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.”
A file photo of an Uber driver protesting outside Uber’s headquarters in Santa Monica, California. Photo: Reuters
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.
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 Governor 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.
© 2017 The New York Times News Service