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Lyft Sues New York City Over Driver Minimum Wage Rules

On Friday, New York City plans to implement some of the country’s most progressive worker protections for ride-hail company drivers. According to new rules approved by the city’s Taxi and Limousine Commission in December, drivers for Uber, Lyft, Juno, and Via would have to make at least $17.22 per hour, no matter the time of day or how many rides they give. City officials say the move would increase the average New York ride-hail driver’s salary by 14 percent and would ensure that every driver meets the city’s minimum wage of $15, even after expenses like fuel and vehicle maintenance. The city says the 85 percent of drivers currently making below the minimum wage would net an extra $6,345 a year.

Or maybe not.

On Wednesday, ride-hail companies Lyft and Juno (which is owned by the Israeli company Gett) filed separate lawsuits against the TLC in state court, alleging the rules would unfairly advantage Uber, the city’s largest ride-hail provider. A judge denied the companies' request for temporary relief, which would have postponed the new rules set to roll out Friday. While the issue is pending, the difference between what Lyft and Juno would have paid drivers before and after the new law will be held in an escrow account. The companies' next day in court is slated for mid-March. (The two other ride-hail companies in New York, Uber and Via, have not taken legal action against the rules.)1

Yes, it makes sense that these companies would be against rules forcing them to pay drivers more per trip. (Reminder: Both Lyft and Uber are set to IPO this year.) But the Lyft and Juno lawsuits make more nuanced arguments about New York’s new rules.

What the companies dispute is the way the city regulator calculated its wage floor. The $17.22 figure is derived from a lengthy analysis completed by two labor economists last summer. The formula takes into account each ride-hail trip’s length, distance, and something called a “utilization rate.” The economists figured that New York wanted to come up with a fair minimum wage for drivers, sure—but that the city also wanted to incentivize these companies to keep their cars filled at all times. (The companies want to do the opposite: keep the number of drivers high to drive down riders’ wait times.) A company with a low “utilization rate” would have too many ride-hail vehicles on the road, circling while waiting for riders and clogging up traffic. New York wants to force ride-hail companies to up their utilization rates and become more efficient.

But each company’s utilization rate is different. Uber’s and Via’s are the highest, at 58 percent and 62 percent respectively. (That means riders are in NYC Ubers 58 percent of the time its drivers are logged on.) Lyft’s and Juno’s are lower, at 56 percent and 50 percent, respectively. Those companies argue they would have to pay drivers additional money per trip, compared to Uber and Via, to make up the difference between what drivers earn and the wage floor. And that they’d have no choice but to pass those costs on to New York passengers, who would end up paying higher prices for Lyft and Juno rides, especially compared to Uber.

They say that the city’s decision to use the companies’ current utilization rates favors the company that currently has the most vehicles on its app in New York—that is, Uber. (Via’s utilization rate is higher than Uber’s not because it has more drivers but because it offers only shared rides, much like Uber’s ride-pooling service, UberPOOL.)

“Our lawsuit does not target the law passed by City Council but instead addresses the specific way the TLC plans to implement the rules, which would advantage Uber in New York City at the expense of drivers and smaller players such as Lyft,” Lyft spokesperson Campbell Matthews said in a statement. “It’s no secret that Uber has tried to put us out of business in the past. They’ve failed repeatedly, and the TLC should not assist them in their efforts.”

Lyft also wants the TLC to let it calculate driver pay on a weekly basis instead of per ride. The company argues that the current formula incentivizes drivers to seek out higher per-trip payouts with a bunch of short-distance trips that take a lot of time—exactly the sort that happen in the most-congested areas. Calculating pay on a weekly basis, the company says, might push more drivers to head to less populated areas, like the city’s outer boroughs.

In other words: Lyft claims it would be willing to shell out at least $17.22 an hour to drivers; the company just doesn’t like the way the city has chosen to calculate what each driver makes per trip.

Representatives for Juno and its parent company, Gett, did not respond to a request for comment. Uber declined to comment on the lawsuits.

In a statement, lawyers for the city defended its new wage regulations. “These rules protect thousands of hardworking drivers who work for the four busiest app companies,” a spokesperson from the New York City law department said in a statement. “The rules ensure minimum income protections, are fair and legal, and we'll vigorously defend them in court.”

Worker advocates also slammed the lawsuits. “This is an indefensible attack on workers by the billion-dollar corporations that profit from their labor,” Jim Conigliaro Jr., the founder of the Independent Drivers Guild, said in a statement. “The idea that this lawsuit is about anything other than avoiding paying drivers a fair wage is laughable.”

New York City regulators have taken the most aggressive stance in the US toward the app-based transportation companies. The city has forced the companies to share detailed data with city agencies, including information on pickups and drop-offs that the city says help it plan transportation infrastructure. The companies say that sort of data sharing threatens user privacy and their own proprietary information, and have resisted giving detailed information to other cities that do not have the regulatory authorities that New York does. And in August, New York’s city council capped the number of ride-hail vehicles operating in the city for up to one year, as regulators study how best to regulate the companies.

First, though, New York’s ride-hail regulation efforts will have to face a worthy foe: lawyers.

1Story updated, 1/31/19, 6:40 PM EST: This story has been updated with a New York state court judge's decision on Lyft and Juno's request for temporary relief.

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