Here’s what’s in the bill regulating Uber and Lyft driver pay and labor standards

Uber and Lyft drivers hoist Sen. Omar Fateh, DFL-Minneapolis, in the air after the Senate passed a bill on May 19, 2024 that included minimum pay rates for drivers. Photo courtesy Senate Media Services.

Minnesota Uber and Lyft drivers can expect their pay to rise more than 14% when a new wage floor takes effect in December, assuming Gov. Tim Walz signs a bill that passed the Legislature late Sunday.

The new pay floor is part of a sweeping bill that expands insurance requirements, codifies procedures for firing — or “deactivating” — drivers and mandates greater pay transparency.

State Democrats heralded the bill for providing the strongest labor protections to ride-hail drivers in the country, with Minnesota following Washington and New York states in guaranteeing drivers minimum wages. The rules do not apply to delivery drivers on platforms like UberEats or DoorDash.

“Minnesota has a long history of protecting workers,” said bill author Rep. Hodan Hassan, DFL-Minneapolis. “Minnesota is a labor state.”

The bill traveled a rocky road over the past 18 months, dividing both drivers and Democrats as they struggled to reach a deal that Democrats could pass with a one-seat Senate majority, earn the governor’s signature after a previous veto and keep Uber and Lyft operating in the state.

Reaching a deal ultimately required Democrats to cross one of their red lines by blocking Minneapolis from enacting its own wage floor, ending a monthslong stand-off between the City Council and the companies that was on track to lead Uber to pull out of the entire Twin Cities metro area this July.

City Council members blasted Walz for that part of the agreement, saying he caved to multi-billion dollar corporations. They also took credit for the deal.

“This was only possible because Minneapolis [council members] held firm in passing comprehensive protections for drivers last year, and held firm on wages this year,” several council members wrote on X, including Aisha Chughtai, Aurin Chowdhury and Robin Wonsley.

The regulations have not officially been signed into law but were passed as part of a massive, 1,430 page omnibus bill (HF5247) containing most of Democrats’ 2024 priorities in the final minutes of the legislative session. The governor is expected to sign the bill.

Here are the details:

Minimum pay rates

The bill sets minimum pay for drivers statewide at $1.28 per mile and 31 cents per minute before tips when transporting a passenger. Drivers must earn at least $5 per trip and are entitled to 80% of any cancellation fee if they have already left to pick up a rider. Drivers with wheelchair accessible vehicles are entitled to an additional 91 cents per mile. Rates will increase each year with inflation like the state’s minimum wage.

A key detail: Minimum rates aren’t guaranteed for every single trip. Rather, drivers must be paid the minimum rates on average over a two-week pay period. If drivers’ earnings average out below the wage floor over a given pay period, the companies must top them off with the difference. That was an important provision for Uber and Lyft because it gives them wide latitude in setting pay and price according to rider demand.

The new wage floor equates to $34.58 per hour for Twin Cities drivers when they are logged in and accepting fares — a 14% increase from the average metro area driver’s earnings in 2022 — according to an analysis by the Service Employees International Union based on a state study of driver earnings.

Democrats say the bill will raise wages 20%. That’s according to a DLI analysis of 2023 averages.

Uber and Lyft both say customers will pay for the raises with increased fares, although it’s unclear by how much. Neither company wants demand to drop significantly, and they will face new competition from ride-hail start-ups entering the market.

The rates will yield hourly earnings in line with those proposed in a state study of the more than 18 million trips taken on Uber and Lyft in Minnesota in 2022.

The study’s authors — economists James Parrott of The New School and Michael Reich of the University of California, Berkeley — estimated Twin Cities drivers would have to earn at least 89 cents per mile and 49 cents per minute transporting riders in order to earn Minneapolis’ minimum wage of $15.57 an hour after paying for their payroll taxes and expenses, which can vary greatly between drivers.

(The economists did not account for the federal mileage deduction — 67 cents per mile in 2024 — which offsets drivers’ taxable income. The SEIU analysis includes that tax benefit and assumes a 18.8% tax rate.)

The economists also calculated a higher per mile rate of $1.21 in the Twin Cities metro area, which would compensate drivers for benefits, including workers’ compensation, unemployment insurance, paid family leave, paid sick leave, health insurance and retirement savings in addition to their vehicle expenses.

Despite the raise, there’s no guarantee drivers in greater Minnesota — which accounts for about 5% of rides — will earn the state minimum wage. That’s because drivers outside the Twin Cities metro spend more time waiting for fares and driving to pick up riders.

When comparing drivers’ expected per hour earnings across various proposals, the minimum rates passed by the Legislature are similar to those proposed by Minneapolis Mayor Jacob Frey and agreed to by Uber earlier this year — both yield a 14% raise. The statewide rates also aren’t far off from a deal Uber reached last year with a driver group called the Minnesota Rideshare Drivers Association, which was rejected by the bill authors.

The rates are significantly lower than those the Minneapolis City Council passed the day before the state study was released, which would have yielded $43.73 per hour while actively accepting rides. The Minneapolis ordinance also required the companies to pay drivers 80% of surge pricing paid by the customer.

Lyft said it would leave Minneapolis if those rates were enacted and Uber said it would pull out of the entire Twin Cities metro, and the council pushed back enactment twice to negotiate with state lawmakers and allow more competitors time to enter the market.

The Minneapolis ordinance won’t take effect under the state bill, which prohibits cities from enacting their own standards covered by the bill, including pay, insurance and data transparency. Cities may charge transportation network companies licensing fees as Minneapolis and St. Paul currently do.

The state Department of Labor and Industry is the only agency that can enforce the wage standards. Driver advocates hoped to have the right to sue the companies for violations, and members of the Minneapolis City Council also wanted to have enforcement authority.

Washington state was the first to enact a statewide wage floor for Uber and Lyft drivers in December 2022, and drivers are now guaranteed $1.31 per mile and 38 cents per minute outside Seattle. In Seattle, drivers are guaranteed $1.55 per mile and 66 cents per minute. Unlike Minnesota, the rates are required to be met on every trip.

Uber and Lyft drivers in New York state are entitled to $26 per hour on average for the time between accepting a fare and dropping a passenger off. The minimum rates were agreed to by Uber and Lyft as part of a $328 million settlement with the New York state attorney general.

In New York City, which was the first to enact minimum pay rates, drivers are entitled to $1.36 per mile and 58 cents per minute.

Classification

Unlike the law in Washington and settlement in New York, the Minnesota bill does not explicitly define drivers as independent contractors.

Classifying drivers as independent contractors was a key priority for Uber and Lyft, which say their business model doesn’t work if drivers are treated as employees. But it was a non-starter for Democrats and their allies in organized labor, who want to preserve the option for future legal challenges to how companies like Uber and Lyft treat gig workers.

Because drivers are treated as independent contractors, drivers aren’t guaranteed minimum wage, overtime pay, workers’ compensation, unemployment insurance, paid sick leave or other benefits afforded regular employees.

Many drivers say they prefer to be independent contractors because they value the flexibility of the platforms — driving whenever they want and for multiple apps — which the companies say they would lose if forced to make them employees.

The status of Uber and Lyft drivers in California has been entangled in a yearslong political and legal fight that is now before the state’s supreme court. And earlier this month, a trial began in Massachusetts in a lawsuit brought by the state’s attorney general alleging Uber and Lyft are misclassifying drivers as independent contractors.

Deactivation

Drivers will have the right to appeal being fired — or “deactivated” — to ride-hail companies, which must review and make a decision within 30 days of the driver’s request. Company managers, while making the final decision, must have evidence showing it’s more likely than not that a violation occurred to uphold a deactivation. Ultimately, a driver could force his or her case to go to arbitration or, if they declined arbitration, to court.

Under the bill, companies must maintain clearly written policies on deactivation in several languages — including Somali and Spanish — that explain what conduct can result in deactivation or other disciplinary action.

When a driver is deactivated, companies must provide written notice explaining the reason for the deactivation, how long it will last and instructions on how to challenge the deactivation. Companies must also communicate that drivers have the right to receive assistance from a driver advocacy group.

Under the bill, drivers may not be deactivated for rejecting rides — so long as the rejection isn’t discriminatory — or for sharing their opinions about compensation or working conditions.

Funding for non-profit driver center

The bill requires transportation network companies to contract with a non-profit organization — “operating without excessive influence from the (transportation network company)” — to help drivers appeal deactivations, educate drivers on their rights and provide technical assistance with using the apps.

The non-profit must have been operating in Minnesota for at least two years and be able to provide “culturally competent driver representation services, outreach and education.”

The language of the bill seems tailored to describe the Minnesota Uber/Lyft Drivers Association, the non-profit organization founded in June 2022 and has been lobbying lawmakers to increase pay.

All three driver representatives on a governor’s task force studying driver pay were MULDA, and the group’s president, Eid Ali, advocated for the task force to formally recommend that his organization be funded to help drivers. Ultimately the task force made a generic recommendation that a third-party be used.

In Washington, a driver center is funded by a passenger per-trip fee. In New York, Uber funds a driver center run by the Independent Drivers Guild, a branch of the Machinists Union, according to Uber.

Uber and Lyft declined to say which group they planned to contract with or how much the contract would be worth.

Republican lawmakers voiced sharp opposition to this provision, saying it could lead to fraud and graft. During debate on the bill, House Republicans pointed out that Uber currently contracts with the Somali Community Resettlement Services to help drivers, many of whom are East African. That organization has been linked to the sprawling $250 million Feeding Our Future fraud case.

“If they discover fraud in these nonprofits, and perhaps, there isn’t a darn one available without ties to fraud, well then what do these transportation network companies do?” said Rep. Anne Neu Brindley, R-North Branch. “Their hands are tied.”

Rep. Hodan Hassan, DFL-Minneapolis, the author of the bill, defended the provision.

“I can tell you 1,000 organizations that can fit into the description,” Hassan said.

New insurance requirements

Transportation network companies are already required to carry commercial insurance covering injuries to passengers and the public up to $1.5 million per incident — equivalent to commercial limousine coverage. Drivers, who must also carry their own auto insurance, are covered to a lesser extent by company policies between accepting a fare and dropping a passenger off.

The bill expands coverage requirements up to $1 million for ride-hail drivers and includes the time immediately after ending a trip, which was a major priority for drivers. Driver Abdillahi Mahamed Abdi, who was attacked and robbed by a passenger, routinely showed up to the Capitol and the Minneapolis City Hall in his blood-stained shirt. He said he wasn’t entitled to any assistance with medical costs or wage replacement after the assault, which took place after the trip ended.

Minnesota’s current insurance requirements are the most stringent in the country, equal only to New Jersey, according to Uber.

Uber says the insurance premiums cost the company more than $20 million a year in Minnesota, representing about 10% of their costs. Other ride-hail start-ups entering the Twin Cities complained of high insurance premiums of around $150,000 per year to meet current standards.

The new standards take effect Jan. 1.

Pay transparency

The bill formalizes pay transparency requirements that Uber and Lyft were already largely doing, while adding some new requirements.

When offering fares to drivers, transportation network companies must tell drivers the estimated total compensation for the trip, the time and distance to pick up the passenger and the time and distance to complete the drop-off. Both Uber and Lyft already tell drivers how much they will be paid for a fare as well as the duration and distance as part of their “up front pricing.” The bill says companies must give drivers “sufficient time” to review fare offers, but does not define what that means.

Transportation network companies must also provide daily and weekly electronic receipts to drivers detailing their earnings, including tips and bonuses, the time and distance they spent driving, what customers paid, and a breakdown of any other fees.

No car loan program

A last-minute bill was also introduced to appropriate $2 million from the workforce development fund to create a new 0% interest car loan program for ride-hail drivers.

The bill did not ultimately pass. It would have provided interest-free loans of up to $15,000 for regular vehicles and $20,000 for wheelchair-accessible vehicles to drivers who have been working for at least a year on ride-hail platforms and have a household income less than $80,000.

The bill would have directed the Department of Employment and Economic Development to award grants to community development financial institutions or similar nonprofit organizations to administer the loans and keep up to 10% for administrative costs.

The post Here’s what’s in the bill regulating Uber and Lyft driver pay and labor standards appeared first on Minnesota Reformer.