MANHATTAN (CN) – Taking aim at New York City’s efforts to increase minimum wage for ride-hail drivers, affiliates of the apps Juno and Lyft claim in court that the the rule set to take effect Friday is “irrational” and will lead to a “downward spiral” for many companies.
In separate petitions filed Wednesday in Manhattan Supreme Court, the Taxi and Limousine Commission faces allegations from Lyft subsidiaries Tri-City LLC and Endor Car and Driver LLC, and from Omaha LLC and Vulcan Cars LLC, two bases that support the NYC-based ride-hail app Juno.
The suits come just over a month after the New York City Taxi and Limousine Commission passed a rule requiring drivers for app-based services to be paid at least $17.22 per hour, with higher wages for drivers who take passengers out of Manhattan.
The amount is based on a formula that takes into account factors such as mileage and the amount of time spent driving a customer versus the amount of time a driver is logged into their ride-hail app.
At the time, the rules were praised by ride-hail driver associations like the Independent Drivers Guild, as well as taxi associations that have felt threatened by what they see as encroachment by Uber and other car-service companies.
The Lyft and Juno affiliates cried foul, however, on the basis that the new rules hamstring companies that purposely charge their drivers less in commissions.
Juno’s affiliates say the new TLC rule is “well intentioned in theory” but “inherently flawed and fundamentally unfair” to smaller ride-share companies like Juno.
The New York City-based Juno boasts it charges drivers as much as 65 percent lower commissions than its competitors, and say its drivers make more money per trip than Uber and Lyft, its two biggest rivals in New York City.
“The rule actually will harm the very drivers it ostensibly was designed to protect, and adversely impact passengers by eliminating healthy competition in the industry,” the petition states.
Omaha and Vulcan also allege that the the commission’s Utilization-Based Rule is based on a “complicated formula” that arbitrarily sets different minimum wages for each of the four ride-hail companies operating in the city.
As a result, the suit claims, companies with lower utilization rates would actually be required to pay their drivers more for providing the same service.
“The rule will permit companies with higher utilization rates to pay their drivers less than smaller companies with fewer riders pay for the same service,” the 42-page petition states. “In turn, those companies will inevitably be forced to increase their fares to make the higher mandated payments to their drivers, losing their already smaller customer bases.”
Accusing the commission of pushing the new rule through, the petition accuses the the commission of not conducting any analysis on driver utilization rates, including how often a driver accepts ride requests on the app.
“Drivers do not accept every ride they are offered by a given ride-hail company for a number of reasons,” the petition states. “Indeed, virtually all of Juno’s drivers also drive for other [for-hire vehicle companies] or larger ride-hail companies such as Uber or Lyft, and thus Juno attempts to increase overall ‘utilization’ of these existing drivers by providing more trip opportunities without adding new drivers to the pool.”
Omaha and Vulcan say the new rule punishes Juno’s approach because it then assigns those drivers lower utilization rates, forcing the company to bump up their compensation for the same or less work, the suit claims.
The companies worry as well about splitting down time evenly for idle drivers logged into several ride-hail apps at the same time, again punishing companies like Juno that have targeted drivers already working with competitors.
The suit claims the rule also violates New York City Local Law No. 150, which states that the commission cannot prevent companies from paying for-hire drivers based on an hourly or weekly basis instead of a per-trip basis.
Mayor Bill de Blasio was swift to rebuke the suits Wednesday, calling them “unconscionable” on Twitter.
“The overwhelming majority of these companies’ drivers earn less than minimum wage,” De Blasio wrote. “We won’t stand for it in New York City, and we’ll fight every step of the way to get workers the pay they deserve.”
A New York City Taxi and Limousine Commission spokesman did not immediately return an email seeking comment, but a representative for the city defended the regulation change.
“These rules protect thousands of hardworking drivers who work for the four busiest app companies,” a spokesman for the New York City Law Department said in a statement. “The rules ensure minimum income protections, are fair and legal, and we’ll vigorously defend them in court.”
Juno launched in New York City in 2016, five years after Uber broke into the Manhattan market.
Tensions between taxis and ride-hail companies have grown in recent years, with taxi companies claiming they have been losing their livelihood to the app-based companies.
In a statement, New York Taxi Workers Alliance Director Bhairavi Desai decried the lawsuits. “Shame on Lyft and Juno,” he said. “These companies are collectively valued at billions of dollars but claim to be too broke to pay drivers even minimum wage.”
After 80,000 ride-hail vehicles in New York City topped 80,000 in 2018, the New York City Council passed a measure to temporarily cap new vehicles for hire.
In other areas, legal fights have erupted between Uber and its competitors. In San Francisco, competitor Diva Limousine sued Uber, claiming it has flouted labor laws to avoid paying its drivers.