Roughly one month ago, we reported that New York City’s Taxi and Limousine Commission (TLC) was petitioning for a higher minimum pay for drivers, aka the NYC pay increase.
With that announcement, we also advised it was likely that a rideshare company, specifically Lyft or Uber, would try to stop the change if their history of lawsuits for changes they did not like were to repeat itself.
In the eleventh hour, about a week before due to start, Uber sued TLC, effectively blocking the increased rate from being approved.
We’re breaking down everything to know about the proposed rate hike and the reasoning for a strike down by Uber right here.
Proposed NYC Pay Increase
The policy that was supposed to be put into effect in December was one that promised a better living wage for rideshare and taxi drivers. The proposal, which was already approved by the NYC TLC, included an increase of 7% for per-minute rates and 24% for per-mile trip rates.
The NYC pay increase would also include an additional $2.26 fee that would function as an expensive component to be used by workers for costs like car maintenance.
The calculations were all part of a plan to raise the minimum wage to $23.82, one step closer to the goal of $25 per hour for drivers. Drivers, while also realizing they needed more than this slight adjustment, were optimistic at the promise of an increased wage.
Uber’s Reasoning for NYC Pay Increase Strikedown
In Uber USA LLC v. New York City Taxi & Limousine Commission, Uber succeeded in temporarily blocking the city’s move to increase driver rates. The roughly 100-page suit outlines the reasoning for why the courts should not pass the pay hike.
Uber claims that their reasoning for blocking the pay increase is that the rate hikes are unprecedented. Despite being approved and largely favored by New Yorkers, Uber goes on to say the proposed change is “dramatic, unprecedented and unsupported.”
$20 Million Cost for Uber
The company says that the raises, though slight on a rider-by-rider basis, would cost the company an additional $21 to $23 million in fees each month – a cost that the company could not reasonably recover from.
Increased Costs for Riders
Evoking rider support, the company also goes on to state an NYC pay increase would not be plausible unless additional costs were offloaded onto rider’s fares.
The lawsuit states an average increase of about 10% for rider prices if the policy were to go into effect as is. This is, of course, something that no rider wants when fees are already as high as they’ve ever been.
Uber goes on to say this increase will affect lower-income riders disproportionately.
Poor Holiday Timing
The suit says, “Such a significant fare hike, right before the holidays, would irreparably damage Uber’s reputation, impair goodwill, and risk permanent loss of business and customers… The company said the commission suddenly switched to a “volatile inflation index for a one-time increase that makes no sense, and that is a drastic departure from the Commission’s past practice or any rational approach.”
A Flawed Rate Calculation
Uber also alleges that the TLC and similar groups based their rate increases on flawed equations and numbers.
More specifically, the calculated need for higher pay was based on times of high inflation that have since fallen, meaning there is not nearly as much need as factored into the proposal.
In the lawsuit, Uber refers to this as, “the Use of a Cherry-Picked Volatile Index for One-Time Only and Cherry-Picked Months of the Year.”
Falling Demand
Uber alleges that the increase in prices with an NYC pay increase offloaded to riders will lower overall demand having an adverse effect on drivers. In other words, despite there being higher pay rates, the demand may not be there, resulting in equal or lower pay anyway.
If approved on December 19th as planned, Uber says, “it carries the likely risk that riders request and take fewer trips on
the Uber platform than they otherwise would have.”
Additional Reading: Uber USA, LLC v. New York City Taxi & Limousine Commission
New York City Uber Driver Strikes
In response to the Uber lawsuit, New York rideshare drivers are striking. Initially, the strike was a 24-hour pause by some drivers to protest Uber’s interception in the passing of the TLC’s pay increase.
The strike was set to begin at 12:01 a.m. and end at 11:59 p.m. on the day that the pay increase was supposed to go into effect. Not only were drivers asked to participate but also riders to help show their support for the driver wage increase.
Major groups and politicians were behind this strike, including Alexandria Ocasio-Cortez, who encouraged New Yorkers to avoid using Uber for the day.
It was estimated that the strike included over 5,000 drivers and an unknown number of rider participants. Unfortunately, this strike seems to have little effect if Uber’s rebuttal has any truth to it.
The company stated in response to strike news that the day the strike occurred on December 19th, the Monday was as typical as any other Monday of the year. However, there’s no way to validate this claim.
The decision has been postponed until January 31st – much to the drivers’ dismay, who were looking forward to an NYC pay increase going into effect before the holidays.
The New York Taxi Workers Alliance Executive Director Bhairavi Desai said,
“To steal a raise from drivers who work so hard and on the eve of Christmas and the New Year hurts. It stings. But make no mistake, we’re not crying in a corner. We’re readying to fight the small-hearted pettiness of a billionaire company that just doesn’t want to see its workers survive.”
It’s likely that as there continues to be a back-and-forth discourse among Uber and unions that represent drivers, that continues strikes and discourse will occur. Conversations are likely to pick up after the New Year over whether an NYC pay increase is coming.