The Seattle City Council on Tuesday unanimously backed a new pay formula for Uber and Lyft drivers meant to ensure they make the same $16.39 per hour minimum wage as other workers in the city.
The new rules require ride-hailing companies to pay drivers rates high enough to account for a wide range of expenses and for the time drivers spend waiting for rides and heading on their way to pick up passengers, not just the time when a passenger is in the car.
As the gig economy surged in recent years, Seattle battled ride-hailing companies Uber and Lyft over pay and rights for their drivers, who are classified as independent contractors and work without basic guarantees like minimum wage. Drivers have split on City Hall proposals.
The new requirements, proposed by Mayor Jenny Durkan and approved by the City Council, met staunch opposition from Uber, Lyft and some drivers who worry the companies could respond as they have to similar rules in New York City. There, Uber and Lyft stopped hiring new drivers and restricted drivers’ access to the app. Uber allowed drivers to go online and drive anytime only if they had given a certain number of rides in the previous month.
Other drivers said current practices force them to work long hours for low pay, now with frequent worries about the spread of the coronavirus.
“The legislation before you has the possibility to be as impactful as the $15 minimum wage,” said Don Creery, a driver and member of the Drivers Union, which is affiliated with Teamsters Local 117. The union supported the legislation.
The legislation will set new per-mile and per-minute rates for drivers while they’re transporting passengers, meant to be high enough to also account for expenses and downtime. Under a formula in the legislation, gross hourly pay would amount to about $29.90 this year, according to council staff. The legislation takes effect in January.
The legislation will also require drivers be paid a minimum of $5 per trip for most trips.
“I make far more than minimum wage as a driver — at least $70,000 a year — and am able to write off my expenses in my taxes at the end of the year,” said Lyft driver Beverly Waters, a member of Drive Forward, a group that opposed the legislation and has received funding from the ride-hailing companies.
In accounting for expenses, the legislation assumes a broad array of costs, including roughly $8,000 a year for vehicle costs like lease payments, $2,000 a year for maintenance and repairs, $1,600 a year in cellphone costs, $3,800 a year for medical, dental and vision insurance. The pay formula also accounts for 30 minutes each day for vehicle cleaning and 10 minutes of rest for every four hours worked.
Driver pay on the apps is fiercely debated.
In a city-commissioned study, researchers from The New School and University of California, Berkeley, concluded drivers make about $21.50 an hour before expenses and $9.73 after. In an industry-funded study, Cornell University researchers found the median driver made about $23 an hour after expenses. The studies relied on different sources of information about drivers, different calculations for time worked and significant differences in assumed expenses.
To guarantee the minimum wage, the new rules will use a combination of per-minute and per-mile pay rates, divided by what’s known as a “utilization rate.” That figure is based on the share of drivers’ time spent with passengers in the car, rather than waiting for a ride.
Today, companies benefit from having more drivers on the road so passengers get picked up faster. But the new formula incentivizes companies to keep that utilization time high when the city calculates its pay rates. That can mean the companies look for ways to have fewer drivers on the road. Seattle plans to keep its utilization rate in place for the first three years, possibly delaying the effects.
Today, “there’s no cost to the company if the drivers aren’t busy,” said Meera Joshi, the former chair of the New York City Taxi and Limousine Commission who is now providing legal counsel to Seattle’s Office of Labor Standards.
“If you don’t have a commitment from the companies to keep drivers busy, pay protection on its own doesn’t do much to elevate wages,” Joshi said. “You have to pay a certain amount per trip and you have to give them trips.”