(Bloomberg) -- New York City’s taxi commissioner warned that his agency is working on a tighter set of rideshare driver pay rules in response to driver lockouts implemented by Uber Technologies Inc. and Lyft Inc. that have contributed to lower wages.
The city’s Taxi and Limousine Commission, which regulates the ride-hailing industry, plans to unveil the proposed rules in “the next couple of months,” Commissioner David Do said in an interview. Meanwhile, the commission has been in talks with the companies to see if it can address the lockouts without implementing a rule change, Do said.
“There are a variety of rules that we are going to be using to strengthen the pay standard for drivers,” Do said, without sharing further details. “We want to say that the regulator is here, that we are on the side of drivers and that we will impose new rules and new restrictions on the high-volume companies if we need to ensure that they’re playing fair.”
The latest sparring between the ridehailing companies and New York City officials underscores a still-evolving regulatory landscape, which has prompted these firms to adjust their business models in various markets.
New York City’s industrywide pay rule takes into account driver statistics from all ridesharing firms and requires companies to pay workers for both active driving time and time racked up between trips. And there have lately been more drivers to pay — the supply of for-hire drivers spiked last fall after the commission lifted a cap on new permits, which spurred a rush in applications from rideshare drivers. Uber has said in regulatory filings that the New York minimum rates have had an “adverse impact” on its financial performance in the city since they took effect in 2019.
This spring, Uber began temporarily locking drivers out of its app mid-shift to reduce how much idle time could count toward drivers’ calculated pay, Bloomberg reported last month. Lyft began its own lockouts in early July. As a result, some drivers have seen their take-home pay fall by as much as 50%, Bloomberg reported.
In messages to drivers, Uber and Lyft have blamed the commission’s pay rule for the lockouts. Uber warned the regulator that it would begin locking drivers out “long before the rule went into effect,” said company spokesperson Freddi Goldstein. The commission was “unwilling to make the necessary changes,” she said, adding that Uber’s average driver statistics shouldn’t be lumped in with Lyft’s. “We want a company-specific standard so we’re only responsible for ourselves.”
Shares of Uber and Lyft both slid on the news that the commission is preparing fresh regulations. Uber’s stock was down 1.3% at 11:34 a.m. on Monday in New York. Shares of Lyft were down 1.3%.
A Lyft spokesperson reiterated an earlier statement, saying the city’s “broken” pay formula forces the company “to limit when drivers can earn.”
Do, however, said the companies created what he calls a “manufactured crisis” by onboarding too many drivers. Uber and Lyft have other ways to address the driver surplus, he said, such as giving drivers more trips or not dispatching new workers. But the rideshare companies instead “use the easiest option, which is to lock you out.”
Goldstein said in response that Uber began limiting new driver sign-ups last April to people with electric or wheelchair-accessible vehicles. This helps the company meet its own zero-emission goals and comply with a similar city mandate. In January, Uber froze all new driver sign-ups. Would-be drivers now have to add their names to a waitlist.
“There is no doubt this is a crisis brought on by over-saturation,” said Bhairavi Desai, president of the New York Taxi Workers Alliance, which is organizing a driver protest against the lockouts that will take place this week. “Both the TLC and the companies need to answer for the over-saturation and not pin it on the drivers,” she said.
New York is not the only market where Uber and Lyft will have to contend with local regulatory changes. Last month, the two companies reached a settlement with the Massachusetts attorney general, agreeing to provide some worker benefits to resolve a state lawsuit that challenged drivers’ independent employment status. In May, the companies secured a compromise on a lower-than-proposed minimum wage from the state of Minnesota after they threatened to pull their services from the state.
Outside the US, European Union countries reached an agreement earlier this year to set limits on how workers can be managed by digital platforms such as Uber. In Hong Kong, the government this month unveiled a plan to require Uber drivers to be licensed after 10 years of the service operating in a legal gray area.
In its latest earnings report, Uber posted a sequential decline in operating income, saying it needed to set aside more funds to resolve legal settlements and other regulatory issues.
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