Lyft will file a lawsuit against the city of New York on Wednesday to block the implementation of a new law requiring a minimum pay for drivers, according to a source. The law, which passed last December and would go into effect February 1st, would mandate the wage floor of $17.22 per hour after expenses for drivers, or $26.51 per hour before expenses.
In a statement, Lyft argued that the new rule would make it more difficult for the company to compete with Uber. Ride-hailing app Juno filed its own lawsuit, while the city’s other two services Uber and Via are not currently contesting the law. Lyft filed its suit in court on Wednesday afternoon.
Ride-hailing app Juno is joining Lyft on the lawsuit
“Our lawsuit does not target the law passed by City Council, but instead addresses the specific way the [Taxi and Limousine Commission] plans to implement the rules, which would advantage Uber in New York City at the expense of drivers and smaller players such as Lyft,” a spokesperson said. “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.”
The city’s Taxi and Limousine Commission voted to approve the pay rule last December, with the goal of raising the average pay for over 77,000 drivers by around $9,600 a year with “minimal disruption to passengers,” according to the commission’s analysis. However, ride-sharing app companies say the rule could lead to an increase in rates for riders.
“These rules protect thousands of hardworking drivers who work for the four busiest app companies,” a spokesperson for the city’s Law Department said in a statement. “The rules ensure minimum income protections, are fair and legal, and we’ll vigorously defend them in court.” New York City Mayor Bill de Blasio later tweeted his distaste with Lyft and Juno’s lawsuit.
In the run-up to the vote, advocates argued that ride-hail app drivers in New York City earned an average $11.90 an hour after expenses. That’s below the city’s current minimum wage of $15 an hour, increased from $13 an hour at the end of last year.
In passing its rule, the TLC approved a pay standard that makes use of a formula created by economists James Parrott and Michael Reich for a report on driver earnings commissioned by New York City. The key to the formula is an industry-wide “utilization rate” that adjusts the amount drivers are paid per mile and per minute to account for how much work they are getting each hour. (Quartz’s Alison Griswold wrote an excellent explainer of driver utilization rates last year.)
The economists argue that occupied cars are good for keeping traffic moving and drivers paid, but Lyft and Juno claim that they cannot keep drivers as busy as Uber because of their comparative size. Those companies say they fear getting stuck in a downward spiral if they have a lower utilization rate at the start.
Lyft fears getting stuck in a downward spiral if they have a lower utilization rate than Uber
The city’s driver equity law is a first in the US, and it came to fruition after a contentious debate across 2018 between elected officials, regulators, and the California-based app companies. In August, the New York City Council voted in favor of a cap on the number of for-hire delivery and transportation vehicles on the city’s streets.
The explosion of ride-hail vehicles in New York City, while wildly popular among riders, has been a source of almost constant strife for policymakers, disability advocates, taxi medallion holders, and driver groups. They complain that Uber and Lyft have been allowed to dominate the market without having to follow many of the same rules that apply to taxis. This has led to a glut of drivers that has outstripped demand, driving down wages, and increasing traffic congestion.
Lyft’s lawsuit to block the wage rule is rankling driver groups. “This is an indefensible attack on workers by the billion dollar corporations that profit from their labor,” said Jim Conigliaro, Jr., the founder of the Independent Drivers Guild. “Lyft and the gang should be ashamed that while their executives and investors are millionaires, their drivers, who do all the work, take home less than minimum wage and are even taking their own lives out of desperation.”
Updated January 30th, 12:04PM ET, to include a statement from Lyft, as well as an explanation of driver utilization rates.
Updated January 31st, 12:00PM ET: A state judge declined to grant Lyft and Juno’s request for a temporary retraining order blocking the city’s implementation of the driver pay law. Instead, the judge directed the ride-hailing companies to put the driver pay differential into an escrow account while the case is pending. TLC officials are meeting with representatives from Lyft and Juno on Thursday.
“Though we are heartened that the Judge did not issue a TRO, we are concerned that by allowing these companies to pay into escrow instead of paying drivers, professional drivers who live from paycheck to paycheck will be deprived of the benefit of their well deserved and long overdue raise,” TLC Commissioner Meera Joshi said in a statement.
Meanwhile, Lyft Chief Policy Officer Anthony Foxx responded to de Blasio’s tweet about the lawsuit.