Lyft Fails to Overturn NYC Driver Minimum Wage Law

Photo: Mario Tama (Getty)

Lyft’s lawsuit to overturn New York City’s minimum wage for ride-hailing drivers failed after a ruling by Judge Andrea Masley on Wednesday.

The city’s rule mandates that companies pay drivers, which are considered independent contractors and not company employees, make at least $17.22 an hour after taxes and expenses. To achieve this, the rules dictate that companies must use a “utilization rate” that’s based on how much time a driver spends shuttling passengers versus time spent waiting for new rides or idling.

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The Lyft lawsuit was filed in January, while the rule took effect in February. Competing ride-hailing service Juno also sued over the minimum wage rule, while Uber sued over the driver cap.

Ride-hailing drivers for companies like Lyft and Uber have increasingly been organizing for higher pay, benefits, transparency, and a voice at work. Groups of drivers protested Lyft’s $25 billion IPO. And driver groups are celebrating the judge’s ruling.

“The judge’s message today is clear,” said Independent Drivers Guild founder Jim Conigliaro Jr., according to a report in the Verge. “If ride-hail companies want to operate in New York City, they need to pay drivers fairly and follow our minimum wage laws. This is a proud day for drivers who organized with the Guild for years, taking on Silicon Valley behemoths, to win this historic pay protection.”

Lyft, which says it supports higher wages for drivers, nevertheless criticized New York’s rules on the grounds that the utilization rate is bad for its business, drivers, and users.

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“The TLC’s rules have hurt earning opportunities for drivers, and will diminish competition that benefits drivers and riders,” the company told Business Insider. “We will continue fighting to provide the best experience for drivers and riders in New York City.”

Lyft and Uber recently halted onboarding for new drivers in New York City following the new rules. That is the law’s point: In a market like New York City, which critics say is over saturated with drivers, the new rules penalize companies for having too many drivers on streets that aren’t actively shuttling passengers. The rules are meant to lower the number of useless cars and raise drivers’ wages at the same time.

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One of Lyft’s chief complaints about the new law is that it benefits Uber because the company is bigger, with more drivers and more riders, and that it will have the opportunity to petition for a different utilization rate next year. Judge Masley rejected Lyft’s argument, writing in her ruling that a smaller company like Lyft could still compete with Uber in the ride-hailing market.

In an email to members, the Independent Drivers Guild, which represents some 70,000 NYC ride-share drivers, spotlighted its own role in the new minimum wage law.

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“We knew that far from being harmed by these new rules, app companies were still making record profits,” the group said. “We showed up, we made our voices heard, and we made sure that the city sided with workers over app companies like Lyft that continue to make massive profits on our backs.”

You can read the full ruling here.

Clarification: A previous version of this article incorrectly implied that Uber sued over the NYC minimum wage rule alongside Lyft and Juno. Uber did file a lawsuit over the cap on drivers, but not over the minimum wage rule.

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Patrick Howell O'Neill

Reporter in Silicon Valley. Contact me: Email poneill@gizmodo.com, Signal +1-650-488-7247