Drivers score win against Uber and Lyft in Minnesota

Uber and Lyft drivers in Minnesota notched a significant win against the ride-hailing companies this weekend, as state lawmakers passed a law guaranteeing minimum pay rates for drivers. It’s a noteworthy development at a time that the ride-hailing giants continue to fight state regulators and their own drivers on job protections.

“We got it done, passing the strongest rideshare driver protections in the nation and a 20% wage increase,” wrote Minnesota state Sen. Omar Fateh, a Democrat who spearheaded the effort in the state legislature to add protections for drivers.

Once the bill is signed, Minnesota will join Washington state and New York City as a handful of jurisdictions that have put minimum payments for ride hail workers into effect.

“While the coming price increases may hurt riders and drivers alike, we will be able to continue to operate across the state under the compromise brokered by the governor,” Uber spokesperson Josh Gold told local news outlets in a statement after the deal passed.

Proponents say the payments are in line with what Uber and Lyft pay drivers in other cities. And the rates will put drivers’ compensation on par with Minneapolis’ $15.57 an hour minimum wage after accounting for car- and business-related expenses.

But there is a catch, and it is one that has become a signature of Uber’s and Lyft’s policy playbook, said Laura Padin, the director of work structures at the National Employment Law Project The law, she said, will ban city rules governing pay rates and related issues.

“This was a win, but there was a big compromise in it that’s unfortunate, with the preemption,” said Padin, who worked with some of the groups pushing for the Minnesota law.

“I wish it didn’t include preemption of cities because cities have been a really, really critical policy target for organizing groups,” Padin explained. New York City and Seattle were the first places to pass minimum pay rules, and Minnesota’s law was only OK’d after the Minneapolis City Council passed an even more aggressive law that was set to take effect in July. Cities “started the trend, so they are really critical.”

Growing Frustration

The Minnesota deal comes amid growing frustration for ride-hailing and food delivery drivers, who disproportionately tend to be Black, Hispanic or recent immigrants.

Attitudes toward app-based services started to swing during the pandemic, Padin said.

At first, Uber and Lyft “were able to offer really high wages and low fares because they were so subsidized by outside [venture capital] funding. It was just this amazing thing that both workers and customers were happy about,” she said. “Then around the time of the pandemic, everything shifted. Drivers were getting less, and customers’ prices were going up.”

“The pandemic really laid bare how precarious the jobs were. The ride-hail drivers were out of work, but they couldn’t collect unemployment insurance because they weren’t considered employees. You had delivery drivers that were working more than ever but they had no PPE [personal protective equipment], no paid time off and no health benefits in the time of the pandemic,” Padin said. “People started seeing these jobs as much, much harder and more exploitative than they had before.”

Since then, ride-hailing and food delivery drivers have gone on strike and pursued policy changes, protesting low pay rates, and arrangements that have let Uber and Lyft avoid common employment protections, like minimum wages, time off and overtime rates.

Uber and Lyft have successfully fended off many of those efforts, relying on the popularity of their services with riders and relationships they have cultivated with elected officials for years.

New York City became the first U.S. city to require minimum pay for ride-hailing drivers in 2018, and last year it extended those protections to food delivery services too. Seattle also created a minimum compensation law in 2020, and Washington state expanded on that with mandatory paid sick leave in 2022.

But the ride-hailing companies have resisted efforts to treat their drivers as employees, Padin noted. They might agree to other concessions, but they have vigorously fought to classify drivers as independent contractors, not employees. “Their red line is they don’t want to give their workers the same baseline employment rights and protections that other workers have,” she said.

The Massachusetts attorney general took Uber and Lyft to trial last week, arguing that the companies have so much control over their drivers that they cannot be treated as independent contractors. The ride-hailing companies, though, argue that they are letting people earn money when they choose. “Lyft works for drivers, not the other way around,” Felicia Ellsworth, Lyft’s lawyer, said during the trial.

Meanwhile, Massachusetts voters could see two competing ballot measures in November that seek to define the relationship between drivers and their companies. Labor unions want to let the drivers unionize, while the ride-hailing companies are pursuing proposals to state that the drivers are independent contractors.

The companies won a similar ballot measure in California in 2020, but the state’s supreme court is currently considering a challenge that could throw out the results of that vote.

Pressure Mounts in Minnesota

Minnesota legislators passed the bill during the final hours of their spring legislative session, in order to avert a showdown in Minneapolis. A local group of drivers, known as the Minnesota Uber/Lyft Driver Association, or MULDA, has put pressure on local politicians to add pay protections for the last two years.

But Gov. Tim Walz, a Democrat, vetoed a measure last year that would have set minimum payment rates and given drivers more protections from deactivations. Uber and Lyft threatened to curtail their services in Minnesota if the bill was signed. It was the only veto Walz has issued since assuming office in 2019.

So, this March, the Minneapolis City Council approved a pay threshold for the drivers—over the veto of Mayor Jacob Frey—and the ride-hailing companies again threatened to leave the state when the changes were slated to take effect in July.

Walz pressed lawmakers to find a compromise, which lawmakers reached this weekend. The resulting legislation includes a rate of $1.28 per mile and 31 cents per minute, rates designed to help Twin Cities drivers earn the Minneapolis minimum wage after expenses.

Padin said the ride-hailing companies used similar tactics in Minnesota as they have to fight off organizing efforts throughout the country. When Uber debuted in 2011, it sought state-level laws to preempt city regulations on taxis that would have otherwise applied to the company. When Austin and Houston enacted mandatory fingerprinting for Uber drivers in 2016, Uber and Lyft ceased operating there until the Texas Legislature preempted the local ordinance.

The ride-hailing companies have also highlighted how their services help people with disabilities. Some nonprofits in Minnesota, for example, use Lyft to provide rides, and the cost is later reimbursed through Medicaid.

At the same time, the companies have strategically hired high-profile Democrats, who help soften the companies’ brash reputation with state and local leaders, she said.

“They’ve essentially embedded themselves in local government, and they’re providing essential services. So when they threaten to leave, that’s much more problematic,” Padin said.

The situation is exacerbated because the two companies act as a “duopoly,” she added. If they were both competing for market share, one of the companies would jump at the chance to provide service if their main competitor left, but that almost never happens because the two almost always make decisions in lockstep.