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👩⚖️ Uber Brings Case Against NYC TLC, Questioning Inflation Metrics Used For Driver Pay Increase
Uber believes the NYC TLC used misleading inflation calculations to unlawfully push through an abnormal driver pay increase. Do they have a point or are they illegally delaying a driver pay raise?
⏱️Summary
📊 Uber alleges the NYC Taxi & Limousine Commission (NYC TLC) used a volatile inflation index & manipulated other inflation data to pass higher than normal driver pay increases, set to go into effect next week.
🛑 Uber wants to stop a December 19th TLC app-based driver minimum pay raise, and instead revert back to previously agreed to standards around inflation adjustments to driver minimum pay calculations.
📉 Uber says passenger fares would need to rise by up to 10% and/or its NYC business would lose over $200 million per year.
🚕 NYC TLC believes its acting within its rights and is ready to defend against any and all allegations.
😠 Prominent driver advocacy groups, such as IDG and NYTWA, are angered by Uber’s actions
Uber has filed a legal petition in New York State Supreme Court against the New York City Taxi & Limousine (NYC TLC), over a driver minimum pay increase set to be implemented next week.
The 98 page legal action is filled with interesting details and minutiae. We encourage our readers to read the legal action in its entirety, but for those who can’t, the suit, essentially revolves around the following allegations.
The one-off use of a volatile inflation index & other distorted adjustments to inflation-related calculations, artificially inflated how much TLC driver minimum pay rates should be adjusted.
TLC is being uncooperative in helping Uber understand new inflation-adjustments made to the minimum driver pay calculation, rejecting alternatives & refusing to give sufficient time to appeal.
TLC’s abnormal minimum pay increases will cause irreversible damage to Uber’s ability to offer competitive prices to NYC passengers.
Uber estimates passenger fares would need to increase up to 10% AND/OR cause it lose more than $20 million per month (in NYC) if not offset by fare increases
Responding to Uber’s legal action, NYC Taxi & Limousine Commission Chair David Do stated:
“New York City leads the nation in protecting drivers, and this important rule reflects that reality…We are confident that we are well within our legal authority in implementing this important rule, and we are vigorously fighting this lawsuit.” - NYC TLC Chair & Commissioner David Do
Prominent TLC driver advocacy groups were also angered by Uber’s legal action:
How Does NYC TLC Adjust Driver Minimum Pay For Inflation (or Deflation)?
The chart above overviews how the TLC has (and plans to) “inflation adjust” the TLC driver minimum pay standard or TLC wage standards Uber & Lyft have to abide by in NYC. Uber and Lyft are the only high volume for-hire services (HVFHS), or companies that facilitate more than 10,000 daily trips, in NYC. Other traditional black car and livery bases are NOT subject to the TLC driver minimum pay standard.
The NYC TLC driver minimum pay standard, passed in early 2019, initially adjusted wages for annual inflation by:
Using a CPI Index (CPI-W) tied to urban wages in the NYC metro area
Comparing trailing annual / 12 month time periods
For 2020/21, no adjustment was made as some deflation (🤔 remember, oil prices went negative!) may have occurred and trip demand was severely impacted by the COVID pandemic, so it was essentially agreed that no inflation adjustment would be pushed through.
As you can tell by the charts below from Uber’s legal filing, the company is arguing the most recent inflation adjustment to the driver minimum pay standard:
Temporarily uses a different CPI Index (CPI-U) tied to transportation
“Cherry picked” data and time periods meant to distort normalized inflation data. For example, using an April to September 2022 average
“In September 2022, the Commission Proposed a Rule Using New Data and Calculations Designed to Maximize Per Mile and Per Minute Rates While Wildly Departing from the Prior Methodology”
“CPI-U Transportation is a particularly volatile index, driven in large part by wild fluctuations in retail gasoline prices.”
“The December 2022 Rate Adjustment Is Based on an Arbitrarily Cherry Picked Set of Months Designed to Yield a Substantial Rate Increase.”
- excerpts from Uber legal petition against NYC Taxi & Limousine Commission (Dec 9 2022)
This is what Uber’s legal action is essentially about. They are not arguing that the TLC driver minimum pay standard shouldn’t increase due to inflation, they are arguing inflation is being overstated, which leads to an abnormal increase. For example, gas prices have come down significantly they argue, but that is not captured and subjects Uber to all-time high retail gas price inflation, which no longer exists.
Some Thoughts
We are not qualified to guess probabilities around Uber’s success in stopping the December 19th, NYC Uber & Lyft driver pay proposals OR if their allegations of the Taxi & Limousine Commission will be validated by the legal system. What we are fairly confident in saying to our readership is, it is highly confusing to follow how and why certain inflation metrics are used in calculating TLC driver minimum pay standards. The TLC needs to do a much better job at explaining this, as to an outside observer the most recent period selection of data does seem odd at best and purposeful at worst.
Furthermore, the annual inflation-adjustment to the TLC driver minimum pay calculation shouldn’t need a degree to analyze and needs to be made simpler. For example, an index that does not include the easily measurable cost of NYC TLC commercial insurance (a specific & core expense) for TLC drivers and fleets, seems like an obvious oversight. Why are we using general insurance inflation metrics? Core expenses specific to NYC TLC drivers should be used, not generalized regional inflation indexes. It doesn’t make sense 🤷. Uber also does bring up a good point re. locking in artificially high commodity prices ⛽, as that is unfair to the Company because once you lock it in, it cannot be undone.
Our criticism for Uber is the optics of suing over a driver pay increase are horrible and the company needs to clearly, in simple English, explain why they are taking such action. Uber needs to understand if they do not explain their actions, especially in regards to blocking a pay increase, NYC TLC drivers will naturally react negatively 😠. What else were they expecting?
Our criticism for the NYC TLC is they need to start simplifying, through infographics or other media, how inflation adjustments to the driver minimum pay formula works. To say fares will increase by X.X% per minute and per mile based on regional CPI indexes is not easy for many drivers to convert into what that means for their earnings. In addition, the TLC and driver advocacy groups must also understand, as we’ve noted before, that increasing driver pay too aggressively can collapse trip demand.
Often the battle between Uber/Lyft, the TLC and drivers doesn’t incorporate how consumers may react to policies that increase how much they have to pay for trips. If you raise fares so high that everyone is priced out of a NYC for-hire trip, the minimum pay standard isn’t going to matter. Uber does make a valid point here. That being said, Uber could also increase driver pay by decreasing the commission it takes, so it’s also framing the issue without truly presenting all solutions.
“A rate increase of this magnitude may very likely result in higher rider fares…Those higher fares, in turn, will depress the number of rides requested through the Uber platform. Fewer requested rides translates into fewer opportunities for Drivers to earn fees. The Challenged Rule could very well have the effect of harming Driver earnings, undermining the purpose of these regulations.”
- excerpt from Uber legal petition against NYC Taxi & Limousine Commission (Dec 9 2022)
Uber is represented by law firm Paul, Weiss, Rifkind, Wharton & Garrison (a/k/a Paul, Weiss). It is unclear if the NYC Taxi & Limousine Commission has retained external legal advisers.
this site is pro uber, it is absolutely within the rights of the tlc to set it rules for licensing and rate criteria as it chooses , it must not allow Uber to undercut taxis by letting taxi rates go higher while Uber’s stay low and gain ridership
The bottom line
Uber hasn’t got a chance , uber is a for profit and cannot ask for government help in order to increase their profits
The courts will conclude that if uber doesnt like it they can leave and not ask the tlc for a license
“A rate increase of this magnitude may very likely result in higher rider fares…Those higher fares, in turn, will depress the number of rides requested through the Uber platform. Fewer requested rides translates into fewer opportunities for Drivers to earn fees. The Challenged Rule could very well have the effect of harming Driver earnings, undermining the purpose of these regulations.”
- excerpt from Uber legal petition against NYC Taxi & Limousine Commission (Dec 9 2022)
This is coming from the same company that used to slash rates across NYC and said you could make more money that way. Then they did upfront pricing and kept more of the increases in fares they passed on to their passengers. Uber knows exactly where the numbers are to shoo away price conscious passengers. They could care less how much drivers make. Their reputation is renowned for this around the world. Uber loves a driver that doesn’t understand basic business principles nor math.