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Proposed Rules: Open to Comments

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Agency:
Comment By: 
Friday, September 28, 2018
Proposed Rules Content: 

 

STATEMENT OF BASIS AND PURPOSE OF RULES

 

On Tuesday, August 14, 2018 Mayor de Blasio signed into law legislation that mandates these proposed rules. Intro 890-B reiterates the Agency’s authority to establish a driver pay floor and Intro 144-B provides the same support for the Agency’s authority to require the provision of certain data from for-hire vehicle (FHV) service providers. The proposed rules would provide protections relating to income and financial transparency to For-Hire-Vehicle (FHV) drivers and yellow taxi drivers.

 

 FHV Drivers

 

 As the number of Taxi & Limousine Commission (TLC) FHV drivers has grown by more than 80 thousand since 2014, drivers are working longer hours for fewer trips and less pay, while bearing a significant share of the expenses for providing for hire service. Over 80,000 drivers now drive for the four largest FHV companies in New York City, which operate through the apps Uber, Lyft, Gett/Juno, and Via (collectively the “Largest FHV Companies”). These four companies account for over 75% of FHV trips. Despite economic success of these companies, reflected in the massive growth in the number of trips in recent years from roughly 42 million trips in 2015 to nearly 159 million trips in 2017, the majority of drivers have not seen an increase in income.

 

 

 

Driver Earnings. Based on six hours of testimony provided during the April 2017 TLC Commission hearing on driver income and expenses, meetings with industry stakeholders, including driver groups, and a TLC survey of drivers, the TLC determined that driver earnings are falling. In response to this growing evidence of declining driver pay, TLC commissioned two labor economists from the Center for New York City Affairs at the New School and the University of California, Berkeley, respectively,  to study the economics of New York City’s FHV industry, including driver income and earnings (“the Report”), which is available at http://www.centernyc.org/an-earnings-standard/.

 

 

 

Using driver earnings data from the Largest FHV Companies, the report found that FHV driver median earnings declined by almost $3.00 per hour  from $25.78 in September of 2016 to $22.90 in October of 2017, a decrease of 11.17%. Eighty-five percent of these drivers are earning less than the equivalent of the $15.00 minimum wage (which was determined to be $17.22 to account for the fact that Largest FHV Companies treat these drivers as independent contractors and therefore, unlike employees, drivers are responsible for additional payroll taxes and do not receive paid time off).

 

 Driver Expenses. As currently structured, the Largest FHV Companies’ business model involves significant financial investment and risk on the part of drivers. The FHV Companies do not pay for the expenses of purchasing, leasing or operating a vehicle and most do not pay for labor outside of trips, i.e. while idle waiting for a dispatch, but these costs are substantial. From 2015-2017, over 30,000 vehicles with the current or prior model year were licensed as FHVs. At a purchase price of $25,000 – roughly the market price of a Toyota Camry, the most common vehicle used for-hire – that amounts to $750,000,000 drivers have invested purchasing new cars before any financing is taken into account. Also, because companies classify drivers as independent contractors and not employees, they avoid common employer requirements such as paid time off, health care, and collective bargaining. 

 

 A significant portion of each fare drivers receive must go toward covering their vehicle costs and other expenses. The average cost for a driver to license, register, and operate a 2017 Toyota Camry is at least $400 per week, adding up to over $20,000 per year. Unlike drivers in other markets, these are vehicle expenses many drivers would not have were they not driving for hire. Eighty percent of drivers took on the significant cost of car ownership and maintenance mainly to earn a living by driving. In New York City, the majority of TLC-licensed drivers drive for over 30 hours per week. Sixty-five percent of drivers work full time and 54 percent are the primary earner in their household.

 

 

 

The Report confirmed the need for action to protect drivers against further decreases in their earnings. To reverse the trends of declining earnings and trips per driver, the proposed rules address pay per trip as a function of both expenses and compensation, as well as how often drivers are on a trip per working hour, a factor referred to as utilization.

 

 The commission hearing and stakeholder input also underscored the need for more transparency in the financial relationships among FHV drivers, vehicle owners, and bases. This need is also reflected in the proposed rules.

 

 Proposed Driver Pay Rules. TLC is proposing rules to protect driver earnings. The proposed driver earnings policy is as follows:

 

  • Minimum Per-trip Payment Formula. TLC’s proposed rules would establish a minimum per-trip payment formula to provide drivers a minimum take-home pay after covering their expenses and taking into account drivers’ time, both time spent driving passengers, and time spent waiting for a dispatch and then traveling to pick up passengers.  These two latter factors will be considered a base’s Utilization Rate, and calculated by dividing the total amount of time drivers spend transporting passengers on trips dispatched by the base by the total amount of time drivers are available to accept dispatches from the base.

 

  • The proposed policy would establish a means for determining the minimum amount the Largest FHV Companies must pay a driver per trip. This would result in estimated typical gross hourly earnings before expenses of at least $25.76 per hour. The minimum driver pay would be determined using one of the below formulas, developed with both the expenses of non-accessible vehicles (non-WAVs) and the higher expenses of wheelchair-accessible vehicles (WAVs) in mind. The non-WAV formula would apply to trips performed in vehicles that are not equipped to transport passengers in wheelchairs (non-WAVs), and the WAV formula would apply to trips performed in vehicles equipped to transport passengers in wheelchairs (WAVs):

 

           
     

 

 

 

  • Sample Calculation. For an unshared, non-WAV trip that is 7.5 miles and 30 minutes long at the current industry-wide average utilization of 58%, you would see the following result:

 

 

 

 

 

 

 

Alternatively, for the same trip in an unshared, non-WAV dispatched by a base with a utilization of 70%, you would see the following result:

 

 

 

 

 

 

 

  • Covering Driver Expenses and Ensuring Minimum Compensation. The non-WAV formula requires a minimum payment of $0.580 for each mile of a trip, divided by a company-specific utilization rate, to cover a typical driver’s expenses, such as vehicle purchase or lease, fuel, maintenance and insurance. Given their higher purchase and operating costs, wheelchair-accessible vehicles have a higher per mile rate of $0.803 divided by a company-specific utilization rate. The formula also requires a minimum payment of $0.287 for each minute the driver spends transporting passengers, divided by a company-specific utilization rate, to ensure a minimum compensation after expenses taking into account working time spent without a passenger. For a typical non-WAV driver, this results in gross earnings of $25.76 per hour and net income of $17.22 per hour after expenses. This figure is the equivalent of $15 per hour for a regular employee.  The additional $2.22 accounts for the 7.65 percent ($1.32 per hour) drivers must pay in payroll taxes (covered by employers for their employees) plus 6 percent ($0.90 per hour) for paid time off (representing the average time off compensation value as a share of a transportation industry worker’s overall compensation according to the U.S. Bureau of Labor Statistics).

 

  • Driver Utilization. The proposed rules would also account for the percentage of a driver’s on-duty time that is spent with a passenger in their car, or utilization. The per-mile and per-minute driver expense and compensation rates would be tailored to each of the Largest FHV Companies based on how frequently each company sends trips to their drivers while they are available to work.  The companies with lower utilization rates would be required to pay higher driver compensation per trip to offset the time their drivers are waiting for a dispatch. The TLC will assess the driver utilization of each of the Largest FHV Companies on a regular basis and adjust and make public the company’s per-mile and per-minute driver compensation rates accordingly.

 

·       Shared Rides. Drivers often do not benefit financially from providing shared rides; the 40 percent of drivers with the lowest estimated hourly earnings disproportionately provide shared rides. To compensate drivers for the additional time and customer service required to provide efficient for-hire service, each pick-up for a shared ride would entitle the driver to a Shared Ride Bonus, in addition to minimum mile and minute rates. The TLC will set the Shared Ride Bonus value and post it on the TLC’s website after analyzing driver income and expenses for shared rides and the occupancy rates for vehicles performing shared rides.

 

 

 

Scope of Driver Pay Rules. The proposed rules would apply to the Largest FHV Companies, defined as bases operating under the same “doing business as” name, dispatching at least 10,000 trips per day. In 2016 and 2017, the four Largest FHV Companies accounted for more than 75 percent of all FHV trips, providing more than 400,000 average daily trips as a group in 2017. In comparison, the highest total for the fifth largest FHV company was fewer than 3,000 average daily trips. The Largest FHV Companies’ fleets also work with significantly more vehicles than their smaller competitors. Large companies have achieved the economies of scale that enable them to make the financial, operational or other adjustments necessary to accommodate the driver earnings policy proposed in these rules.

 

Impact of Driver Pay Rules. In addition to their analysis of TLC data, the labor economists retained by TLC conducted a prospective economic impact analysis of the proposed per trip payment formula and determined that this policy would benefit drivers with minimal disruption to passengers. This policy is expected to lead to an effective raise for over 68,000 of the drivers working for the Largest FHV Companies. The bottom 25% of drivers earned $13.16 or less per hour after expenses in 2017, meaning a quarter of drivers (about 15,000) would receive at least an average $4.00 per hour raise with this new policy. The next quartile would receive at least an additional $3.00 per hour on average. The policy would result in an average 22.5 percent increase in take-home pay or about $6,345 annually per driver, or from $14.06 net per hour to $17.22 net per hour. After an hour of work, typical gross earnings would be about $25.76. Typical earnings after expenses would be $17.22 per hour.

 

Enforcement. To enforce these proposed rules, TLC will investigate and prosecute driver complaints and audit trip records on a regular basis. TLC will require the Largest FHV Companies to submit additional information on driver pay, passenger fares, driver working time, and trip distance to facilitate these audits and inform future policymaking. The Largest FHV Companies will also be required to provide driver receipts that list the applicable per-minute and per mile rates, the number of miles for each trip and the number of minutes for each trip so that drivers can determine whether they were paid at least the minimum amount required by this rule.

 

Expanding Pay and Expense Transparency. TLC rules have long included transparency requirements for financial transactions between drivers and yellow taxi owners. These requirements provide yellow taxi drivers the information to understand all charges a fleet may impose and allow TLC to effectively investigate allegations of fleet overcharges.

 

Specifically, the TLC’s Driver Protection Unit regularly receives transparency and fairness-related complaints from taxi drivers that can be addressed with existing rules. These complaints frequently concern vehicle owners failing to return vehicle security deposits, vehicle owners and fleets charging fees not clearly listed in driver leases or agreements, and vehicle owners and fleets not providing a clear explanation of earnings and fees on written receipts. Relying on the taxi owner rules set forth in Chapter 58, the Driver Protection Unit has successfully enforced taxi driver rights to transparency and fairness with prosecutions resulting in over $2.5 million in restitution for drivers who did not receive money that they were due.

 

These protections do not currently exist in the FHV sector, and TLC’s Driver Protection Unit does not always have the legal tools available to address valid concerns brought to them by FHV drivers.

 

Proposed Rules to Expand Financial Transparency for Drivers.  TLC is proposing rules setting requirements for all FHV bases and all FHV vehicle owners that would ensure transparency for FHV drivers in these financial relationships. The transparency rules will apply to all FHV bases, regardless of size.

 

For vehicle owners who lease their FHV, the proposed rules require:

 

  • Leases be written in plain language
  • Leases specify all costs to drivers
  • Where the owner of the vehicle is a different person than the driver of the vehicle, the rules require that the owners pay drivers’ earnings in a timely manner
  • Owners provide drivers with receipts itemizing all payments, deductions and charges
  • Owners maintain for three years records of their financial relationship with drivers.

 

For FHV base owners, the proposed rules require:

 

  • Agreements with drivers and FHV owners be written in plain language
  • Agreements specify all costs to drivers and vehicle owners
  • Bases provide an itemized breakdown of how much the driver earned and how much the driver’s  passenger fares amounted to, as well as all driver expense information available to the base
  • Bases provide requisite 1099 forms that include the total mileage for trips covered by the Form 1099-K
  • Bases pay driver earnings in a timely manner
  • Bases provide drivers and vehicle owners with receipts itemizing all payments, deductions and charges
  • Bases maintain for three years all records of their financial relationship with drivers and vehicle owners.

 

Taxi Drivers

 

Expanding Taxi Driver Pay Protections. TLC also received feedback from yellow and green taxi drivers about their income and expenses. TLC is proposing several changes to rules related to yellow and green taxi operation to increase existing driver income protections in that sector. For example, the proposed amendments to TLC’s credit card processing rules reduce from $11 to $7, the daily maximum credit card surcharge that fleets could charge, which could save a full-time driver more than $1000 per year. Other proposed changes provide greater financial transparency, opportunities for additional trips and higher incentives, such as an increase of all Accessible Dispatch fee payments, as well as expanded financial restitution.

 

Specifically, the proposed rules:

 

  • Reduce the maximum amount taxi lessors may charge taxi lessees for credit card processing
  • Allow TLC to update the per-trip Accessible Dispatch Fee payable to drivers of accessible vehicles more regularly via TLC’s website, making it easier to increase the fees
  • Require pro-rated leases when taxis are unavailable through no fault of the driver and allow taxi lessors to offer pro-rated leases for shifts under 12 hours
  • Eliminate the prohibition against e-hailing yellow taxis at JFK and LaGuardia airports
  • Protect green taxi vehicle owners from retaliation for making complaints against green taxi license owners
  • Require vehicle owners to compensate drivers for the cost of damage to the taxi that the driver paid to the vehicle owner when the owner was later reimbursed through a separate source
  • Remove any possible discrepancy from the fare total displayed on the taximeter with the fare total displayed on the Passenger Information Monitor display in the back of the vehicle by requiring taximeters to display the total sum of the fare at the end of trip to reduce confusion for drivers and passengers 
  • Afford mandatory restitution to taxi drivers for situations in which the driver has leased a taxi from a lessor and where that lessor failed to meet the terms of the lease and that failure led to additional expenses for the taxi driver. That restitution would be mandated in addition to any fines that were also assessed against the vehicle lessors for the underlying rule violation.

 

To provide additional financial transparency for drivers entering into a conditional purchase agreement for a taxi medallion vehicle pursuant to TLC rule 58-21(c)(4), the proposed rules also:

 

·       Require that such agreements specify the purchase price of the vehicle and the total itemized cost, including interest and fees, payable to the owner or agent, based on the payment terms contained therein;

 

·       Provide restitution as a remedy, in addition to the existing penalty, when drivers are charged a security deposit in excess of the amount permitted by TLC rules; and

 

·       Provide restitution as a remedy, in addition to the existing penalty, when security deposits are not returned to drivers as required by TLC rules.

 

 

Subject: 

Driver Earnings and Vehicle Lease Transparency

Location: 
Hearing Room
33 Beaver Street 19th Floor
New York, NY 10004
Contact: 

No contact