Uber Threatens To Cut Most Service In Minnesota If Minimum Pay Law Takes Effect

Topline

Uber has threatened to stop serving most of Minnesota and only offer higher-price service in the Minneapolis-St. Paul area if Gov. Tim Walz (D) signs a bill setting a new minimum payment rate for drivers—the latest in a string of efforts to boost pay for gig workers.

Uber has threatened to stop most of its service in Minnesota if a bill setting minimum pay for … [+] drivers is signed into law. Sign with logo at the headquarters of car-sharing technology company Uber in the South of Market (SoMa) neighborhood of San Francisco, California, with red vehicle visible in the background parked on Market Street, October 13, 2017. (Photo by Smith Collection/Gado/Getty Images)

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Key Facts

The proposed legislation, which was sent to Walz on Sunday after passing the House and Senate, would require digital ride-hailing companies like Uber and Lyft to pay drivers a $5 fee and at least $1.45 per mile—or $1.25 per mile outside the Twin Cities area—as well as $0.34 per minute for any time spent driving customers.

The bill would also create a process through which drivers could request a review if they feel they have been wrongly removed from their jobs.

If the bill is signed into law, Uber will stop operating service outside of the Minneapolis-St. Paul metro area, where it will only offer “premium products”—along with premium prices—starting August 1, spokesperson Freddi Goldstein told Forbes, arguing the proposal “will make it impossible to continue serving most areas of the state.”

Goldstein said the company had tried to work with lawmakers for “several months” to create legislation that would provide “flexibility and benefits to drivers without compromising service for riders,” but the requests went unanswered.

Walz has not committed to signing the bill, the Minnesota Reformer reported, and when asked about rideshare companies’ threats to leave the state, he said he takes them “seriously but also somewhat skeptically.”

Forbes has reached out to Walz’s team for comment.

Key Background

The Minnesota bill is the latest in a string of nationwide efforts to offer higher wages and more benefits to ride-hailing drivers and other gig economy workers. Similar efforts to guarantee a minimum wage for drivers have succeeded—namely in New York City and Seattle—but both New York and Washington have laws that don’t allow drivers to be considered employees, the New York Times reported. Uber and Lyft have argued their drivers are not employees and are instead independent contractors because of the flexibility in hours that comes with their jobs. Advocates for tighter rules argue that rideshare companies underpay drivers and that even though drivers are considered independent contractors, the companies still have control over their work, making them more like employees who ought to enjoy benefits. The president of the Minnesota Uber/Lyft Drivers Association told the Minnesota Reformer that he can’t predict the future if Uber greatly reduced services in terms of jobs that would be lost, but argued the governor should sign the bill because “it’s the right thing to do.”

Crucial Quote

Rep. Hodan Hassan (D), who sponsored the Senate bill, highlighted in a statement to the Star Tribune on Wednesday that similar changes have been made in other states. “We will not tolerate bad actors exploiting hardworking Minnesotans to pad their corporate pockets,” she said. “If your business relies on keeping your workers in poverty, you don’t have a viable business model, and you need to do better here in Minnesota.”

Contra

If the legislation passes, Uber drivers in Minneapolis would make more per mile than drivers anywhere else in the country, which Goldstein said is “completely out of touch with cost of living in Minneapolis and what riders can afford.” Goldstein said Uber proposed a compromise of $1.17 per mile and $0.34 per minute, along with occupational accident insurance coverage and clarification that drivers are classified as independent contractors. She added that if possible, it is Uber’s “goal to reach a compromise for the next session.”

Big Number

50%. That’s how much Goldstein said the company is estimating the cost of rides would increase for users if the bill passes. She said this would in turn decrease demand by an estimated 30%, resulting in drivers actually taking a pay cut rather than making more money.

Tangent

Rideshare company Lyft has also opposed the bill. The company told Axios that rate increases would limit who could use the app and would result in fewer rides. “Instead of forcing a bill that would destroy the service for many of the communities who depend on it, we should continue to work together on a solution that benefits all,” the company told Axios in a statement.