Tens of thousands of drivers are eligible for a refund, after company admits it took too much commission from drivers’ fares for two-and-a-half years
Uber will pay New York City drivers tens of millions of dollars after admitting to underpaying them for two-and-a-half years by taking a larger cut of drivers’ fares than it was entitled.
Under the terms of service the ride-hailing company put in place in November 2014, Uber was supposed to take its percentage of the commission – ranging between 20 and 25% – after deducting sales tax and a local fee to fund benefits for injured drivers. Instead, the company calculated its commission on the gross fare, resulting in more money for Uber and less for drivers.
The average payout-per-driver will be about $900, an Uber spokesperson said, and drivers will see their fares calculated correctly going forward. With tens of thousands of drivers eligible for a refund, the company will be on the hook for tens of millions of dollars.
An Uber spokesperson said that the company discovered the mistake in recent weeks, as it was preparing to roll out a new pricing scheme.
However, questions about Uber’s calculation of New York City commissions were raised nearly a year ago in a class action lawsuit filed by the New York Taxi Workers Alliance (NYTWA). The suit, which was filed in federal court in New York in June 2016, alleged that Uber’s deduction of sales tax and the injured driver fee after the commission was calculated violated the terms of service and amounted to wage “theft”, as Bloomberg BNA reported at the time.
This is the second time in recent months that Uber has admitted to underpaying US drivers. In March, the company paid refunds to UberBlack drivers in Philadelphia after charging them an extra 5% in commission for about 18 months. In January, Uber agreed to pay $20m to settle allegations by the Federal Trade Commission that it had tricked drivers with false promises of higher earnings.
Uber has been accused of shortchanging drivers in numerous lawsuits, including a recent suit that alleges Uber’s “upfront” pricing scheme is designed to “defraud drivers”.
“We are committed to paying every driver every penny they are owed – plus interest – as quickly as possible,” Rachel Holt, Uber’s regional general manager for the US and Canada, said in a statement. “We are working hard to regain driver trust, and that means being transparent, sticking to our word, and making the Uber experience better from end to end.”
Bhairavi Desai, the executive director of the NYTWA, said that while she welcomed Uber’s “progress”, her organization believes that it is unlawful for Uber to take the sales tax and fee from the driver’s fare in the first place.
“Uber hasn’t just wrongly calculated its commission, it has been unlawfully taking the cost of sales tax and an injured worker surcharge right out of driver pay as opposed to charging it on top of the fare as the law requires,” Desai said in a statement.
“This payout is an attempt by Uber to pull a fast one to avoid court oversight and shortchange drivers in the process,” she added. “Nice try. We’ll see you in court to win back all of the money drivers are owed, includ[ing] up to double damages.”
The Independent Drivers Guild, an affiliate of the Machinists union that represents ride-hail drivers in New York, called for city regulators to launch an investigation into payment practices by ride-hail companies.
“Uber’s theft of drivers’ hard-earned wages is the latest in a long history of underhanded tactics in this industry,” said Jim Conigliaro Jr, the founder of the Independent Drivers Guild, in a statement. “This is exactly why we have been calling for industry-wide pay protections to stop the exploitation of New York’s drivers once and for all.”
Uber has long faced criticism over its treatment of drivers, which it considers independent contractors rather than employees. The classification of drivers as contractors allows Uber to avoid paying minimum wage or providing benefits such as workers’ compensation.
In March, a video of Travis Kalanick berating an Uber driver went viral, prompting the CEO to apologize and seek “leadership help”. In the video, Kalanick responded to his Uber driver raising concerns about his livelihood by saying: “Some people don’t like to take responsibility for their own shit. They blame everything in their life on somebody else.”
The embattled CEO has faced a slew of scandals this year, including allegations of widespread sexual harassment and gender discrimination and a costly intellectual property battle with Alphabet. In March, the New York Times reported that about 500,000 riders have deleted their accounts in protest of the company’s practices.
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