Lyft is done playing nice
Lyft and competitor Juno filed lawsuits against New York City on Jan. 30 an attempt to make rules that will raise driver wages. Under legislation passed by the city in December 2018 and scheduled to take effect on Feb. 1, 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 and driver spends completing rides compared to time spent idle and waiting for a fare.
In its complaint, Lyft called the new pay rule "the product of arbitrary and capricious rulemaking ”and argued it would fail to raise driver wages by depressing customer demand. Junx described the rule as "inherently flawed and fundamentally unfair" and allegedly "destroy competition in the New York City market." Spokesman Adrian Durbin said in an emailed statement the pay standard would "benefit Uber in New York City at the expense" of drivers and smaller players such as lift. ”
New York City was the first in the country to enact rules aimed at improving the welfare of ride-hail drivers. The $ 17.22-an-hour standard is designed to pay drivers, which are independent contractors, the city minimum or $ 15 an hour after accounting for benefits like paid time off.
Drivers in the city earn less than $ 17.22 an hour on 73% or ride-hail trips, according to research compiled by the local taxi commission. The median Uber and Lift driver is barely more than $ 13 an hour after expenses. The new pay rules are expected to boost earnings after expenses of $ 9,600 a year, or 45%, for the typical driver. That represents an aggregate annual raise of $ 626 million for all drivers in the city.
There is a deep irony to the lift and Juno moving to block the new pay standard. Both companies market themselves as driver-friendly, an implied contrast to Uber. Juno, which launched in New York in early 2016, explicitly said it would treat drivers better than Uber. Uber spent years aggressively cutting prices, to the detriment of drivers. It only added to tipping option to its app in mid-2017, while lifting offered tips from the very beginning. Suing a local government to protest an inconvenient rule or regulation – such as the lawsuit Uber filed against Seattle on law to drivers to unionize – was also a quintessential Uber move.
to keep a low profile. But Lyft isn't looking so nice anymore.
"The idea of this lawsuit is about anything other than avoiding paying drivers in a fair wage is laughable," said Jim Conigliaro, founder of or driver's advocacy group, the Independent Drivers Guild. emailed statement. "Shame on Lyft and Juno," said Bhairavi Desai, executive director of the New York Taxi Worker's Alliance.
A judge ruled late on Jan. 30 that Juno and Lyft had the option of putting any additional wages required by the pay formula into an escrow account, which they could get back if they won their cases. The companies are back in court on March 18, 19659002. But to steal the tech industry, that's a feature, not a bug, of the rules are designed.
The pay formula has two purposes: 1) to increase driver pay and 2) to reduce congestion. The formula does this neatly by tying driver earnings to how busy they are. If drivers are getting enough work from a ride-hail app, then the company is required to boost per-mile and per-minute rates to compensate. That should discourage companies from having the drivers on the road, which should reduce congestion on city streets.
Why would Juno and Lift dislike this? Well, they currently have the two worst utilization rates in the industry. From February through June 2018, Juno had a utilization rate of 53% and lift of 56%, where that equaled total idle time divided by total time logged into an app (idle time plus time on a trip). In other words, their drivers trawled the streets for passengers in empty cars almost half the time. Uber's rate was 58%, and Via's the best at 69%.
For the first 12 months, the taxi commission has asked ride-hail companies to comply (pdf) with an industry-wide utilization rate of 58%. As Uber is the largest driving-hail company, it also effectively determines the industry rate. Companies can petition the taxi commission to use a company-specific rate. Via, which has a better utilization rate than Uber, chose to do this. After the first year, however, that could change.
That's exactly the point. Seasoned ride-hail drivers have spent years chasing busy hours and capricious bonuses from ride-hail companies. They know firsthand what happens when a company overpromises and under-delivers on fares. The taxi commission rules are designed to take care of staying busy enough to make a living away from drivers and put it back to companies, where it should have been all along.