Lyft caves on minimum-wage rules

07 Feb 2019

As featured in Crains New York

Mounting pressure from drivers forces company’s hand

By: Matthew Flamm

Lyft, the San Francisco-based ride-hail service, is learning the hard way that you can’t fight City Hall.

The company announced Wednesday that it would begin paying drivers according to the Taxi and Limousine Commission’s new minimum-wage regulations that it sought to block with a lawsuit only last week.

The suit against the TLC, filed in New York state Supreme Court, failed to obtain an injunction. But in a motion posted Friday morning, Judge Andrea Masley told the company it could pay drivers according to its own rate card and put the raise in escrow while the suit was pending. The next court date is March 18.

That solution quickly proved unworkable as driver protests mounted and Lyft rivals Uber and Via agreed to raise their drivers’ pay immediately.

The new rules require that drivers earn an hourly minimum of $27.86, which comes to $17.22 after expenses (the equivalent of a $15 minimum wage, factoring in payroll taxes and paid leave), with the pay calculated on a per-trip basis. The raise averages out to about $9,600 a year.

By late Friday, Lyft had announced it would pay drivers the amount required by the TLC rather than put money into escrow, but the raise would be distributed over the course of a week. That would allow the company to charge less for rides during periods of low demand and add incentives to keep drivers on the road when demand picked up.

The problem with that approach was that drivers felt they were being shortchanged, because the incentives were considered part of their pay, not an addition to their minimum, as was intended under the rules.

The Independent Drivers Guild, which represents app-based drivers and has led the campaign for a raise, launched a petition demanding that Lyft and Juno—which also sued the TLC—follow the new rules. It collected more than 2,500 signatures.

Lyft told the group on Wednesday that it would pay drivers any back pay they are owed dating to Feb. 1, the day the rules took effect. Juno has not responded to requests for comment.

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