Weekly Brief: Uber Joins Lyft in NY Fight Over Malpractice

After eight years of letting Uber and Lyft run roughshod through the streets of New York, city officials have finally stepped up with aggressive attempts at regulation.

Last summer New York became the first city in America to force ride-hailing companies to bump up the pay rate for their drivers above minimum wage, from $11.90 to $17.22, even though drivers for Lyft and Uber are technically independent contractors and don’t qualify for the city’s minimum wage laws. The city also put a year-long cap on new licenses for ride-hailing vehicles, essentially choking off the influx of new drivers for either app.

Now, Lyft and Uber have responded. Last month Lyft sued the city demanding that it vacate the minimum-wage law and last week Uber sued the city claiming that its year-long cap is unlawful. Taken together, the lawsuits suggest that New York City has become the tactical front in the battle between ride-hailing companies and the cities trying to regulate them. The reverberations from how these lawsuits shake out will be felt around the US and the world.

Each company has put forth a different argument behind its legal action. In Lyft’s case, it claims that the minimum-wage law gives an unfair advantage to Uber because it lets individual ride-hailing companies set their own rate rather than mandating an industry-wide rate. That, Lyft claims, favors the company with the largest market share, which is Uber. Sound complicated? It is but when you’re challenging the legality of a minimum wage law, better to be complicated than come straight out and say: “We don’t want to pay our drivers a reasonable wage”.

Uber’s lawsuit claims that the new law is a classic case of legal overreach. Uber says the cap unfairly restricts service, limits growth and deters competition, all of which ends up hurting New York City residents. Both because of higher rates and fewer transportation options, especially those residents who live outside of Manhattan in more far-flung and poorer parts of the city. Uber’s lawsuit wants to end the cap and get new licenses rolling in again.

If all of this sounds like legal mumbo-jumbo, let us remember the big picture here: ride-hailing companies like Uber and Lyft are radically changing the way cities, governments, businesses and people think about transportation. They’ve forced carmakers so far out of their comfort zones that most of them now claim they want to be mobility companies first and traditional carmakers second. They’ve put the taxi industry on its heels and have city planners rethinking the way public transportation should or could work. That’s an unbelievable amount of change in a very small amount of time.

With that change has come some glaring negatives. Ride-hailing companies like to argue that they’re ushering in a world where anybody, no matter where they live, can quickly access affordable transportation; where anyone, no matter who they are, can get a good job in the gig economy; and where cities are less congested and more efficient. To their credit, ride-hailing companies are delivering more services to under-served communities, as a number of recent studies have found. One, from the UCLA Institute for Transportation Studies, found that neighborhoods with the highest percentage of minority populations in LA also had the most ride-hailing pickups and drop-offs for Lyft in 2016. Those were neighborhoods where cabs wouldn’t go or would often pass minorities by.

That’s good news. What’s not good is the fact that Lyft and Uber drivers struggle to cobble together full-time salaries, even if they’re driving for both apps simultaneously. Yet, more drivers keep getting lured into the job, which is flooding city streets with more vehicles and making congestion worse, not better. New York City now estimates that it has 80,000 drivers working for ride-hailing apps and many of those drivers aren’t replacing taxi drivers. They aren’t replacing everyday drivers. They’re in addition to them. [A similar trend has been recorded in London – Ed]

As New York City Mayor Bill de Blasio said when the new regulations took effect, “Our city is directly confronting a crisis that is driving working New Yorkers into poverty and our streets into gridlock.” We’ll see what happens in the courts. No doubt other city governments dealing with similar issues await the verdict.

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