Uber and Lyft have made profits by exploiting their ambiguous legal status to avoid paying workings billions in wages, but taxi unions recently sued the corporations for millions. Their victory is part of a broader wave of worker attacks on the gig economy.
There are as many ways to steal wages as there are to pay them. From unpaid overtime to unauthorized wage deductions, workers have long wizened up to the ingenious ways that bosses have developed to shortchange them. Wage theft, the general term for these practices, refers to the myriad legal, quasi-legal, and illegal ways in which employers seek to manipulate the formal boundary between paid and unpaid working hours.
Through a combination of union power and a protracted legal battle, the New York Taxi Workers Alliance (NYTWA) has clawed back $328 million in stolen wages from Uber and Lyft for over eighty thousand drivers throughout the city.
Founded in 1998, NYTWA, which has over twenty-one thousand members, began fighting this campaign in 2015. Their struggles took off slowly until they sued the state and won unemployment benefits for their drivers in 2016 and again in 2020. These previous legal victories, as well as the most recent fine against the two biggest platform ride-hailing companies, is indicative of a broader trend in the US labor movement.
Platform Payback
Platform work, exemplified by Uber, refers to a wide range of labor processes that are typically mediated through app-based tools. Wage theft is all too common in platform work, but across the globe workers have mounted legal battles from California to Amsterdam, Rajasthan to Brasília. One former driver and NYTWA member named Malang Gassama calculated that Uber and Lyft stole at least $25,000 from their pay packet. Theft on this scale was achieved by illegally deducting sales taxes and Black Car Fund fees (8.875 percent and 2.5 percent of the ride price, respectively) from drivers’ earnings rather than adding them to the passengers’ bill.
Uber claimed in its terms of service that only the platform’s commission fee would be subtracted from drivers’ fares, a blatant lie. It also claimed that drivers could charge passengers for tolls, taxes, and fees despite being provided no means to do so. Lyft employed a similar tactic, skimming an “administrative charge” of 11.4 percent — equivalent to the sales tax and Black Car Fund fees for New York drivers.
The New York cab drivers’ victory extends well beyond the sizable $328 million settlement. Workers’ wages typically include a range of entitlements, which platforms have avoided paying. Following the legal victory, this has also changed.
The new agreement means that for each thirty hours worked, drivers will earn one hour of sick pay up to a total of fifty-six hours a year; will also earn $15 per hour (or more, if the minimum wages exceed this) for every hour of training they undertake; will receive from Uber/Lyft a formal hiring notice that breaks down total earnings and the price a rider has paid; and will be entitled to multilingual chat support, an absolute right to appeal deactivations, and assistance for recovering stolen wages.
Not only are cabbies on the offensive, but delivery riders are also scoring big against the platforms. The New York City Department of Consumer and Worker Protection recently subpoenaed Uber Eats, Grubhub, DoorDash, and Relay, which are responsible for about 99 percent of app deliveries in the city, The new “Minimum Pay Rate for App-Based Restaurant Delivery Workers” is a direct result of organizing by Los Deliveristas Unidos, with help from the Worker Justice Center of New York.
A study found that over half of workers’ wages were paid from customer tips. Riders earn an average of $14.18 per hour with tips and $7.09 per hour without. Their hourly expenses are $3.06, reducing their take home pay to $11.12 per hour with tips and $4.03 per hour without tips. For a typical food order of $33.09, $18.33 goes to the restaurant, $4.11 to the worker in tips, $2.11 to the state in taxes, $3.06 in fees charged to the consumer by the app, and $5.48 in commission to the app (a share of the order subtotal). Platform revenue is $8.54, with $4.32 paid to the worker and the platform taking $4.22. This is poverty pay.
The new pay model approximates what these platform workers would be paid were they to be legally classified as employees. This includes pay of $15 an hour, plus up to fifty-six hours of paid leave per year under the New York City Paid Safe and Sick Leave Law, unemployment insurance, workers’ compensation insurance, employer coverage of half the mandatory 15.3 percent Medicare and Social Security contribution, and shared liability for failure to pay.
Since the workers aren’t employees, the proposed hourly wage is inclusive of wages and benefits, at $21.09 per hour. The platforms, unsurprisingly, challenged this in court by suing the city, but were recently defeated. The state is now phasing this agreement in.
In and Against the State
These two victories are indicative of a broader trend in the US labor movement, as workers organize to not only fight back at their workplaces through historic strike action like that of the United Auto Workers, but also changes to labor laws that are unfit for purpose. As it currently stands, state and federal legislation essentially incentivize exploitation because it is “cheaper to violate the law, even if you get caught.”
Wage theft costs workers as much as $50 billion a year. One study of minimum wage violations suggests these thefts alone surpass $15 billion annually, exceeding the value of all property crimes in the United States each year. And yet, the US Department of Labor, Wage and Hour Division (WHD) only recovered $114,677,814 in back pay on behalf of 98,384 workers in 2022.
Part of this is due to the fact that the WHD continues to face severe resource constraints. In 1948, the WHD employed one investigator for every 22,600 workers; today, it’s one for every 135,000. This decline in investigator-to-worker ratio has hindered effective labor law enforcement. Between 1980 and 2015, cases investigated dropped by 63 percent. In 2015, WHD employed fewer than one thousand investigators — similar to levels from seventy years earlier — despite today’s workforce being nearly six times larger.
Anyone paying attention to wage theft and labor law in the United States can tell that the existing federal legislation is not fit for purpose. The 1938 Fair Labor Standards Act (FLSA) has had numerous amendments, but very little has changed in relation to wage protections. It also only covers minimum-wage violations for employees in companies with a turnover of $500,000 or more. Yet, most workers earn above the federal minimum wage and an increasing number are misclassified as “independent contractors,” especially in the platform economy. Studies suggest that between 10 and 20 percent of employers have deliberately misclassified workers in order to evade tax and regulatory obligations.
This dire situation has driven workers to take aim at improving laws to create deterrents for employers, especially at the state level, where reforms are more winnable. Many such campaigns are coordinated by “worker centers,” which have grown considerably, from only five in 1992 to over two hundred in 2013 and more since then.
New York State has been at the forefront of this legislative shift. In 2011, New York passed the Wage Theft Prevention Act. The act was then amended in 2014 to extend protections and the power of enforcement, increase employer and contractor liabilities, give more written information to workers, and significantly increase penalties for noncompliance. Failure to provide wage statements and employment terms to workers results in fines of $50 a day up to $5,000 per worker. Employers are now liable for liquidated damages up to 100 percent of the unpaid wages, plus up to $3,000 for other repeated violations, a $10,000 fine for noncompliance, 15 percent of damages for failure to pay on time, and up to a $20,000 fine if an employer has taken any retaliatory action against the worker. And this is just at the state level.
At the federal level, the Wage Theft Prevent and Wage Recovery Act has been proposed to the FSLA, though it has not been passed by Congress yet. The bill contains many changes, legally compelling employers: to pay back the full amount of wages owed, rather than wages at the federal minimum rate ($7.25); to pay damages of triple the wages owed plus interest and quadruple if the employer engaged in any retaliatory action against workers; to provide a written contract (20 percent of workers do not have this), with fines for violation; a fine of up to $22,030 for each employee for wage and overtime violations; a civil penalty of $1,000 per employee for each records violation and up to $5,000 for each repeated violation; changes the “opt in” requirement to “opt out” in collective actions; and a range of others.
Battles over wages are the front line of a working-class politics. Yet this is a difficult battle to fight, because bosses have a seemingly endless repertoire of tactics obscuring the extent of wage theft. The law is the fulcrum that helps determine how value is distributed between capital and labor. Unions act as omnipresent inspectors and enforcers at the workplace, protecting individual workers from any potential employer hostilities through the power of collective voice, solidarity, and legal action. Although these victories have been won through legal contests, they were ultimately dependent on the strength of organized labor, which has been able to force companies to pay workers what they are owed.
This post was originally published on Jacobin.
