Uber Proposes Cutting NYC Driver Minimum Pay on Lower Gas Prices

Uber Technologies Inc. is proposing a cut to New York City drivers’ base pay rate, among other recommendations, as it seeks to lower prices of rides in one of its largest markets.

The company would like the city’s Taxi and Limousine Commission, which sets minimum driver pay, to reduce the per-mile rate in its driver pay formula by 6.1% to $1.277 from the current $1.360, according to a letter it delivered to the regulator on Monday seen by Bloomberg News. In the letter, the firm cites falling gasoline prices as a reason for cutting the rate.

For future inflation-related adjustments, which are scheduled annually in March under the current rules, Uber is also suggesting a ceiling of 3%, or the average rate reflected by the Consumer Price Index, whichever is lower.

Uber is submitting its suggestions as the TLC prepares changes to the driver minimum-wage rule, which could have an impact on the costs of rides and operations in one of the company’s biggest markets. Chief Executive Officer Dara Khosrowshahi noted during the firm’s third-quarter earnings call last week that Uber has seen a slowdown in its core US rideshare business, as some consumers have opted for less frequent rides since it passed on higher costs from insurance policies.

This reduction in the per-mile rate is needed to ensure prices “no longer outpace inflation, and riders can continue to afford trips,” Uber Senior Counsel Nicholas Davoli wrote in the letter. The company expects this would translate to a decrease of about 42 cents for the price of an average trip and argues that lower costs will spur demand from riders, offsetting the impact a reduced base rate would have on total driver earnings.

The firm did not ask for changes in the per-minute rate of $0.583, another key element in the formula that covers net driver pay after expenses.

TLC Commissioner David Do said in an emailed statement that his agency is reviewing Uber’s petition. Do said at a September public hearing that he is preparing to unveil additional rules by the end of the year to protect driver pay and plug loopholes after Uber and Lyft Inc. routinely locked drivers out of their apps over the summer to game the pay rule.

The commission has received a “wide range” of suggestions from multiple stakeholders regarding the amendments, Do said in the statement. “We are seeking to introduce a fair rule package that will use the full extent of TLC’s authority to close existing loopholes,” he added.

An October Bloomberg investigation found the lockouts — which temporarily prevent drivers from logging in so they can’t work — are unpredictable and widespread, and have inflicted significant financial and mental strain on workers. Meanwhile, the companies stand to save tens if not hundreds of millions in future driver pay.

“How obscene that Uber would seek to do this, at a time when they have left drivers reeling from the lockouts,” said Bhairavi Desai, executive director of the New York Taxi Workers Alliance, a group representing more than 28,000 drivers. “It looks to me like Uber sees an opportunity in this administration because they’ve barely gotten even a slap on the wrist for gaming the city’s own pay rules.”

The group has led multiple protests against the lockouts and petitioned the regulator for changes in early September. With the backing of New York City Comptroller and mayoral candidate Brad Lander, the Alliance has asked the commission for stricter data reporting requirements in calculating driver pay, which relies on ride statistics supplied by the companies.

Lander and the drivers group want lockouts — which erase some of the drivers’ working time from the record — to be accounted for when the commission recalculates the industrywide pay formula next year.

The TLC responded in a letter to the group last Friday that it expects to propose rules “in the near future,” but didn’t guarantee it would adopt their suggestions, either in whole or in part.

In Uber’s public petition — which the regulator has 60 days to consider or deny — the company is asking for the per-mile rate to be lowered as it said driving costs have remained steady or decreased over the past few years, “while wage inflation has continued to increase.”

Nationally, gasoline prices have been declining since April and have fallen about 38% from their June 2022 peak, according to data from the American Automobile Association. In its letter, the company also says used vehicle prices have decreased in recent years, and that new car prices and rental prices have remained steady.

The petition doesn’t mention an expected rise in commercial insurance prices, a significant expense that licensed drivers are required to bear. Bloomberg reported last month that New York’s Department of Financial Services has approved rate increases by the city’s biggest taxi insurer, American Transit Insurance Co., which is insolvent.

Uber says the more than 20% increases on pay rates that the TLC has introduced since 2019 to adjust for inflation would already cover them.

“We recognize that commercial insurance costs may rise in March and catch up to the 20% increase the TLC has already instituted, which is why we did not petition for them to be lowered,” Uber spokesperson Josh Gold said.

Uber has been lobbying the TLC for other pay-rule changes. In a Sept. 5 email to deputy commissioner James DiGiovanni, obtained through a public records request, Gold shared proposed changes that include banning companies from dispatching new drivers for a quarter if they fail to keep existing drivers busy enough. It also proposed a fine of at least $100,000 if companies fail to efficiently manage their driver pools on an annual basis.

Top Photo: An Uber car waits for a client in Manhattan a day after it was announced that Uber co-founder Travis Kalanick will take a leave of absence as chief executive on June 14, 2017 in New York City. The move came after former attorney general Eric H. Holder Jr. and his law firm, Covington & Burling, released 13 pages of recommendations compiled as part of an investigation of sexual harassment at the ride-hailing car service. (Photo by Spencer Platt/Getty Images)