NYC Sets Smaller Driver Pay Raise After Uber, Lyft Resistance
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New York City on June 20 announced new minimum-pay rules for rideshare drivers, settling on a smaller-than-proposed 5% increase following pushback from Uber Technologies and Lyft Inc.
An earlier proposal called for a 6.1% pay boost. The finalized regulations from the city’s Taxi and Limousine Commission are also designed to deter Uber and Lyft from locking gig workers out of their apps in an attempt to keep costs down. The board of commissioners will vote on the rules June 25, according to the agency’s website.
Uber and Lyft had strongly opposed the original rate, warning customers that it would force them to increase prices. Lyft’s shares extended declines after Bloomberg reported on the rules, falling as much as 3.3% to hit session lows. Uber’s stock, which had been up as much as 2.3% earlier June 20, pared most of its gains on the news.
Uber began locking out drivers at random in May last year, Bloomberg reported, prompting its smaller rival Lyft to follow suit. New York’s pay rule is unique in that it was designed to compensate drivers not just for time with passengers, but time spent driving to their next pickup and waiting for dispatches. The companies initially suggested they were performing lockouts during periods of low rider demand. But a subsequent Bloomberg News investigation revealed they were occurring at virtually all hours, causing financial and mental stress for drivers, most of whom work full time.
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Officials at the local and federal level took notice. The TLC has been under pressure ever since to close the regulatory loophole that allowed the rideshare companies to lock out drivers in the first place.
A More Modest Pay Raise
In their pushback over the driver pay increase, Uber and Lyft took issue with one of the TLC’s underlying assumptions: that vehicles are fully depreciated after five years and would warrant more expenses for car maintenance or replacement.
The TLC ultimately conceded that older, high-mileage vehicles are still “used intensively” for rideshare services and “nevertheless retain some value.”
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“It’s good to see the TLC listened to some concerns and tweaked” their original proposal, Lyft spokesperson CJ Macklin said. “While these changes are a step in the right direction, we still have concerns that the underlying pay formula will still deprive drivers of earning opportunities, drive up prices for riders and reduce ride availability, which isn’t good for anyone — especially the drivers who depend on steady demand to make a living.”
Bhairavi Desai, executive director of the 28,000-member New York Taxi Workers Alliance, welcomed the new rules. “Job security is a big issue for drivers,” she said, adding there is “still a long way to go” in terms of improving driver pay given the hours they work and the financial and physical risks they bear.
Her group, which led protests against lockouts last year, has more recently backed a local bill that would require the rideshare companies to provide more transparency around driver deactivations.
Deterring Driver Lockouts
Under the revised rules, first outlined in January, the TLC will no longer automatically update driver pay rates annually based on a metric called utilization rates, an industrywide indicator of how busy drivers are as measured by how much time they spend with passengers. Locking drivers out of the apps made them look busier on paper, which allowed the rideshare companies to avoid compensating drivers for their downtime.
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Going forward, the commission will only adjust the industrywide utilization rate “as needed to reflect changing industry dynamics.” Any alterations in the future will be done through a rulemaking process, which would allow stakeholders, including the rideshare companies, to give feedback, it said.
The new rules will also require Uber and Lyft to give 72-hour notice to drivers if they intend to lock them out.
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“TLC believes that this approach is superior and offers greater transparency than making automatic changes on a predetermined schedule without full consideration of other factors affecting the industry including citywide mobility trends, economic changes, and changes in the companies’ business practices, such as the use of platform restrictions or driver registration waitlists,” it said in the revised rules.
Uber does not anticipate further driver lockouts given the rule change, said Uber spokesperson Josh Gold. The company had already stopped onboarding new drivers and has been maintaining a waitlist since early last year to control driver supply.
“This rule finally moves away from automatically tying driver pay directly to utilization — a model that just doesn’t work,” Gold said. “It created perverse incentives, stifled innovation and led to a frustrating, unpredictable experience for drivers.”
