The lure of taking home 80 percent of the fares he collected as a driver for Uber was a sweet incentive for Demek Dagnachew to sign up with the ride-sharing service in April.
But soon after he started ferrying passengers around the District in his 2012 Toyota Camry, he said he noticed his earnings didn’t quite reflect the 80/20 split he’d been promised. Deductions began to appear in his paycheck, including a weekly $10 charge for using the app-ready smartphone he received when he started the new job.
“I thought 80 percent of the fares was a very good deal, but in reality Uber was making more money than I was,” said Dagnachew, 49, who quit the job last month. “I had to pay taxes, gas, mileage and for car maintenance and repairs. I was spending time and making $3 per hour.”
As the company based in San Francisco has grown exponentially, Uber has brought tens of thousands of drivers on board, touting the ride-share industry as a hard-to-pass-up opportunity where drivers can make up to $90,000 a year driving for the popular service.
But increasingly, drivers, labor leaders and attorneys representing drivers say the company’s claims of high pay are a sham. Across the country, Uber drivers have complained about unfair treatment and payment policies. Some say the low fares the company implements to remain competitive and attract customers have cut into their earnings.
In addition, because Uber drivers are considered independent contractors, they are not entitled to benefits; their relationship with Uber is merely about their use of the company’s app that connects them to riders. As contractors, they have the flexibility to work when they want and as many hours as they choose, but they also have to cover any costs they incur. After adding up those costs, some drivers say, making a profit is nearly impossible.
Uber spokesman Taylor Bennett said drivers do get 80 percent of the fares they earn; the company takes 20 percent to cover costs for marketing, drivers’ background checks, insurance and other administrative costs. The $10 weekly phone charge, he said, was rolled out over the past year in cities across the country, but he said he is unaware of any other fees imposed on drivers.
The company says it is creating 20,000 new driver jobs every month and it calls its “driver partners” small business entrepreneurs who earn better wages than taxi drivers. The average annual salary for a cabdriver in the United States is $22,820, according to the U.S. Bureau of Labor Statistics.
Uber declined to say how much its average Washington area uberX driver makes, but the company has said its drivers make as much as $90,000 a year in the New York market and $74,000 in San Francisco. UberX is the cheapest of the services it provides; the other is its premium luxury sedan service, uberBlack.
Bennett said that Uber drivers in the D.C. area who work “40 hours a week or more, are making a very good living . . . it is certainly better than taxis.”
Some drivers and labor advocates dispute those figures.
“I haven’t heard from any drivers who are making anything like that,” said Shannon Liss-Riordan, a Boston-based attorney who filed a lawsuit in June against Uber for unfair labor practices. “I don’t see how they think the drivers are going to make more than taxi drivers where they are charging less than taxis and they are having to pay all these expenses.”
Uber has expanded to more than 200 cities around the globe, revolutionizing the drive services industry, challenging antiquated taxicab systems and regulations while promising customers an easier, more efficient and cheaper transportation alternative. The company recently took its self-described war against “Big Taxi” to the next level by hiring former Obama adviser David Plouffe as its senior vice president for policy and strategy. Its popularity and quick growth has drawn protests from the taxi industry and mobilized lawmakers nationwide to tackle the mostly unregulated industry. But most of the attention has focused on the service’s impact on the traditional taxi industry, leading many to believe that drivers for Uber and similar services are leading a charmed life.
In the District, Uber recently cut its prices 15 percent, saying that its service is now 30 percent cheaper than a D.C. taxi. An uberX fare from Dupont Circle to Union Station, for example, is about $9, so if three friends share a ride and split the fare, they’d be paying just slightly more than a rush-hour Metro fare. The same trip by taxi would cost roughly $20.
The low Uber fares, while good news for riders, are a major concern for drivers who say they cut into their profits.
Last week more than 50 uberX drivers in Los Angeles gathered in a parking lot protesting the continued cuts in their pay. A driver said he has been through four fare cuts, going from $2.50 a mile to $1.10 a mile, according to news reports. A week earlier, about 100 uberX drivers in Seattle quit in protest of a recent fare reduction there. The Seattle Ride-Share Drivers Association said that after expenses are accounted for, drivers are losing money each time they pick up fares. In May, about 100 uberX drivers rallied outside the company’s headquarters in San Francisco demanding better pay after Uber announced another massive fare discount to keep the company’s fares below those of taxis.
“They keep reducing the fares, and that is great for them to get more customers, but it is really hurting the drivers,” said Liss-Riordan.
The lawsuit she filed on behalf of an Uber driver claims that Uber misclassifies its drivers as independent contractors to avoid paying them the same as employees with benefits. It also accuses Uber of having an unfair gratuity system and robbing drivers of tips.
The company misleads customers into thinking that a tip is already calculated into the fare, Liss-Riordan said. Uber’s system promotes a flat rate fare, which does not give customers the option of tipping when booking a ride.
“It is customary in the car service industry that passengers would tip drivers, so Uber is misleading the passengers into thinking that tips are already included when they are not,” she said.
Dagnachew, who works as a security guard at The Washington Post, said drivers are warned not to accept cash tips or risk losing their jobs. Uber, however, said that if customers want to tip, the company doesn’t have a policy prohibiting drivers from accepting them.
But part of what makes Uber hassle-free for riders is that customers can count on a one-transaction ride and don’t have to worry about taking their credit card out during the trip or carrying cash for tipping.
“We say you don’t have to tip, it is one flat fare,” Bennett, the company spokesman, said.
And some Uber drivers say that although their experience hasn’t been perfect, they appreciate the opportunity to earn good money.
Willie D. Smith, a Vietnam War Veteran with 15 years of experience in the limo industry, says he has worked for uberBlack for more than a year. In recent months, technical glitches with the company’s computer system resulted in him not getting paid several times, he said. But after several exchanges with the company, he said the problem was fixed. He said he is glad to continue making about $500 a week.
“It is a great company to work for,” Smith, 71, said. “You can make extra cash if your are willing to work hard.”
The challenge, Smith said, is that Uber takes its claim that it is a technology company and not a transportation company very seriously, so much so that nearly all transactions and communication, including drivers’ complaints are handled electronically, causing some frustration among drivers.
When Dagnachew disputed several payments, including one for work done on July 23, he received no answers. That day, his records show he made six trips, traveled 42 miles, spent four hours hauling passengers for a total of $79 in fares. His payment was $37.
In e-mail exchanges with Uber, Dagnachew, who lives in Springfield and works full time as a security guard in downtown Washington, complained about his share being cut by more than 50 percent.
“It is as if I was working for free,” he wrote in the e-mail, asking for an explanation. But the response to his queries came in what appears to be an automated e-mail, with information about how the payment cycle works and no answers specific to his case.
“I need to know why they took more money than me,” he said, frustrated. “I understand this service is good for the customer. The customer pays less and gets clean and reliable service. But the customer doesn't know what goes on inside.”
Uber says it has a good communication system to allow its “driver partners” to make claims. Bennett said the system gives people a chance to work, set their own schedules, drive when they want to drive, and be their own boss. Their drivers, he said, are full-time students working to earn their degrees, parents in need of extra cash, and people who take the job full time. Bennett said he could not respond to Dagnachew’s complaints because he did not know the specifics.
“It is a real opportunity and exciting chance for folks to make a living or make some income on the side,” he said. “We have thousands of drivers, tens of thousands across the globe. . .. We want to address any issues that may arise and we want to make sure that they are feeling comfortable and that the experience is not only great for riders but is great for drivers as well.”