Amid standoff at Capitol over Uber and Lyft driver pay, Minneapolis council delays its ordinance

The Minneapolis City Council, in voting unanimously on Thursday to delay enactment of minimum pay rates for Uber and Lyft drivers for two months, offered a lifeline for Democratic legislators embroiled in their own divisions over the issue.

Legislative leaders, who are trying to craft their own compromise that would increase driver earnings but keep Uber and Lyft in the Twin Cities metro, are increasingly concerned that the polarizing ride hailing issue could upend the remainder of the legislative session, which hangs on a one-vote majority in the Senate.

The council has come under immense pressure to reconsider their minimum rates since the wide-ranging effects of Uber and Lyft pulling out have become more clear: some 10,000 drivers likely losing income without unemployment benefits and tens of thousands of convention-goers, commuters, bar hoppers and people with disabilities needing to find different transportation.

Senate Majority Leader Sen. Erin Murphy, DFL-St. Paul, and House Majority Leader Jamie Long, DFL-Minneapolis, met recently with a half dozen members of the City Council to request the delay and remind them of the stakes of a deal, as well as the city’s significant legislative agenda at the Capitol, according to several people present or briefed on the conversation.

The council voted to delay enacting the rates — $1.40 per mile and 51 cents per minute — until July 1, and both companies say they’ll stay until then. Council members said the extra time would allow them to study a detailed state analysis of driver pay more closely, give legislative leaders more breathing room to finish their work, and give alternative companies more runway to launch.

Council Vice President Aisha Chughtai, who was at the meeting with state lawmakers, said council members were told the legislative session could come to a halt on May 1 if Uber and Lyft pulled out of the city.

Asked what explanation was given, Chughtai referred to “caucus dynamics.”

“It would create too much chaos. There would be lots of disagreements among members within their caucuses about the path forward … If you can’t keep your caucus together, you can’t do your work,” Chughtai said.

Democrats need to work in lockstep to pass a slew of legislation under consideration beyond a bill on Uber and Lyft regulations, while also considering an election in six months that will determine control of the closely divided Minnesota House.

State Sen. Omar Fateh, DFL-Minneapolis, wielded his de facto veto on Democrats’ sweeping legislative agenda last year to revive a bill on Uber and Lyft in the final weeks of session, promising drivers that Gov. Tim Walz would sign the bill even though the governor’s office said he made no such assurances and ultimately vetoed the bill.

After the veto, the governor ordered a report on driver earnings — the largest study of its kind — that has given state Democrats a clear target: somewhere between 89 cents and $1.21 per mile depending on how many benefits lawmakers want to include.

The lower figure would guarantee the typical full-time driver in the Twin Cities metro area the Minneapolis minimum wage of $15.57 an hour after paying for vehicle costs and payroll taxes. The higher figure includes compensation for a suite of benefits including sick leave, workers’ compensation, and unemployment insurance as well as those not guaranteed to regular employees like health insurance and retirement savings.

The report was blasted by Uber and Lyft as inaccurate, with the companies alleging the economists who wrote the report are biased toward drivers. They say the estimate that drivers have to spend more than $10,000 per year to acquire a vehicle and more than $1,400 for a cell phone is too high.

Lawmakers should be able to push the companies to swallow rates at the high end of the range in the state report, given that Uber said last year it would agree to minimum rates of $1.17 per mile and 34 cents per mile — though it also wants drivers to be defined as independent contractors and cities prohibited from passing their own rates.

Fateh recently introduced a bill with rates higher than those proposed in the state report: $1.39 per mile and 49 cents per minute. He got that figure by using the report’s higher rates for greater Minnesota, where drivers spend more time waiting for fares and driving to pick up passengers.

Capitol sources close to the issue say Fateh is dug in on his position. While he attended the recent meeting with City Council members, he declined to attend a meeting with the governor’s office, legislative leaders and company representatives two weeks ago, a spokesman for the senator confirmed.

The spokesman shared a statement attributed to Fateh: “I have had productive meetings with drivers, legislative leaders, my colleagues, and the administration, and am preparing for a committee hearing next week.”

One possible scenario if Fateh doesn’t budge: Democrats could end up without enough votes to pass minimum rates for drivers that will keep the companies operating in the state and win the signature of Walz.

That could force them to work with Republicans to pass legislation, which would surely come with significant concessions to the two tech giants like lower minimum rates, overriding the Minneapolis ordinance and defining drivers explicitly in state law as independent contractors rather than employees.

Asked about this possibility, Chughtai replied, “We’re not stupid. We understand that reality. That’s why we’re talking to state leaders … [We] understand the political realities of how being held hostage works. At the end of the day, we might end up losing more. We’re doing everything we can to avoid that happening.”

Chughtai and nine of her colleagues voted down a proposal brought by Council Members Andrea Jenkins and Emily Koski on Thursday to reduce the rates to $1.21 per mile and 51 cents per minute, just above the high end of the minimum rates suggested in the state analysis.

The proposal faced opposition from both council members who thought it was too low and those who thought it was too high, and the ordinance’s authors only picked up one vote from Council Member Katie Cashman. Others said they needed more time to review the data.

“The top-level complexity is that there’s never going to be one number that captures the totality of the dynamics of this marketplace,” said Council President Elliott Payne during Thursday’s council meeting. “This is why we did a time extension. So we can dig into that complexity.”

In addition to legislative leaders, Minnesota Department of Labor and Industry Commissioner Nicole Blissenbach also met personally with a majority of council members to walk them through the state report and answer questions. For example, two weeks after the report came out, Council Member Aurin Chowdhury said she would work with state lawmakers to get any Minneapolis-specific data, even though the report says its findings are based on county-level data. There is no Minneapolis data.

Payne said he wants city staff to dig deeper into the data because the state report is based on averages and he wants a rate that covers a majority of drivers. He said he thought a reasonable place to start would be setting the minimum rates just above what a quarter of the lowest earning drivers make.

But he said he wants to wait to see what the figures are.

“$1.40 [per mile] could be the exact right number for us,” Payne said in an interview. “I don’t know that it would be that lucky.”

Mayor Jacob Frey said he would allow the delay to pass without signing it, but chastised the council for approving the ordinance before they had seen the state report, which came out just a day later.

“The passage of this policy was ‘ready, fire, aim,’” Frey said in an interview. “This is the second delay … We could’ve saved everybody the grief and done this right the first time.”

The ordinance authors say they stand by the current city rates, and the two companies can either pay it or leave because many other companies trying to enter the market will.

“We did our homework because we knew we wanted to ground a wage that was based and backed up by facts,” Council Member Robin Wonsley, one of the ordinance authors, said during the council meeting. “And we did our homework not once, not twice, but three times right now.”

The rates in the city ordinance are based on a staff report that looked at a study of Seattle driver earning data from 2019 and adjusted the rate based on cost estimates in Minneapolis. That report’s authors cautioned that it’s not based on “direct unrestricted access to rideshare data” in Minneapolis.

Drivers with the Minnesota Uber/Lyft Drivers Association are united behind the council’s higher rates. The group’s President Eid Ali called the council members “heroes” during a press conference with City Council members and alternative ride hailing companies after Thursday’s council meeting.

But many other drivers fear they will lose income if the big companies pull out and are skeptical that alternative companies will be able to fill the void.

Drivers with a group called MULDA Members, which broke from MULDA last year over frustration with the lack of a deal, say they want a compromise (as long as it’s above 89 cents per mile).

“They need to compromise on a bill that pays drivers better and keeps the companies here,” said MULDA Members Board Member Abdi Ahmed. “We want competition. We want new companies to come in [and] established companies to stay. Drivers are going to make their choices.”

Ahmed said Fateh has stopped talking to them.