Ride-hailing companies like Uber and Lyft have been at loggerheads with regulators as well as drivers over the low earnings and poor working conditions. Many cities have implemented regulations aimed at bolstering the earnings of Uber and Lyft drivers, with the goal of transforming driving for these companies into a sustainable and fulfilling career path.

Among these states is New York City (NYC), which devised new rules to help drivers in 2018. However, Uber has come up with a workaround and now the earnings of some drivers have fallen by half despite the regulations by NYC’s Taxi and Limousine Commission (TLC).

TLC Devised New Rules for Driver Pay in 2028

NYC’s TLC implemented a new policy in 2018 (which came into effect on February 1, 2019) after a study showed a fall in median driver earnings. It came up with a new pay policy for drivers which it said would “increase average gross driver pay by 14%, ensure that drivers are able to cover all vehicle and related expenses, and correct some inefficiencies and inequities in the industry.”

The new policy enlisted three components of driver pay. These were

  • Per mile rate or the rate which drivers get for running the cars between trips and is meant to cover vehicle, fuel, maintenance, and insurance. The rate was revised to $1.360 per mile for non-wheelchair-accessible vehicles from March 1.
  • The per-minute rate which stands at $0.583 per minute and is meant to compensate the drivers for the time they spend while driving. The rate is meant to ensure that drivers make the minimum wage.
  • Utilization rate, which is meant to compensate the drivers for the idle time between the rides.

You can check the above video for more information about the TLC rules.

According to the TLC, utilization rates are calculated by “dividing the total time that a high-volume for-hire service’s drivers spend transporting passengers by the total amount of time that drivers are logged into the app (including time waiting for a dispatch, time en route to pick up a passenger, and time with a passenger).”

While ride-hailing companies like Uber and Lyft cannot do anything about the first two components of the payment they are supposed to make to the drivers, they might have figured out a way to dodge the third component.

Uber Locks Out Drivers to Reduce Their Pay

Uber quickly found ways to pay drivers less under the new rules. It has been locking out drivers during periods when the demand is low so that it doesn’t need to pay the drivers for that time. These lockouts have been quite unpredictable and at times lasting for as much as an hour. Because of the lockouts drivers have been facing troubles in planning their work shifts and some say their earnings have fallen dramatically because of this change.

Simply put, if a driver is locked out, he or she has little option but to wait for the lockout to be lifted and, in the meantime, might not have anything productive to do.

Several drivers have expressed their frustration over these lockouts which can happen multiple times during a day. Things are particularly bleak for those drivers who drive full-time for Uber. For instance, Nikoloz Tsulukidze, who drives full-time for Uber and was making between $300 and $350 in 10 hours, has seen his income fall by half due to these lockouts. “Now, I just worked 10 hours and barely made $170. I was so disappointed. I’m paying for my gas and cannot make money,” said Tsulukidze.

Blame Game Between Ride-Hailing Companies

The ride-hailing industry in the US has long been controlled by a duopoly with Uber and Lyft as the only key players. Both the companies have blamed TLC and each other for these lockouts. Uber spokesperson Freddi Goldstein for instance told Bloomberg “With Lyft struggling to keep drivers busy, we don’t have other options.”

Notably, the TLC determines this non-passenger time based on the industry average, not on a company-to-company basis. This basically means that if the non-passenger time is higher for Lyft it would push up the industry average and hence Uber would also have to pay its drivers more.

To be sure, Lyft drivers have been less busy than their counterparts at Uber in NYC this year so there is some merit in Goldstein’s assertion. While they may blame each other, both Uber and Lyft are on the same page when it comes to faulting the NYC rules that were incorporated to ensure drivers earn minimum pay while working.

Lyft spokesperson CJ Macklin termed the NYC pay formula as “broken” and said, “It forces rideshare companies to limit when drivers can earn, and therefore how much they can earn.” It should be noted here that Uber could likely survive perfectly fine without locking drivers out as it turns a decent profit regularly. Lyft, on the other hand, has never been profitable, but could probably still withstand paying drivers a bit more.

Uber is calling upon drivers to “let the TLC know the effect their rules have had” on their pay which is an obvious ploy to pressure the city to change the rules.

Driver Unions Allege Uber Is “Gaming the System”

Naturally, drivers believe that Uber is shortchanging them by locking them out from the app. Bhairavi Desai, president of the New York Taxi Workers Alliance, which represents 28,000 drivers in the city blames Uber for the “mismanagement” and said the company allowed surplus drivers on its platform.

She believes Uber is “gaming the system,” and using a TLC regulation as an excuse to take “time that should be paid under the law and making it unpaid.”

To be sure, driver unions have been at loggerheads with ride-hailing companies pretty much across the world. The business model of ride-hailing companies revolves around charging competitive rates to customers that are invariably lower than what traditional taxis charge. To add up, drivers get to keep only about 75% of the fare with the remaining going to the ride-hailing companies.

Both Uber and Lyft have vociferously opposed attempts to characterize their drivers (who are contractors) as employees as it would mean higher pay coupled with benefits like medical insurance for them. Most recently, both companies threatened to exit Minneapolis altogether after a proposal to increase driver pay to match minimum pay.

As for drivers, they have pushed Uber for change for years and they recently led a massive protest outside Uber’s NYC office. The TLC might also take note of how ride-hailing companies have gamed the system and instead of earning higher pay – as was TLC’s intention – drivers are now making less by working an equal number of hours.