Uber drivers landed a major payday in New York last week when the ride-hailing service agreed to reimburse drivers after miscalculating its commission on rides for years. But a group of drivers claim they are owed even more money than what Uber conceded, and it could end up costing the company millions more.
For nearly three years, Uber calculated its commission including taxes and a black car fee, which meant that Uber was taking slightly more out of drivers’ pay for each ride than it deserved. Uber admitted the error last week and is paying drivers back, with reimbursements averaging $900 per driver. Uber could end up spending upwards of $45 million correcting the mistake, according to a Wall Street Journal estimate.
But some New York drivers, like Inderjeet Pamar, suspect that they’re owed even more. Parmar is one of the six named plaintiffs in a class action lawsuit filed against Uber last year that claims, amongst several things, that the company incorrectly took sales tax from drivers’ fares rather than collecting it from riders, amounting to “taking a kickback” from drivers’ wages.
Parmar drives for Uber Black in New York and also chauffeurs private clients. He first noticed discrepancies in his Uber receipts about a year ago. “I had a bit of doubt in my mind,” he told Gizmodo. “A friend did a good calculation and he showed me we were not getting paid properly.”
Parmar said he visited one of Uber’s offices in New York to raise his concerns about the way taxes and commissions were calculated. “We told them this is happening. Their answer was Uber has a lot of accounting. Their calculation cannot be wrong. One gentleman said he would pass it to his supervisor,” he said.
In June of last year, an organization that represents more than 5,000 Uber drivers, the New York Taxi Workers Alliance, filed the class action suit against Uber. Uber sought several dismissals, but in early April, a judge allowed the case to move forward. The drivers filed an amended complaint in mid-May, just before Uber began refunding drivers.
When Uber sent out reimbursements for its miscalculated commission, Parmar received $4,500—an amount that reflects the roughly 2 percent extra that Uber charged him on each ride since 2014, plus interest.
Another driver involved in the suit, Tim Cavaretta, suspects that Uber’s issuance of reimbursements and timing of the amended complaint aren’t coincidental.
“They are trying to cop to the cheaper fix rather than admitting the larger problem with taking out the sales tax from driver’s pay when they should have been assessing it on top of the fare,” Cavaretta told Gizmodo. “I think they thought they could get away with it. Now that they know they are clearly caught on that count, they are trying to appease drivers with that and hope we don’t stick it to them on the larger issue.”
Uber denies that the reimbursements are intended as damage control, saying it paid drivers back with interest as soon as it recognized its error.
But the $4500 payment pales in comparison to what Parmar would be owed if a judge found that Uber had incorrectly deducted tax from his income, too. In that case, his payment could rise to roughly $19,000. Uber offered Cavaretta less than $900, but he turned it down, believing Uber collected tax from his wages and therefore owes him more. “I don’t believe it was a mistake and I won’t accept that,” he said.
A pay statement Parmar received from the company and shared with Gizmodo appears to indicate that Uber subtracted sales tax (8.875 percent in New York) from his rate instead of passing the cost on to the consumer. “They are still cheating or robbing me out of my money,” he said.
In the pay statement, sales tax is described as a “percentage of UberBlack Fares,” suggesting that sales tax is subtracted from the driver’s fare. The statement also depicts sales tax as a deduction from driver earnings.
Uber’s position is that drivers like Parmar were never charged sales tax.
“Uber calculates and has calculated sales tax and Black Car Fund correctly,” a spokesperson told Gizmodo by email. “This topic is the subject of ongoing litigation and we cannot discuss the specifics except to say that the claims made are meritless and we are confident we will prevail in court.”
The company maintains that it includes tax in its fares so that riders know up-front exactly how much their ride will cost. In a discussion with the New York Times, an Uber representative compared the approach to charging $1 for a slice of pizza and including the tax in the overall price. The structure was confusing, the representative admitted to the Times, adding that Uber would make changes to clarify it.
One day before the reimbursements were announced, Uber sent an email to drivers saying it was changing the payment process to make its collection of taxes, fees, and commission more clear. Despite Uber’s claim that it doesn’t take taxes from drivers, the email seems to suggest the opposite—it says drivers had to deduct tax from their rates to determine earnings.
“We’re moving to a simpler rate structure where service fees & taxes will no longer be included in base, time & distance rates. With these changes, you’ll see an earnings increase on trips in New York,” the email said. “Previously, you needed to deduct Uber’s service fee, sales tax and Black Car Fund fee from your rates to determine your earnings. Now, no math is required.”
The change will simplify driver pay statements so they no longer see deductions for sales tax and black car fees. But Uber’s admission that the change will result in a pay increase for drivers seems to indicate that taxes and fees were taken from their pay to begin with.
Under the new receipt structure, drivers will see tax in a separate section of their receipt—so they will see that tax is coming either out of the rider’s wallet, or out of Uber’s commission. Now, all drivers will see in their section of the receipt is their base fare plus time, distance, and any promotional bonus.
“This is far from over. Uber owes drivers millions more than they’ve copped to and we’re going to make sure drivers are given back all that’s been stolen from them,” New York Taxi Workers Alliance executive director Bhairavi Desai told Gizmodo. “They made a public showing of admitting to one of the charges. But the larger claim, where they owed the bulk of the money to drivers, they’ve tried to bury. It’s very typical Uber. They always appear like they are taking one step forward but in reality it’s three steps back.”
Uber is expected to file a reply to the drivers’ amended complaint tomorrow and will face the drivers involved in the lawsuit again in mid-June at a status conference in the case.
Uber’s reimbursements to drivers came just before the company’s general manager for New York, Josh Mohrer, resigned from the company. Mohrer is taking a role at Tusk Ventures, a firm that helps startups navigate the regulatory landscape.
Cavaretta stopped driving for Uber in January because his car was damaged in a blizzard and he was no longer earning enough income to make it worthwhile, he says. Parmar still drives for Uber because it helps fill his time between private clients.
As Uber and Lyft prepare to expand to upstate New York, the ride-hailing companies will need to attract more drivers to meet new demand. But with drivers unsure if they’ll get paid their fair share, recruiting could prove difficult.
Although the New York Taxi Workers Alliance has focused its litigation on Uber so far, Lyft isn’t out of the picture.
“In any industry, when you’re looking to raise the standard, you go after the biggest corporation. Whether its Walmart in retail or Uber in the app-based dispatching sector, it’s the same goal. It’s only when the mighty fall that the others get into line,” Desai said.
Correction: An earlier version of this story stated that drivers would no longer be able to see tax assessed on their rides at all. Tax is included in a different section of driver receipts to separate it from driver pay. Gizmodo regrets the error.