From The New York Times:
Uber Says It Just Noticed Error on Pay, but It Was No Secret
NOAM SCHEIBER
The New York Times
June 2, 2017
Uber said last week that it had recently discovered an accounting error that had deprived New York drivers of tens of millions of dollars, and vowed to pay back drivers every cent, with interest.
Now evidence has emerged suggesting that Uber and New York State regulators were aware of the improper deductions from drivers’ earnings as early as 2015.
The error involved Uber’s taking its commission on fares that included sales tax, rather than on the pretax portion of the fare. If, for instance, a passenger paid $20 for a ride, and if taxes accounted for roughly $2 of that fare, Uber took its commission on the entire $20, rather than on $18.
When admitting the error last week, Uber officials said they had discovered the problem only a few weeks earlier, as the company was updating its contract.
But changes that Uber made to its contract in 2015 suggest that the company has been aware of the issue and grappling with it since at least that year.
In an update to its contract in November 2014, Uber said that it would levy its commission on the pretax or “net” fare. If cities or other jurisdictions “require taxes to be imputed in the fare, Uber shall calculate the service fee based on the fare net of such taxes,” the contract stipulated.
In December 2015, however, Uber changed this portion of the contract, replacing the phrase “imputed in the fare” with the phrase “calculated on the fare.” The new wording, while ambiguous, lent itself more strongly to an interpretation that the fare did not include taxes.
That appeared to address the problem that Uber admitted to last week: computing a commission on a tax-inclusive fare. But whatever legal cover that might have provided, the company did not change its practices until now, continuing to base its commission on the full fare while telling passengers it included tax. (The company continued to remit the tax revenue to the state.)
Richard Emery, a plaintiffs’ lawyer who litigated a 2009 case with similar issues, said the change in the contract was “very powerful circumstantial evidence that they understood that their calculation of the commission was wrong.”
He added, “It seems clear that they were looking at it.”
Uber’s contract covers drivers not just in New York, but in all states where it operates. New York is one of the company’s biggest markets, and only a subset of cities and states where Uber operates imposes tax on its fares.
Uber declined to comment.
The problem with commissions has arisen amid driver discontent over a range of issues, including fare cuts instituted early last year.
Beyond the commission error that Uber has conceded, The New York Times has reported that the company may have improperly deducted the entire sales tax from New York drivers’ earnings.
Photo
Inder Parmar, speaking to fellow Uber drivers and their supporters last June about a class-action lawsuit filed in Federal District Court in Manhattan. Credit Bryan R. Smith for The New York Times
The 2015 changes to Uber’s contract coincided with efforts by the New York Taxi Workers Alliance, an advocacy group for professional drivers, to point out improprieties in the way Uber was calculating its commission, as well as other issues involving improper treatment of drivers.
The group’s account suggests that the administration of Gov. Andrew M. Cuomo was also aware of the improper commission charges as of 2015.
The Taxi Workers Alliance described the issue in detail in a memo and a PowerPoint presentation that it sent to the New York State Department of Labor before a meeting in August 2015. The Times has reviewed both documents, which the group went over at the meeting.
The group then met in October 2015 to discuss the issues with senior Cuomo administration officials, including Elizabeth de Leon Bhargava, a deputy secretary for labor, and Ali Chaudhry, then an assistant counsel to the governor. A Taxi Workers Alliance official distributed an updated copy of the memo at the meeting.
The Cuomo administration officials did not appear to take the question of improper wage practices very seriously, said Bhairavi Desai, the taxi workers’ executive director, who attended the meetings.
Ms. Desai said she got the same impression during a less formal interaction with state officials in November 2015.
Then, in December 2015, Uber unveiled its updated contract, which appeared to address the commission issue.
A spokesman for the Labor Department, Cullen Burnell, said the department’s recollection was that the meetings with the taxi workers group centered on general opposition to the ride-hailing industry rather than on the commission issue. “We meet with all stakeholders to gather information while considering legislation, and continue to meet and work with this group on issues of common interest,” Mr. Burnell said.
Separately, a former Uber employee provided an account also indicating that company officials were aware of the commission issue in New York as long ago as 2015. The former employee, who requested anonymity because he had signed a nondisclosure agreement, said that he had seen emails from drivers complaining about the issue at least two years ago, and that Uber’s response had typically been dismissive.
Inder Parmar, an Uber driver in New York, corroborated this account. Mr. Parmar said he first alerted Uber to the issue of the improper commission calculations in December 2014, when Uber officials in New York held an event for drivers at a Sheraton hotel in Queens. “We went there and mentioned it to the Uber people,” Mr. Parmar said. “They said they are right and we” — the drivers — “are having a misunderstanding.”
Mr. Parmar said he later met with an accountant friend, who confirmed the commission problem after examining Mr. Parmar’s trip receipts. In mid-2015, Mr. Parmar said, he went to an Uber office in Queens and showed a customer support worker the calculations that he and his friend had made. The worker told him that he was incorrect and that Uber had calculated the commissions properly.
At that point, Mr. Parmar turned to the Taxi Workers Alliance, which complained to the Cuomo administration and eventually included the allegation about improper commission in a federal lawsuit it filed on behalf of drivers in June 2016.
Uber officials say that they were aware of the lawsuit, but that they did not realize it had raised the commission issue before they recently discovered the problem on their own.
Mike Isaac contributed reporting.
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