[HN Gopher] Uber, Lyft pay $328M for "cheating drivers" out of e...
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Uber, Lyft pay $328M for "cheating drivers" out of earnings, NY
says
Author : rntn
Score : 154 points
Date : 2023-11-02 18:13 UTC (4 hours ago)
(HTM) web link (arstechnica.com)
(TXT) w3m dump (arstechnica.com)
| ccooffee wrote:
| The terms of the settlement[0-pdf] are kind of interesting.
|
| Drivers in New York City proper are entitled to $17/hr for sick
| pay. If I'm reading it correctly, that is also the minimum wage
| that drivers must be compensated at.
|
| However, drivers who begin trips in New York State _but not
| inside NYC_ are guaranteed pay at $26/hr [see paragraph 30 of
| settlement]. If I'm reading this right, drivers in Buffalo,
| Syracuse, Utica, Albany, etc. are all going to reap significantly
| higher pay from Uber while living in much lower cost-of-living
| areas.
|
| [0-pdf] https://ag.ny.gov/sites/default/files/settlements-
| agreements...
| dastbe wrote:
| You're reading it wrong, you need to look at
| https://www.nyc.gov/site/tlc/about/driver-pay-rates.page for
| the pay rates.
|
| just looking at the per minute numbers, if you worked 60
| minutes of P2+P3 time you would make 33.84, which isn't even
| considering the per-mile pay.
| sschueller wrote:
| Now pay the almost half a billion Swiss Francs you owe in unpaid
| wages/retirement and sick leave to the Swiss drivers.
| toomuchtodo wrote:
| Is anything needed to assist the Swiss in pursuing this more
| aggresively?
| crazygringo wrote:
| In terms of illegally deducting sales tax and black car fund fees
| from drivers' pay... I genuinely don't understand why a large
| corporation ever messes up like this in the first place.
|
| It surely can't be legal incompetence -- a large company like
| this has lawyers to review these things, and who know the
| contracts they've created.
|
| But it's hard to imagine Uber/Lyft thinking they're going to get
| away with it -- obviously it's going to eventually turn into a
| legal suit and they're going to lose.
|
| I really don't get it. Often these kinds of situations happen
| when the law is ambiguous or unclear, and the company it taking a
| calculated risk that the courts would rule in their favor. But
| this doesn't seem to be that, unless I'm missing something?
| Scoundreller wrote:
| Maybe it's like Google handing back all the money it made in
| its early years from advertising gray/black-market pharmacies
| and prescribing mills.
|
| They needed the money then, and had no problem paying it back
| in 2011, many years later. And if they went bankrupt, well, no
| way to pay back anyway.
|
| Classic "heads we win, tails you lose" situation.
|
| Cheaper source of capital than venture capital. And no hit to
| the cap table.
|
| https://theguardian.com/technology/2011/aug/24/google-settle...
| sitkack wrote:
| It is fraudulent and stealing, I would think there would be
| criminal charges against the perpetrators.
| Nextgrid wrote:
| Fraud/theft only happens to the common man. When a company
| does it it's either good business acumen or (if they got
| caught) a "technical glitch affecting a small percentage of
| users".
|
| See also: Comcast mis-billing customers.
| plagiarist wrote:
| The perpetrators are corporations, those are only people when
| it is convenient for the ruling class for them to be people.
| techsupporter wrote:
| Sometimes it is incompetence; someone flags a certain thing as
| the wrong classification and it comes out of the wrong bucket.
|
| But I think it's more than that, here. The settlement covers
| almost the height of when Uber and Lyft were desperately trying
| to undercut everyone else in the market--taxis, public transit,
| taking a bike, scooter-share, anything--and keeping these out
| of view of the customer helps a lot in that effort by making
| the price look lower.
|
| > The Uber settlement fund is for people who "drove for Uber
| between November 10, 2014, and May 22, 2017, and had deductions
| taken for New York sales tax and Black Car Fund fees." The Lyft
| fund is for people who drove for Lyft between October 11, 2015,
| and July 31, 2017, and had the same kinds of deductions.
|
| By my mind, it's in the same vein as businesses (everyone from
| Comcast to that small restaurant on the corner) that list one
| price in big numbers but tack on surcharges at the end.
| Obscuring the true price should be more illegal than it is.
| tialaramex wrote:
| The trouble is that Americans seem to be onboard with not
| adding taxes, and so that's your slippery slope right there.
| In Europe regulators are like "If the headline price is EUR10
| but actually nobody pays EUR10, that headline price is wrong
| and must be fixed" and they're including taxes in that.
|
| In IT there was a UK battle years back when magazines were
| still a big deal about whether you could advertise prices
| without VAT. All these companies charge retail customers VAT
| of course, but in effect the way VAT works the price is
| without VAT if you are yourself a business that claims VAT
| refunds. So the argument in some of these magazines was,
| look, you can buy this magazine as a hobbyist, you can buy
| this Western Digital 200MB hard disk from an advertiser as a
| consumer, and you'd pay VAT. But actually they advertise in
| our magazine because many readers work in IT, so while they
| might get 10 hobbyist orders for that 200MB disk, they also
| get one or two business orders for a hundred drives, and
| those customers don't pay VAT so why must we show VAT prices
| ?
| Amezarak wrote:
| I've never been sympathetic to the American argument that
| we want people to constantly feel how much they're paying
| in taxes, but VAT might be a good point in their favor. VAT
| is very high (20-25% in many countries) and horrifically
| regressive. It would be a nonstarter for even people like
| me, who support raising taxes in the US, because of that.
| Mechanical9 wrote:
| VAT has other benefits though that would fix a lot of
| weirdness that traditional sales tax has. Taxing the
| value added makes a lot more sense than taxing the
| "sale", IMO. It distributes the tax fairly among all
| businesses in the supply chain and eliminates double-
| taxing that can happen when the local mom and pop shop
| resells soda from Sam's Club.
| Amezarak wrote:
| There is of course no national US sales tax and every
| state does it differently - some even have no sales tax
| at all - but generally speaking, it's already structured
| to prevent double-taxing situations like the one you're
| describing (plus groceries are usually exempt anyway in
| both cases.)
|
| The issue is VAT is astronomical compared to the US and
| hits the poor hardest because consumption taxes are
| regressive. If it were more apparent on on pricing how
| much was tax, I could see people who make that argument
| here having a point. I find it hard to believe Europeans
| would not blink at seeing such a regressive tax day after
| day.
| lozenge wrote:
| It doesn't really matter how regressive an individual tax
| is as it's part of a larger system.
|
| You don't just pay regressive VAT, you also benefit from
| progressive income tax, progressive education and health
| policies, etc.
| gustavus wrote:
| > The trouble is that Americans seem to be onboard with not
| adding taxes, and so that's your slippery slope right
| there. In Europe regulators are like "If the headline price
| is EUR10 but actually nobody pays EUR10, that headline
| price is wrong and must be fixed" and they're including
| taxes in that.
|
| Again the problem is that the taxes are different in every
| municipality and state which presents a calculating
| nightmare. I mean you do the math on 0.0625% of $17.23.
| It's super difficult to do and can change frequently anyone
| that wants to run a business in more than one or two
| municipalities would have to hire someone full time. Plus
| there's the extra headache of running a sale, etc.
|
| It is more helpful to think of the US as 50 different
| states that have a common federal government rather than a
| single united whole.
| RF_Savage wrote:
| If they can charge it, why can't they mark it?
| dboreham wrote:
| They can and do (airline tickets for example). Most hotel
| web sites will also give you an "all-in" price, although
| they retain the dark patterns of displaying the ex-tax
| rate by default, and slipping in a "resort fee" when you
| check in.
| brendoelfrendo wrote:
| Gee, if only ride share apps had access to both your
| starting and ending locations so that they could
| accurately assess taxes and fees. This is not an
| intractable problem when your product is a software
| platform that can look at the location data and do the
| math for you.
|
| > anyone that wants to run a business in more than one or
| two municipalities would have to hire someone full time.
|
| Yes, when you're trying to operate a nation-wide
| business, you should generally hire accountants and
| lawyers, or at least consult with them and take their
| good advice.
| Mechanical9 wrote:
| Americans also don't know how much their taxes are.
| Retailers often use taxes to hide extra charges by bundling
| both into a "taxes and fees" section, which if enumerable
| always includes more fees than taxes. Uber Eats, GrubHub,
| etc all do this.
| jzb wrote:
| "obviously it's going to eventually turn into a legal suit and
| they're going to lose."
|
| I'm not convinced that's obvious. I'm guessing for every story
| of "large corporation held to account for breaking wage laws /
| committing wage theft" there are 5 stories of them _not_ being
| held to account. (I could be wrong - it could be 2 stories, it
| could be 10... but I 'm willing to bet they get away with it
| more than they don't.)
|
| Also - is the amount they pay out more than or even equal to
| what they grabbed, or less? If I read the settlement correctly
| this means that there won't be a full investigation, e.g. - a
| deep dive to find out how much money they actually skimmed.
| This is a settlement so I don't think they ever actually got an
| absolute tally of how much money was in question.
|
| I'd also consider that the _corporation_ may face consequences
| but the individuals who green lit the decisions are unlikely to
| suffer. In fact, by the time the bill comes due, legally, isn
| 't there a good chance the folks have already updated their
| resume with glowing current numbers and moved on to another
| company? The time period in question was 2014-2017. How many
| people are even still at those companies from that time period
| that made these decisions?
| dogsgobork wrote:
| If they do something illegal and don't get caught they win. If
| they get caught, but the fine is less than they made breaking
| the law, they win. If they have to pay back the same amount of
| money, but can pay it years later, they win. If the only
| punishment for bank robbery were paying the bank back if you
| got caught, we'd probably see a lot more bank robberies.
| FireBeyond wrote:
| > If the only punishment for bank robbery were paying the
| bank back if you got caught
|
| ... and on a schedule mostly convenient for you...
| polygamous_bat wrote:
| In the US corporations are people with some extra
| provisions for robberies.
| brandall10 wrote:
| The Pinto Memo is a great exposition of this... $140M cost to
| retrofit a modification to the fuel system against a $50M
| "benefit to society" (ie. legal costs) saving 180 deaths and
| 180 serious injuries per annum.
| rqtwteye wrote:
| Same for US hospitals and health insurance. They constantly
| make "mistakes" in their favor and the worst thing that can
| happen is that they have to pay what they are required to pay
| anyways.
| holoduke wrote:
| The worse thing of all is that these companies dont care for
| its drivers. On what kind of earth do we live. Hopefully these
| kind of companies will be seen as pure evil in history books in
| 100 years from now.
| wavemode wrote:
| The way it would usually go is that one or more higher-ups
| whose job it was to optimize pricing decided to get "creative"
| with the law. People who eventually noticed that things seemed
| shady/irregular probably spoke up but their concerns were
| dismissed (with the same reasoning you mention - "the lawyers
| probably looked at all of this - of course it must be perfectly
| legal!") and so they stopped wasting their breath.
|
| (Probably also on some level Lyft felt like they needed to
| follow suit in order to compete on price in their most populous
| and important customer region.)
|
| Keep in mind that the lawyers aren't software engineers - if
| you tell legal that you're doing A but in the code you're
| actually doing B, they will tell you "A is perfectly legal,
| keep doing that." They're not going to review the code for
| themselves.
| solardev wrote:
| To these companies, the law is just another cost of doing
| business to be accounted for and amortized whenever possible.
| If they can feign success in the early years, they get a bunch
| of investor dollars that they can then use to pay off or bribe
| their way out of legal situations later, when they're much
| bigger.
|
| After all, they did get away with it, didn't they? 290 million
| is like 4% of one quarter's revenue for them, to pay back 6
| years of operating illegally. Seems like a slap on the wrist if
| there ever was one.
| akavi wrote:
| Barring evidence to the contrary (internal emails/discussion),
| I _definitely_ would assume mistake over malice.
|
| I've worked in Monetization at 3 SaaS cos (admittedly all
| smaller than Uber, O(100-1000) employees), and at all of them
| I've seen mistakes of a similar proportion of revenue (~1%)
| made in both directions (overcharging and undercharging
| customers) in violation of the letter of our contracts with
| absolutely zero intent or malice.
|
| Wage law adds _several_ additional layers of complexity beyond
| that.
| dastbe wrote:
| at least one cloud provider service over (and sometimes
| under) charged customers for several years on a particular
| product due to a misinterpretation of some complex rules. it
| happens at all orders of magnitude.
| plagiarist wrote:
| This is a wage theft. From the sheer scale of wage theft going
| on in this country, yes, they do think they will get away with
| it. And the punishment if they don't is inconsequential.
| wahnfrieden wrote:
| Isn't wage theft the most common and largest form of theft? The
| reputation of business in the US precedes itself
|
| Odd that when this common thievery impacting the hardest
| working among us shows up among business inclined folks the
| reaction is oh it must have been in good faith, must be some
| kind of mistake. When lower stakes lower impact shoplifting
| occurs, people are immediately discussing punishments and
| outcries for jettisoning groups of people to preserve our
| social fabric.
| gen220 wrote:
| It's a loan to the Uber at t=x, issued by Uber at t=y+x. The
| interest on the loan is legal fees and penalties. When the
| value of the money at t=x is greater than the predicted cost of
| interest, and you aren't bound by ethical scruples, you take
| the cash.
|
| Sure, a couple drivers might have needed to take out predatory
| loans to cover their stolen income, but hey at least the
| company still exists today to fund their future, unbridled
| income! They should be thankful, actually.
|
| Yep, it is the mental gymnastics of might-makes-right.
| varispeed wrote:
| Here the UK government addressed this issue by marrying worst
| elements of employment and self-employment. With the revised IR35
| rules, a company can bring someone on board as a "deemed
| employee". This means they have to pay the individual through a
| fee payer, that deducts employee and employer taxes. However,
| even though these workers are taxed like employees, they are
| officially self-employed and therefore do not receive the usual
| employment rights and benefits. So things like minimum wage don't
| apply.
| Night_Thastus wrote:
| It's only a matter of time before Uber and Lyft cease to exist.
| Lyft lost what, $1.5 billion last year? The trend isn't towards
| profitability, and they have had plenty of years to work out the
| kinks and figure out structural issues.
|
| I've said it before, and I'll say it again - if you were to pay
| for _real_ cost of overhead and to pay the driver, you 'd end up
| with a price that no customer is willing to pay.
|
| Uber has briefly entered profitability, but only by absolutely
| shredding any pay to their drivers, who will jump ship
| eventually.
|
| The reality is that once investors wake up and close their
| pockets, these companies vanish into dust. It's either that or
| their drivers will abandon them.
| cozzyd wrote:
| I almost never use Uber or Lyft rideshare (sometimes on
| business travel if no reasonable public transport, but since
| I'm not paying I'm less cost sensitive there), but Lyft runs
| the bikesharing system in my city, so hopefully that can be
| salvaged, since I use that lot...
| Scoundreller wrote:
| My guess is that they're profitable in some regions and losers
| in others. They don't need to disappear everywhere if they run
| out of capital to work with.
|
| They probably run real-life experiments to see "what happens if
| we increase prices 25% in a region" and have a model for how
| that can be applied everywhere and where they would just have
| to close up shop if they needed to go into profit-mode instead
| of maintenance or growth mode.
| potatolicious wrote:
| I suspect you're right, but there lies the bitter
| disappointment with these companies.
|
| I'm sure Uber in NYC makes money, and DoorDash in NYC makes
| money... but _those are also the places where those services
| have existed for many decades profitably_.
|
| The whole promise was that with [insert handwaviness]
| technology the business model can be made to work in places
| where it was never sustainable before (i.e., the suburbs and
| much smaller cities). This... overwhelmingly hasn't panned
| out.
|
| I'm generally skeptical of the oversimplistic "you've
| invented [thing]" complaints that are often leveled at new
| tech, but in this case... the shoe does seem to fit.
|
| The only places this business model seems to work are places
| where the business model has _always worked_!
| Nextgrid wrote:
| > if you were to pay for real cost of overhead and to pay the
| driver
|
| How come taxis existed then? I find it hard to believe that
| taxis could turn a profit despite being very low-tech and
| inefficient compared to Uber.
|
| I wonder if the real reason Uber isn't profitable is more due
| to "growth & engagement". How much money is wasted on US-salary
| engineers playing with microservices in their engineering
| playground or burned on ads?
| AmericanChopper wrote:
| Terrible take. Rideshare apps aren't going anywhere, because
| they are strictly better than regular taxis, and demand for
| taxis isn't going anywhere.
|
| Maybe some individual companies might go bust, and probably
| rideshare prices will continue to increase towards typical taxi
| prices, but there's no reason at all to think the apps are
| going anywhere.
| Night_Thastus wrote:
| The _demand_ for rideshare apps is enormous. It 's the only
| thing keeping investors interested.
|
| But there's no way to make them profitable as it stands.
| AmericanChopper wrote:
| Of course there is, once the investor subsidies go away
| they won't have to compete on price so much, and prices
| will go up.
|
| All of the services that rideshare apps offer were highly
| demanded before the apps existed, and they were all
| delivered at more expensive prices with perfectly decent
| profit margins.
|
| If VC money stops funding these products, then the prices
| have to go up to something similar to "traditional" prices
| for those services, but consumers will still choose to use
| the apps, because the service they provide will still be
| substantially better than the traditional service.
| freeone3000 wrote:
| Traditional services have gotten way better -- in that,
| they got an app. Teo went from an obscure local taxi
| service to a great local taxi service, and now
| _undercuts_ uber because they don't have an insane
| advertising burn to subsidize.
| reducesuffering wrote:
| Uber Rides are profitable and subsidizing Uber Eats growth.
| Any take that "Uber will cease to exist" is farcical.
| BeetleB wrote:
| > Rideshare apps aren't going anywhere, because they are
| strictly better than regular taxis, and demand for taxis
| isn't going anywhere.
|
| I've had poor experiences with Uber/Lyft at airports. Taxis
| are way better. Sometimes there's not enough luggage space in
| the car for my luggage, and I won't know that until _after_ I
| 've called them and waited a long time. If I cancel, I end up
| paying.
|
| (And it's not about me picking a small car - they've got a
| lot of their personal stuff in the trunk so the capacity is
| smaller).
|
| Also, plenty of rude Uber/Lyft drivers ("Hey! You were on the
| wrong side of the road! I could get in trouble for picking
| you up on the other side of the road!").
|
| We're talking about a single lane each way road, and I went
| to the other side because I knew he was coming from that
| direction.
|
| Still, being able to call one via an app is convenient
| compared to taxis.
| dboreham wrote:
| > Uber/Lyft at airports
|
| That's only because their software lacks the necessary
| feature (select driver based on imminent arrival at the
| curb, from a queue of arriving drivers).
|
| Since that feature doesn't seem hard to implement,
| presumably the underlying reason is regulations to do with
| airport pickup.
| xyst wrote:
| Their success is largely due to the fact that American cities
| are built so poorly. Emphasizing suburban sprawl and associated
| highway, parking, and street infrastructure over safe and
| walkable/bikable cities.
|
| Also investor subsidies due to low interest loans or cheap
| money from banks. Although that is quickly going away.
|
| If it weren't for these two items, Lyft/Uber would just be
| another mediocre taxi service.
| rightbyte wrote:
| Their success is due to the taxi medallion system.
| gumballindie wrote:
| I am wondering how much of silicon valley "success" is just theft
| and lies? Yesterday's unicorns, today's ai, all seem to gravitate
| around shady practices.
| CoastalCoder wrote:
| This reminds me of a line from the movie Sneakers, by one of
| the bad-guy-company stooges.
|
| It was something like, "Remember when computers used to be
| fun?"
| dralley wrote:
| Don't forget ZIRP. Lots of startups are ultimately built on
| selling dollar bills for 75 cents.
| seneca wrote:
| It's not cheating anyone when both parties knowingly agree to the
| terms. This is just heavy handed regulation that destroys options
| for workers and consumers.
| CoastalCoder wrote:
| But in this case, Uber/Lyft were breaking workers' _unwaivable_
| legal protections.
|
| It's analogous to saying that robbery at gunpoint isn't
| "cheating", because both sides agree to the terms. Technically
| it's not "cheating", but that's not the aspect most people care
| about.
| salamanderss wrote:
| The Uber driver is basically a business owner fulfilling
| contracts to customers brokered through an online
| clearinghouse. They're hyper capitalists exploiting
| regulatory advantages over taxi drivers then sad face at the
| downsides to that.
| throw_m239339 wrote:
| > The Uber driver is basically a business owner fulfilling
| contracts to customers brokered through an online
| clearinghouse. They're hyper capitalists exploiting
| regulatory advantages over taxi drivers then sad face at
| the downsides to that.
|
| No they are not, otherwise they could freely set the fare
| and the market would decide the final price, not Uber or
| Lyft. Clearly that's not the case here.
| jkaplowitz wrote:
| Both parties did not knowingly agree to the terms. From the
| article, quoting the office of NY Attorney General Letitia
| James:
|
| > From 2014 to 2017, Uber deducted sales taxes and Black Car
| Fund fees from drivers' payments when those taxes and fees
| should have been paid by passengers. Uber misrepresented the
| deductions made to drivers' pay in their terms of service,
| telling drivers that Uber would only deduct its commission from
| the drivers' fare, and that drivers were "entitled to charge
| [the passenger] for any tolls, taxes or fees incurred," though
| no method to do this was ever provided via the Uber Driver app.
| plagiarist wrote:
| Libertarianism, the perfect economic system in which nothing
| can go wrong.
| xchip wrote:
| Bad use of the quotes, it looks like were the drivers who were
| cheating, and it was Uber and Lyft.
| salamanderss wrote:
| Isn't Uber/Lyft a broker/market? Wouldn't it be the driver
| cheated himself, or the passenger contracting the driver cheated
| him?
| dboreham wrote:
| Labor laws say you can't declare the drivers to be corporate
| entities. Presumably because employers would use that as a way
| to circumvent employment law.
| not_enoch_wise wrote:
| And we would have gotten away with it, too, if it weren't for you
| meddling regulations!
| unethical_ban wrote:
| Ars' title should have "cheating" drivers, or "cheating drivers
| out of earnings", not "cheating drivers" out of earnings.
| TrackerFF wrote:
| When your business (model) is built around skirting labor laws,
| you either become big and powerful enough to change those laws to
| your own advantage, or you pay the piper when that time comes
| around, and pivot/change your business model...or simply cease to
| exist.
| decafninja wrote:
| Always love how any thread on Uber or Lyft inevitably contains a
| debate about Uber/Lyft versus taxicabs and how someone's have had
| bad experiences and vow never to use one or the other.
|
| Also inevitably someone chiming in about how cars in general are
| evil incarnate and everyone must convert to public transportation
| and bicycles.
| mcbrit wrote:
| ?
|
| You haven't engaged with even ONE concrete argument; ideally,
| you would scan all arguments and engage with in good faith the
| very best argument. Or alternatively just say: nope, not
| interested.
|
| But you just strawmaned against nothing. Not so great.
| lbrito wrote:
| Never seen anyone classifiy personal cars as evil incarnate.
| Extremely damaging to humans, inefficient and full of negative
| externalities, yes.
|
| Alas this has nothing to do with the post.
| j-bos wrote:
| The quotation marks in the headline make it sound like uber lost
| money to fraudulent drivers, rather than the actual story, the
| drivers were the ones ripped off.
| Vicinity9635 wrote:
| Quotation marks in headlines normally mean they're quoting a
| source. The disengenuous "scare quotes" are a recent
| degradation in journalistic integrity, which ars isn't doing
| here.
| renewiltord wrote:
| Do I understand this correctly?
|
| Customer pays $100 for service, Uber takes (say) $45 => Driver
| allocation is $55. Uber now collects $10 tax from here and gives
| the driver $45.
|
| That's wrong because the passenger should be paying the sales
| tax. So the right way to do it is
|
| Customer pays $100 for service + tax, which is $90.91 service +
| $9.09 tax. Uber takes (same ratio) $40.90. Driver allocation is
| now $50.01.
|
| Okay, so the accounting was wrong here. That makes sense. Does
| this mean that Uber will be going back to get that extra taxed
| money back from the government if they paid it?
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