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Lyft Claims that NYC’s New Driver Minimum Wage Makes It Even Harder to Compete with Uber

Ride-sharing companies Lyft and Juno filed lawsuits against New York City’s Taxi and Limousine Commission on Wednesday, saying that new driver wage rules make it even harder for them to compete with Uber.

New York City passed the nation’s first minimum wage for ride-sharing drivers in December, guaranteeing a minimum wage of at least $17.22 per hour after expenses starting this Friday. Ahead of the vote, advocates argued that ride-sharing drivers in New York City earned an average of $11.90 an hour after expenses, well below the city’s minimum wage of $15 an hour. The taxi commission estimated that the rule will benefit 96% of the city’s ride-hailing drivers to the tune of nearly $10,000 annually.

Drivers will be guaranteed the pay rate even during slow periods, incentivizing companies to keep drivers busy, the Wall Street Journal reports. But companies with lower utilization rates, like Lyft and Juno, would be at a disadvantage against Uber because they’ll have to pay drivers more out of pocket to make up the difference, which will force them to raise fares. Lyft said in its lawsuit that increased fares could lead to even lower utilization, compounding the problem. All ride-sharing companies continue to subsidize trips via promotions in their race for market share.

The explosion of ride-hail vehicles in New York City has been a source of strife for policymakers, disability advocates, taxi medallion holders and driver groups. They complain that Uber and Lyft have come to dominate the market without having to follow the rules that apply to taxis. A glut of drivers has outstripped demand, driving down wages and increasing traffic congestion. WSJ reports the competition for NYC fares includes 13,500 taxis, almost 30,000 liveries and black cars and about 80,000 ride-sharing vehicles.

The city’s ruling on for-hire vehicle driver wages said Uber, Lyft, Gett/Juno and Via account for 75% of the ride-sharing business in New York City, with the overall trips booming from 42 million in 2015 to nearly 159 million trips in 2017.

Uber has not filed a lawsuit, but the controversy could put a pall on its upcoming IPO as well as Lyft’s. A hearing regarding the lawsuits is set for March 18.

The Independent Drivers Guild said in a statement if Uber joins the lawsuits, it would be “a nightmare for drivers who are desperately awaiting this raise.” If Juno and Lyft refuse to pay the new minimum wage before the case is decided, they will be required to put the additional earnings aside in escrow accounts for drivers. If the city wins, drivers will get the back pay, but if Juno and Lyft prevail, they will keep the money.

“This is an indefensible attack on workers by the billion-dollar corporations that profit from their labor,” Independent Drivers Guild founder Jim Conigliaro Jr. said. “Lyft and the gang should be ashamed that while their executives and investors are millionaires, their drivers, who do all the work, take home less than minimum wage and are even taking their own lives out of desperation.”

“Drivers are at a breaking point,” the New York Taxi Workers Alliance Executive Director Bhairavi Desai said in a statement. “Maybe it’s time for us to start talking about going on strike.”