Uber, Lyft Drivers May See Higher Wages Under NYC Plan

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New York City is trying to close a loophole that Uber Technologies Inc. and Lyft Inc. have used to deny drivers millions of dollars in pay with a raft of new measures that would effectively raise their rates by roughly 6.1%.

The city Taxi and Limousine Commission, which regulates taxis and rideshare vehicles in one America’s largest ride-hailing markets, is proposing to both address inflation as it does every year and make changes to the way Uber and Lyft calculate drivers’ pay that together would result in the pay hike. The agency is accepting comments and will hold a Feb. 5 hearing on its plan.

The commission has vowed to introduce changes to its minimum pay formulas for Uber and Lyft drivers after a Bloomberg investigation in October showed the companies have systematically locked drivers out of their platforms to game those calculations and save millions in future pay. In its proposal, the commission said the lockouts have prevented drivers from “working and earning the daily income they were expecting to earn” and are “in clear conflict with the intent of local law.”

The city’s plan threatens to further weigh on demand for ridesharing in a key market for Uber and Lyft, which are both warning that costs will be passed through to consumers. Just two months ago, Uber CEO Dara Khosrowshahi told investors that the company has seen some slowdown in rides because of higher insurance costs being passed onto riders.

Chief among the changes the commission is proposing is the way it sets so-called utilization rates, a gauge of the time drivers spend actually making trips versus waiting to be matched with riders. Those rates, which are part of the formula for driver pay and are currently supposed to adjust annually, were designed to ensure drivers were compensated for both trips made and the time spent en route to passengers and waiting for work.

The city is now proposing to change those utilization rates and adjust them as needed to reflect “industry dynamics.” In doing so, the commission said it’s hoping to remove the perverse incentive to lock drivers out of apps in an effort to inflate the following year’s utilization rates.

The agency is also proposing a new rule that would require Uber and Lyft to give 72-hour advance notice to drivers if they intend to lock them out so they have “reasonable expectations of their working hours and incomes.”

“For drivers, both the pay adjustments and lockout protections leave them one step better than last year but still far from recovering the losses from lockouts or the pay and job security their service deserves and costs demand,” said Bhairavi Desai, executive director of the New York Taxi Workers Alliance. Her group represents more than 28,000 drivers and has led protests against lockouts and advocated for better driver pay.

Uber and Lyft are meanwhile warning that the proposal will lead to more expensive rides for consumers.

“The mayor may talk a big game about affordability on the campaign trail, but in his New York, only the richest can afford to get around,” Uber spokesperson Freddi Goldstein said. Last November, Uber suggested that the regulator cut driver base pay instead, citing lowered gasoline prices. The company is considering all options, including litigation, to fight the plan, Goldstein said.

Lyft said the city’s proposal won’t rule out future lockouts, as long as utilization rates continue to play a role in calculating driver pay.

“These new rules, combined with the second government-mandated congestion pricing fee that hit riders on [Jan. 5], would ensure even further fare hikes,” Lyft spokesperson CJ Macklin said.