On December 4, 2018, New York City’s Taxi and Limousine Commission (“TLC”) voted to require ride-hailing companies operating in New York City to compensate its drivers who are treated as independent contractors, and not employees, on a per-minute and –mile payment formula, which will result in a $17.22 per hour wage floor.

This new rule is scheduled to take effect on December 31, 2018.

This new minimum wage for independent contractor drivers who operate vehicles on behalf of ride-hailing companies – including Uber, Lyft, Via, and Juno – will surpass the new $15 minimum wage for many New York City-based employees, which will also take effect on December 31, 2018.

This appears to be the first time a government entity has imposed wage rules on privately owned ride-hailing companies.

The main reason for this new requirement is that independent contractor drivers are often required to cover their own expenses that affects their hour wages.

Prior to this rule, ride-hailing app-based drivers were reportedly paid an average of $11.90 per hour (after deducting expenses), which resulted in drivers complaining of severe financial hardship. According to TLC Chair Meera Joshi, this rule would increase driver earnings by an average of $10,000 a year. Joshi also stated that traditional yellow taxicab drivers already earn on average at least $17.22 per hour pursuant to separate regulations.

The wage requirement is expected to have far-reaching repercussions, including:

  • Fare hikes by Uber that may result in customers using New York City yellow taxicabs and Boro Taxis, particularly given the rise of apps that allow riders to hail taxis from their phones, similar to Uber, Lyft, Via, and Juno.
  • Passage of similar minimum wage protections in other locales with a large population of ride-hailing drivers, such as San Francisco.
  • To avoid paying the higher wage prescribed by the rule, Uber, Lyft, Via, and Juno may consider reclassifying their for-hire vehicle drivers as employees, as the new minimum wage rule applies only to drivers who are independent contractors. However, it is anticipated that these companies will conclude that the others costs of employing drivers, such as providing employee benefits, would outweigh the costs of paying drivers the newly instituted minimum wage.

Effective December 31, 2018, New York State’s salary basis threshold for exempt executive and administrative employees[1] will increase again, as a part of amendments to the minimum wage orders put in place in 2016.[2] Employers must increase the salaries of employees classified as exempt under the executive and administrative exemptions by the end of the year to maintain these exemptions.

The increases to New York’s salary basis threshold for the executive and administrative exemptions will take effect as follows:

Employers in New York City 

  • Large employers (11 or more employees)
    • $1,125.00 per week ($58,500 annually) on and after 12/31/18
  • Small employers (10 or fewer employees)
    • $1,012.50 per week ($52,650 annually) on and after 12/31/18
    • $1,125.00 per week ($58,500 annually) on and after 12/31/19

Employers in Nassau, Suffolk, and Westchester Counties

  • $900.00 per week ($46,800 annually) on and after 12/31/18
  • $975.00 per week ($50,700 annually) on and after 12/31/19
  • $1,050.00 per week ($54,600 annually) on and after 12/31/20
  • $1,125.00 per week ($58,500 annually) on and after 12/31/21

Employers Outside of New York City and Nassau, Suffolk, and Westchester Counties

  • $832.00 per week ($43,264  annually) on and after 12/31/18
  • $885.00 per week ($46,020 annually) on and after 12/31/19
  • $937.50 per week ($48,750 annually) on and after 12/31/20

What New York Employers Should Do Now

  • Review executive and administrative exempt positions in New York State with salaries below the stated thresholds to determine whether (a) the employee’s salary should be increased or (b) the employee’s position should be reclassified as non-exempt.
    • For executive and administrative employees remaining exempt, increase their salaries to the new threshold based on their primary work location as of the December 31, 2018, effective date.
    • For employees reclassified to non-exempt, ensure that all of their work time is accurately recorded as of December 31, 2018.
  • Consider establishing procedures to track and update the weekly salaries for employees who work in different locations within New York State.
  • Conduct a regular review of primary duties tests for the executive, administrative, and professional exemptions because meeting the salary threshold alone does not confer exempt status upon employees.

Download a PDF of this Advisory.

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[1] New York law does not contain a salary threshold for employees who meet the duties requirements of the professional exemption.

[2] See Epstein Becker Green’s prior Act Now Advisory titled “New York State Department of Labor Implements New Salary Basis Thresholds for Exempt Employees.”