It’s been a rough month for ride-hailing companies, and Seattle is about to put another bump in the road.
As Uber and Lyft grapple with new California regulations that could threaten their business models, Seattle Mayor Jenny Durkan is working on a plan to tax the industry and establish a minimum wage for drivers. The city says its goal is to ensure drivers are protected by the same labor standards that traditional employees enjoy while raising revenue for affordable housing and other objectives.
The minimum wage threshold and details of the tax have not been finalized, but a Lyft spokesperson said the company understands that the city is considering charging an additional per-ride fee. Uber and Lyft already pay 24 cents for every ride originating in Seattle under a city ordinance passed in 2014.
On Monday evening, Lyft and Durkan’s office traded letters about the proposal. The documents, obtained by GeekWire, include new details about legislation Durkan plans to introduce this year.
In addition to a minimum wage and tax, Durkan’s office says it wants to ensure drivers have paid time off, workers compensation, unemployment insurance, and other benefits.
“Cities like Seattle are becoming the new safety net, so we must ensure adequate wages and benefits for all workers,” the city’s letter says. “Seattle is a national leader in ensuring our workers are treated fairly.”
In its letter, Lyft says it supports a “driver earnings guarantee” that ensures all Seattle drivers earn above the city’s $16 minimum wage. Lyft says drivers earn more than $20 per hour. But the company is resistant to a tax that would only apply to ride-hailing companies. Lyft wants Durkan to consider a tax on all vehicles in Seattle.
“Lyft shares your concerns about the increasing challenge of affordability in Seattle,” the company said in its letter. “After housing, transportation costs are the second-largest household expense for most families. We believe that added taxes on rideshare penalizes the very groups you are seeking to help.”
Uber and Lyft both support congestion pricing, a method of mitigating traffic by tolling cars that drive through cities’ urban cores during peak hours. Durkan’s office is considering congestion pricing in addition to the new ride-hail regulations.
Uber’s position is similar to Lyft’s. The company is pushing for congestion pricing and a minimum wage while resisting new fees.
“We would have concerns with any proposal that raises prices for riders and decreases trips for drivers,” Uber spokesperson Nathan Hambley told GeekWire. “We support the creation of a guaranteed minimum earnings standard for drivers, and we believe that any ride-hail proposals should be developed based on broad input from the entire driver community in Seattle.”
Cities and states across the country are considering new rules for the gig economy. New York was the first city to adopt a minimum hourly rate for Uber and Lyft drivers, establishing a wage floor of $17.22 per hour after expenses. The companies have responded by locking drivers out of their apps during periods of low demand, according to Reuters.
Seattle’s new regulations are part of a broader push to extend worker protections to occupations that aren’t covered by traditional employer-employee relationships. Last year, Seattle became the first city in the U.S. to introduce a Domestic Workers Bill of Rights, coupled with a law that gives a minimum wage and rest breaks to thousands of nannies, housekeepers, gardeners, and other home service providers.
“As you know, many gig workers are considered independent contractors and as such, app-based businesses require cities and/or states to approach minimum compensation standards and benefits different than traditional employers,” the city’s letter to Lyft says.
Seattle was also the first city to pass an ordinance allowing Uber and Lyft drivers to unionize, but a federal court said that authority rests with states and the federal government.
The new rules in Seattle, a key ride-hail market where Uber and Lyft both have engineering centers, come at a turbulent time for the companies. Both went public this year, with a rough start on Wall Street. Uber reported a $5.2 billion quarterly loss in its last earnings report, sending its share price plummeting. Lyft fared a bit better but posted a loss of $644 million during the quarter. Analysts believe investors are apprehensive about the longevity of the ride-hailing business model and the regulatory uncertainty plaguing gig economy companies.
Last week, California state lawmakers approved a bill that makes it harder for companies like Uber and Lyft to classify their workers as independent contractors. The sponsors of the legislation intended it to apply to Uber and Lyft but the companies are fighting back.
Uber’s Chief Legal Officer Tony West said the company will not reclassify drivers as employees in response to the legislation. He believes Uber can convince the courts that “drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces.”
Uber and Lyft are funding a campaign to get an initiative on the California ballot that would effectively exempt them from the new bill.
Seattle is watching the California fight closely. The letter from Durkan’s office notes that Lyft spent “at least $30 million towards a referendum in California” and says the proposed Seattle regulations “will have little impact on drivers or your business model while creating a significant positive impact for drivers and our community.”