability to affiliate with multiple bases.

The result was decades of litigation and inconsistent classifications, which persisted even as the industry evolved.

Part II: Economic Structure and Labor Dynamics

1. The economics of dispatch: why bases mattered

The economic structure of the black car industry was fundamentally shaped by the dispatch model. Unlike yellow cabs, where drivers cruised independently and competed for street hails, black car drivers received ride assignments from bases. This created a specific economic dynamic:

• Information asymmetry: Bases had information about demand (which customers were calling, where they wanted to go), while drivers had to rely on base assignments.
• Coordination value: Bases could match drivers to rides more efficiently than drivers could find rides on their own.
• Market power: Because bases controlled access to demand, they could extract a share of revenue through commission fees or fixed payments.

The dispatch model also meant that driver earnings were highly variable. Some drivers received many ride assignments; others received few. Some rides were long and lucrative (e.g., airport trips); others were short and low-margin. Drivers had limited ability to predict or control their daily earnings.

2. Payment structures and revenue allocation

Black car payment structures varied, but most followed one of two models:

• Commission model: The base took a percentage of each fare (typically 10–20%), and the driver kept the rest.
• Lease model: The driver paid a fixed daily or weekly lease fee to the base (often for radio access and ride assignments), and kept all fare revenue.

Both models created economic tensions:

• In the commission model, drivers resented giving up a share of revenue, especially on low-margin rides.
• In the lease model, drivers faced fixed costs regardless of how many rides they completed, creating pressure to work long hours.

Payment structures also intersected with employment classification disputes. Lease models made drivers look more like independent contractors (they paid a fixed fee and kept all revenue), while commission models made bases look more like employers (they took a share of revenue and controlled assignments).

3. Hours and effort: the driver labor supply debate

One of the most studied aspects of taxi and black car economics is driver labor supply: how do drivers decide how many hours to work?

Standard economic theory predicts that drivers should work more when wages are high (e.g., busy times) and less when wages are low (e.g., slow times). But research on New York City taxi drivers found that many drivers did the opposite: they worked shorter hours on busy days (when they reached their income target quickly) and longer hours on slow days (when they needed more hours to reach their target).

This behavior, called "income targeting" or "reference-dependent preferences," suggested that drivers had daily income goals and stopped working once they reached them. This was initially interpreted as evidence of behavioral economics—drivers were making "irrational" decisions based on daily targets rather than optimizing over longer time periods.

However, later research questioned this interpretation. Some studies found that experienced drivers did work more on busy days, suggesting that income targeting might reflect inexperience or learning rather than a fundamental behavioral pattern. Other studies pointed out that drivers faced genuine constraints: they needed to balance work hours with family obligations, vehicle maintenance, and sleep, and daily income targets might be a reasonable heuristic for managing these constraints.

For the black car industry, the labor supply debate highlighted a key tension: drivers had formal flexibility (they could choose their hours), but they also faced economic pressure (they needed to earn enough to cover fixed costs and support themselves). This tension would later become central to debates over platform-based work.

4. The immigrant workforce and occupational mobility

New York's black car industry has historically been dominated by immigrant drivers, particularly from South Asia, the Caribbean, Africa, and Latin America. This reflects broader patterns in the city's labor market: for-hire driving has served as a point of entry for immigrants seeking work with relatively low barriers to entry.

Several factors made black car driving attractive to immigrants:

• Language flexibility: While English proficiency was helpful, it was not strictly required, especially for livery routes serving ethnic enclaves.
• Licensing process: The TLC license was accessible compared to many other professional licenses.
• Flexible hours: Drivers could balance work with family obligations or second jobs.
• Community networks: Many drivers entered the industry through connections with family or community members already working as drivers.

However, the industry also presented challenges for upward mobility:

• Low and unstable earnings: Many drivers earned below the median wage for New York City.
• No benefits: As independent contractors, drivers typically lacked health insurance, retirement savings, or paid leave.
• Physical demands: Long hours of driving created health risks (back problems, stress, fatigue).
• Limited advancement: There was no clear career ladder within the industry.

The immigrant workforce also shaped the industry's politics. Many drivers organized through community and religious networks rather than traditional labor unions, and their concerns often intersected with broader immigrant rights issues (e.g., immigration enforcement, language access, discrimination).

Part III: Social and Regulatory Implications

A. Discrimination and Access: Persistent Patterns

1. Service refusal and destination-based discrimination

One of the most persistent issues in New York's for-hire vehicle industry has been service refusal and discrimination. Despite legal protections prohibiting discrimination based on race, destination, or other protected characteristics, studies have consistently found that certain groups—particularly Black passengers and passengers traveling to outer-borough neighborhoods—face higher rates of service refusal or longer wait times.

Research on transportation network companies (TNCs) like Uber and Lyft has found patterns similar to those observed in the yellow cab and black car industries:

• Racial disparities: Black passengers experience longer wait times and higher cancellation rates than white passengers.
• Destination-based refusal: Drivers are more likely to cancel or refuse trips to neighborhoods perceived as low-income or high-crime.
• Time-of-day effects: Discrimination is more pronounced at night or in less-monitored contexts.

These patterns suggest that discrimination is not solely a function of individual driver bias; it is also shaped by economic incentives, information asymmetries, and structural features of the industry. When drivers can selectively accept or refuse rides, and when certain trips are perceived as less profitable or more risky, discrimination becomes a predictable outcome.

2. Regulatory responses: from enforcement to algorithmic allocation

Regulators have tried various approaches to combat discrimination:

• Legal prohibitions: The TLC prohibits service refusal based on race, destination, or other protected characteristics.
• Enforcement actions: The TLC can fine or suspend drivers who engage in discrimination.
• Complaint mechanisms: Passengers can report discrimination through TLC hotlines or complaint forms.

However, enforcement has been inconsistent. Discrimination is difficult to prove on a case-by-case basis, and complaint systems rely on passengers knowing their rights and being willing to report incidents.

The rise of platform-based services (TNCs) created a new possibility: algorithmic allocation. Unlike street hails or dispatch systems where drivers could see destination information before accepting a ride, TNC platforms could assign rides algorithmically and penalize drivers who frequently canceled. This created a new form of anti-discrimination enforcement: rather than relying on individual complaints, the platform could monitor cancellation rates and deactivate drivers who showed discriminatory patterns.

However, algorithmic allocation also raised new concerns:

• Transparency: How do platforms determine which cancellations are discriminatory versus legitimate?
• False positives: Could drivers be penalized for cancellations that were not discriminatory?
• Accountability: If discrimination persists despite algorithmic allocation, who is responsible—the platform, the driver, or both?

These questions remain unresolved, but they highlight a key lesson from New York's black car history: discrimination is not solely a problem of individual behavior; it is also a problem of system design. Effective anti-discrimination regulation must address both.

B. Employment Status and Worker Classification

1. The legal history of driver classification disputes

The question of whether black car drivers are employees or independent contractors has been litigated repeatedly, with inconsistent results. Courts have applied various legal tests, including:

• The common law test: Focuses on the employer's right to control the manner and means of work.
• The economic reality test: Considers economic dependence, investment, and the nature of the relationship.
• The ABC test: Presumes employee status unless the worker is free from control, performs work outside the employer's usual business, and is customarily engaged in an independent trade.

In practice, these tests have produced mixed results. Some courts have found that black car drivers are employees, citing the base's control over ride assignments and fare structures. Other courts have found that drivers are contractors, citing vehicle ownership, flexible hours, and the ability to work for multiple bases.

The inconsistency reflects genuine ambiguity: black car drivers have some characteristics of employees (they depend on bases for work, they follow certain operational standards) and some characteristics of contractors (they own their own vehicles, they set their own hours).

2. Independent contractor status: why Saleem remains conceptually central

Even without litigating the doctrinal details, Saleem captures an enduring puzzle: how should law classify a worker who can choose hours and affiliate with multiple entities, yet depends on an intermediary that controls the customer relationship and the flow of work?

That puzzle did not begin with apps, and it will not end with them. The black car sector shows that classification conflicts are not primarily a problem of technology; they are a problem of institutional design. When work is organized through access to demand rather than through wages, and when workers bear substantial capital and time risk, legal tests will repeatedly be asked to decide whether "opportunity" is genuine independence or merely a relabeling of dependence.

A practical lesson for TNC policy is therefore somewhat sobering: absent a clear statutory settlement, classification disputes will remain cyclical, case-specific, and sensitive to factual variations in control and autonomy. The long history of the black car sector suggests that waiting for courts alone to produce stable categories is unlikely to yield durable governance.

3. What New York's experience implies for contemporary regulation

New York's experience suggests some important guiding principles that will help regulators create appropriate and reasonable regulations for platforms.

1. Regulate access points instead of focusing solely on regulating the vehicles themselves.

In all three types of intermediate markets (Medallions, Bases, Platforms), the primary source of power is at the demand allocation point. During the Medallion period, the government regulated the curb. During the Base period, companies regulated dispatch. With the emergence of the platform, companies have the ability to regulate their algorithms and data. In order for effective regulation to take place, the regulator needs to control and regulate the access points (i.e., transparently report and allow audits of, and regulate how) the demand is allocated; i.e., deactivation, pricing, assignment, etc.) — not simply inspect and license vehicles.

2. Use equity as a key performance measurement for the platform.

One reason for the growth of the Black Car sector was due to its inability to participate in the dominant Street Hail market. A regulatory approach that ignores the discriminatory effects of a platform (e.g., cancellations, wait times, service deserts) replicates the same historical pattern using the same interface. An effective regulatory approach will need to monitor and enforce non-discrimination as a system wide property — not simply based on whether individual biases exist.

3. Design benefits for mobility workers as an issue affecting the entire sector.

The Black Car Fund is an example of a baseline benefit being pooled across an industry, even when employment status is disputed. This suggests a practical direction for platforms: Benefits tied to the work — and funded by transactions — may be created without creating a binary choice between full employment and complete deregulation. However, such benefits need to be carefully constructed so as not to become a substitute for broader labor standards — but instead, a complement to them.

4. Recognize that caps and limitations will generate "parallel" markets.

New York's own history demonstrates that caps on certain services (e.g., street hail taxis; other operational restrictions) do not eliminate demand — they simply divert it. Therefore, regulators should assume substitution will occur — and prepare accordingly: If one type of service is restricted, another type of service will emerge — possibly in different and/or less transparent forms. When regulatory policy anticipates and successfully manages those substitutions — rather than simply attempting to deny they will occur — then regulatory policy is successful.