Executive Summary: The introduction of ride-hailing apps has upended the taxi and for-hire car industry in New York City. What began with a promise of independence and wealth for drivers has actually pushed more into dire financial straits, as competition has increased. Now, following a string of driver suicides, New York City’s Taxi and Limousine Commission (TLC) is considering imposing minimum wage requirements on certain app-hailing services like Uber and Lyft.
Under a proposed new rule being considered by the TLC, if a driver’s hourly earnings fall below $17.22 after expenses over the course of a week, the app company could be required to pay the difference. The new rule would apply to services like Uber, Lyft, Juno, and Via (“the App-Hailing Services”). Mayor Bill de Blasio has indicated his preference to address the challenges faced by drivers through more comprehensive regulation of the app-hail industry. The New York City Council has formed a Committee on For-Hire Vehicles and is considering seven different bills to address multiple issues. Meanwhile, a drivers’ advocacy group, the Taxi Workers Alliance, has called for a suite of regulations, including a cap on for-hire vehicles, parity of minimum fares between taxis and app-hailed cars, and imposition of the same labor standards for all drivers.
A recent study found that app-hailed drivers average $14.25 per hour after expenses. The same study found that after paying the apps their commissions, 40 percent of the drivers qualify for Medicaid and 18 percent qualify for food stamps. Another study found that across the country, Uber drivers averaged a net $11.77 per hour, after deducting expenses and the commission paid to Uber, which in New York City tends to range between 10 percent and 25 percent of fares collected from passengers. The TLC proposal is intended to bring the earnings of drivers into line with the $15.00 per hour minimum wage that will go into effect across the state in 2020.
Employers' Bottom Line: The proposed rule, if adopted, could apply not only to the App-Hailing Services, but also to many private car services, and even yellow cabs in New York City that have their own apps. The City Council, moreover, could eventually adopt more sweeping changes that would affect all employers in the industry. Even the imposition of the TLC rule could put more pressure on owners of taxi medallions and private car services, who are already dealing with a decrease in business as a result of competition from the App-Hailing Services. Just as such competition has hurt the industry, a mandatory minimum wage in excess of the state minimum wage could also be expected to impact the industry, including leading to a potential increase in fares. In turn, the potential increase in cost of labor may eventually hasten the development and introduction of driverless technology to replace these drivers altogether. It is advised that employers in the industry keep a close eye on the law, which could have a substantial impact on pay practices.
If you have any questions regarding the updates to the laws, or any other labor or employment issues, please feel free to contact the author of this Alert, Valerie K. Ferrier, Senior Associate in the New York Office, vferrier@fordharrison.com. You may also contact the FordHarrison attorney with whom you usually work.