Lyft Loses Lawsuit Against Minimum Wage Rule For Drivers

A state judge has tossed out Lyft's lawsuit against New York City's minimum wage rules for app-based drivers. The ruling comes days after Lyft and Uber announced that they were not hiring new drivers to work in the city.

The new minimum wage law went into effect in January, and requires that the drivers be paid a minimum of $17.22/hour after expenses. According to the city, 85 percent of for-hire vehicle drivers were making less than the city's $15/hour minimum wage before the law went into effect.

That figure is based on a formula, applied per each trip, that accounts for something called a "company utilization rate," which is defined by how much time a company's drivers spend on duty, carrying customers.

"The companies with lower utilization rates would be required to pay higher driver compensation per trip to offset the time their drivers are waiting for a dispatch," the Taxi and Limousine Commission rules explain. So for a 7.5 mile, 30-minute trip, a company with a 58 percent utilization rate would pay the driver $22.34, while a company with a 70 percent utilization rate would have to pay $18.51. Drivers who pick up shared rides are entitled to a "shared ride bonus," which in theory encourages the companies to utilize more shared rides with fewer drivers.

Lyft had argued that they opposed the formula, not the minimum wage law itself, because it favored Uber, a company with a higher utilization rate (UR).

Judge Andrea Masley pointed out in her decision that Via, not Uber, has the highest UR. "It is possible for a smaller company to beat Uber in the UR category, using a business model focused exclusively on shared rides," Masley writes.

Lyft, which bought Citi Bike last summer, had also argued that the formula meant that it would encourage drivers to work fewer hours. "Indeed, that is the TLC's goal," Judge Masley writes. "For drivers to be deployed efficiency instead of the industry model which relies on 'persistent excess capacity' of drivers which allows FHVs to compete with each other for passengers by providing short wait times."

In a statement, a Lyft spokesperson said, “The TLC's rules have hurt earning opportunities for drivers, and will diminish competition that benefits drivers and riders. We will continue fighting to provide the best experience for drivers and riders in New York City.”

Lyft declined to comment on whether or not they'd appeal the ruling.

Mayor Bill de Blasio called the decision "a victory for the hardworking drivers of New York City, who have been taken advantage of by these companies for far too long."

In a statement, Jim Conigliaro Jr., the founder of the Independent Drivers Guild, which represents 70,000 FHV drivers in the city, said, "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."

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