The car service apps don't like how much the city says they'll have to pay their drivers
The people of Minneapolis, Minnesota may soon be without the services of Uber $UBER and Lyft $LYFT, the two so-called “rideshare” car service companies that connect users of the companies’ apps with for-hire drivers, due to a dispute with the city’s government regarding driver pay. The measure was supposed to go into effect May 1, but the council has pushed that date back to July 1. But if still goes into effect as-is, the companies say they will pull out of the city.
What is going on, and how did things get here? Here’s what you need to know.
Drivers for the two services have long asked for greater regulation of the rideshare industry in order to secure more protections and higher pay.
In January 2023, members of the Minneapolis city council introduced a bill that would remove Uber and Lyft’s exemption from the city’s $15.57 per hour minimum wage. Legislation co-author Robin Wonsley said that the companies’ drivers, who are considered independent contractors instead of employees, were being exploited with low pay that didn’t cover their expenses.
“Multibillion dollar corporations will always see workers as expendable,” she said at an annunciatory press conference, according to the Minnesota Reformer. “Minneapolis council members are fighting back on behalf of our workers.”
Using a tried-and-true method to get what they want, Lyft and Uber said that they would pull out of Minneapolis if they had to guarantee a minimum wage for their drivers. When the bill passed in August 2023, the companies said they would leave when it went into effect.
One talking point they’ve used to rally opposition to the measure is that higher wages for drivers would increase costs and lower demand from riders, which in turn would decrease the amount of service available.
“I believed we could craft a policy that both leads in advocacy of worker’s rights and maintains service for those who greatly depend on this for their day-to-day needs; sadly, this proposal did not accomplish that,” said City Council Vice President Linea Palmisano, who opposes the ordinance, ahead of the vote, according to the non-profit newsroom MinnPost.
Minneapolis Mayor Jacob Frey vetoed the legislation in March, asking the council to wait on a state study of the driver pay issue to see if there could be another way of tackling the problem.
“I’ve been telling the council for six months now to wait for the data to come out,” he said at the time, according to the Minneapolis Star Tribune.
Governor Tim Walz had commissioned the study by the Minnesota Department of Labor and Industry after vetoing a statewide bill that would have also improved driver pay. It came out the same day as Frey’s veto. It found that the median driver pay in Minneapolis and nearby St. Paul was $13.63 after expenses.
“The analysis of company data indicates that gross hourly earnings per passenger time for drivers in the seven-county Twin Cities metro area averaged $52.94 in 2022,” the report says. “But drivers had a passenger in the car only 58 percent of the time they were logged into the app and available for a dispatch.”
Maintaining a vehicle, fueling it, and other costs make those earnings go way down. The government also found that drivers in the state were three times more likely than Minnesota workers overall to require assistance like food stamps or Medicaid insurance coverage.
In a blog post, Uber quibbled with the state’s estimated costs of owning, cleaning, and insuring a car, as well as the cost of obtaining a cell phone that would be necessary to work as a driver for the service, calling them “exaggerated and based on a flawed approach.”
The council overrode the veto anyway, maintaining their prior position. The ordinance was supposed to go into effect May 1, but after council member Andrea Jenkins and a swing bloc of other members pushed the body to reconsider the measure Thursday, CBS reports that the implementation date will now be July 1.
There are a number of possibilities for what happens next.
There’s a possibility that Minnesota’s state government could pass a law overriding the Minneapolis ordinance. Texas’s state government did so after city council’s in Austin and Houston mandated fingerprinting and background checks for drivers. In Minnesota, state legislators opened the door to reconfiguring the bill that Gov. Walz vetoed before commissioning the state study. The state study suggested that a driver pay rate of $0.89 per mile and $0.49 per minute could net out to a $15.57 effective minimum wage. The city ordinance would impose $1.40 per mile and $0.51 per minute, plus a $5-per-trip minimum payment.
Another possibility is that the city council itself changes its approach. The Star Tribune reports that Jenkins has proposed a compromise rate of $1.21 per mile and $0.51 a minute. Minnesota Public Radio reports that other council members are waiting to see if the state legislature takes action before July.
Both companies told Quartz that they would stay if they had to pay the state rate, but not if they had to pay the city rate. “Despite the study’s inflated rates, we will support a compromise at the study’s proposed rates,” an Uber representative told Quartz.
For now, Uber and Lyft are still planning to leave the city. But even after the ordinance goes into effect May 1 as it currently stands to, the car services anticipate that they will continue lobbying for a legal framework that they like better.
“Barring any changes to the ordinance, we will be forced to shut down operations in Minneapolis beginning on its effective date,” a Lyft representative wrote in an email. “However, it’s too early to speculate what would happen beyond that, other than we would keep trying to find a solution.”
Minneapolis city government is preparing for the possibility that both companies will leave. It is offering $150,000 in grants to local businesses that might figure out alternatives to the two companies. Further, drivers for Uber and Lyft are working on establishing a collectively run app that would also fulfill a similar role in the city’s transportation network.
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