Starting today, drivers for certain ride-hail apps in New York City will see a significant pay bump, while drivers for other apps will not. In many cases, they will be the same driver since New York City drivers typically moonlight for multiple apps. If that sounds like a hot mess, it’s because it is.
This confusion is the result of an 11th-hour push by two companies, Lyft and Juno, to disrupt the implementation of a new law mandating higher wages for drivers. Under legislation passed by the city in December 2018, which is scheduled to take effect today, ride-hail companies must pay drivers at least $17.22 an hour after expenses. The pay formula uses a so-called utilization rate, which accounts for the share of time a driver spends with passengers in their vehicles compared to time spent idle and waiting for a fare.
Lyft and Juno are trying to disrupt the implementation of a new law
On Wednesday, Lyft and Juno filed separate lawsuits arguing that the new law would put them at a competitive disadvantage to Uber. The utilization formula is unfair, they argue, because Uber has more users and can keep drivers busier. The law will ultimately fail to raise driver wages because it will depress customer demand, Lyft contends.
Both companies asked the judge to block the implementation of the law, but the judge initially declined the request. Instead, New York State Supreme Court Justice Andrea Masley offered the ride-hail companies the chance to put increased driver earnings in a lock box escrow account. Lyft and Juno accepted, while Uber and Via did not. (Contrary to some press reports, Lyft did not strike a deal with the city’s Taxi and Limousine Commission.) This may change, though, as Lyft and Juno are expected to reconvene with the judge on Friday.
Still, Uber is using the legal fight as an opportunity to portray itself as an advocate for wage fairness. “We do not intend to hold back any portion of drivers’ earnings,” an Uber spokesperson said in a statement. A spokesperson for Via agreed: “We also believe strongly that holding companies to utilization standards is an important step in reducing congestion causing single-occupancy trips and we support the TLC in this goal.”
Uber isn’t shying away from the fact that the new law will result in higher fares for riders. The company published two blog posts last night — one for riders, one for drivers — in which the company implies that the days of cheap Uber trips are over. Moreover, trips that start in New York City and end somewhere outside of the five boroughs will include an extra fee to compensate drivers for the return trip back to the city.
trips that start in NYC and end outside of the five boroughs will include an extra fee
Essentially, the method used to calculate the new driver rates entails a “roaming charge” where riders are paying higher prices in order to compensate drivers for their time on the road without a passenger. We believe that simple changes to the way the TLC applies the rule would allow us to reduce prices for riders without impacting the minimum driver pay of at least $27.86 per hour.
Uber said it will likely reduce or eliminate some of the financial incentives, like limited-time bonuses and promotions, that it used to lure drivers to its app. The company is also increasing the cancellation fee if a rider doesn’t show up, with the cancellation window changing from five minutes to 15 minutes.
So what happens now that Uber is complying with the new wage law and Lyft is withholding some of that pay? The Taxi and Limousine Commission had no official comment on Friday, and representatives from Lyft are expected to meet again with Justice Masley to further discuss the escrow deal. Lyft may ultimately end up paying drivers some, if not all, of the higher wage rates. But the damage may already be done.
Was hoping to get into a @lyft today knowing my driver would be earning a living-wage rate of pay.
Here’s what I’m doing instead.https://t.co/rplatH97QG pic.twitter.com/fMQZ6J5mcu
— Brad Lander (@bradlander) February 1, 2019
“Lyft drivers are so severely underpaid that simply enforcing the minimum wage would increase driver earnings by nearly $10,000 per year,” a spokesperson for the Independent Drivers Guild said. “Shame on Lyft and Juno for prolonging the suffering for their drivers – thousands of hardworking New Yorkers – and their families.”
The fight over the new wage law may cost Lyft its “nice guy” image. The company formerly associated with the fuzzy pink mustaches has worked diligently to cultivate a reputation as the more “woke” alternative to the larger and more unsympathetic Uber. And drivers certainly responded to that effort: according to a 2017 survey, 75.8 percent of Lyft drivers agreed with the statement that they were satisfied with their experience driving for Lyft, while only 49.4 percent of Uber drivers could say the same.
Both Uber and Lyft are expected to go public this year, so cost control is certainly of major concern. To be sure, New York is just one market of the many hundreds that both Uber and Lyft operate in. It also happens to be the largest in the US, and other cities are watching closely to see how the wage fight plays out. This could just be the tip of the iceberg.