Uber has to open up its wallet and pay an estimated $45 million to its drivers in New York City, after it miscalculated drivers’ share of fares for more than two and a half years.
Since Nov. 2014, Uber has been deducting its commission (reportedly around 25%) on each ride before applying sales tax.
So if the total value of a fare was $20, Uber would help itself to $5. Assuming $1.60 in tax, that left the driver with $13.40.
Problem is, the 2014 agreement with drivers said that Uber was supposed to be taking this cut after taxes. That means, using the above example, Uber should have only collected $4.60 for itself, leaving $13.80 for the driver.
Not much, but it adds up. In fact, it’s expected that payouts will average around $900 per driver. That could add up to $45 million, notes the Wall Street Journal.
Drivers who are currently driving for the service or who have taken at least one trip in the last 90 days don’t need to do anything to receive any back pay that’s due. Drivers who haven’t worked recently will be emailed a form confirming their bank account information. The company did not specify whether this form would be online or printed and mailed in.
On the Uberpeople.net driver forums, users who received an email about their back pay were justifiably suspicious that the message might be a phishing attempt or some other kind of scam.
“Has anyone gone to Uber’s office to find out if it’s a scam by someone?” one driver wrote. “Seems like a scam.”
The New York Taxi Workers Alliance included this specific under-payment issue in a class action filed against Uber, among other issues related to drivers being misclassified as independent contractors while the company treats them as employees.
“While we welcome progress in Uber acknowledging its unlawful deductions, make no mistake: the full amount that Uber owes to drivers is much more than what it is now claiming.” the NYTWA claimed in a statement issued today.
The group claims that Uber has also been deducting sales tax and Black Car Fund surcharges from drivers’ share of each fare, which would increase the total back pay significantly. We have asked Uber for their take on these specific allegations, and will update this post when we hear back.
Other groups that represent New York’s ride-hailing app drivers had harsh words about the payout announcement.
“Uber has time and time again demonstrated complete disregard for the welfare of its drivers and the news of this egregious and suspicious error comes as no surprise to the men and women who work for the company,” President Michael Cordiello of Amalgamated Transit Union Local 1181-1061, which represents 16,000 Uber drivers, said in a statement.
“It is noteworthy that Uber only took action to right this wrong after regulators made clear they would be putting the company’s payment practices under the microscope,” Executive Director Ryan Price of the Independent Drivers Guild, which receives funding from Uber and represents 50,000 drivers, said in that group’s statement.
Price was referring to the Taxi and Limousine Commission’s plans to require in-app tipping for all mobile ride-hailing services, forcing Uber to offer it as an option.
Uber settled a similar under-payment situation with its Philadelphia drivers in March of this year. Drivers were charged 25% commission when a drivers’ agreement in place since Nov. 2014 put commissions at 20%, and 1,300 drivers shared $4.3 million in back payments.
In a curious coincidence, the announcement came shortly before a drivers’ group in Philly announced that it would affiliate with a union that’s part of Communication Workers of America.