In terms of illegally deducting sales tax and black car fund fees from drivers' pay... I genuinely don't understand why a large corporation ever messes up like this in the first place.
It surely can't be legal incompetence -- a large company like this has lawyers to review these things, and who know the contracts they've created.
But it's hard to imagine Uber/Lyft thinking they're going to get away with it -- obviously it's going to eventually turn into a legal suit and they're going to lose.
I really don't get it. Often these kinds of situations happen when the law is ambiguous or unclear, and the company it taking a calculated risk that the courts would rule in their favor. But this doesn't seem to be that, unless I'm missing something?
Sometimes it is incompetence; someone flags a certain thing as the wrong classification and it comes out of the wrong bucket.
But I think it's more than that, here. The settlement covers almost the height of when Uber and Lyft were desperately trying to undercut everyone else in the market--taxis, public transit, taking a bike, scooter-share, anything--and keeping these out of view of the customer helps a lot in that effort by making the price look lower.
> The Uber settlement fund is for people who "drove for Uber between November 10, 2014, and May 22, 2017, and had deductions taken for New York sales tax and Black Car Fund fees." The Lyft fund is for people who drove for Lyft between October 11, 2015, and July 31, 2017, and had the same kinds of deductions.
By my mind, it's in the same vein as businesses (everyone from Comcast to that small restaurant on the corner) that list one price in big numbers but tack on surcharges at the end. Obscuring the true price should be more illegal than it is.
The trouble is that Americans seem to be onboard with not adding taxes, and so that's your slippery slope right there. In Europe regulators are like "If the headline price is €10 but actually nobody pays €10, that headline price is wrong and must be fixed" and they're including taxes in that.
In IT there was a UK battle years back when magazines were still a big deal about whether you could advertise prices without VAT. All these companies charge retail customers VAT of course, but in effect the way VAT works the price is without VAT if you are yourself a business that claims VAT refunds. So the argument in some of these magazines was, look, you can buy this magazine as a hobbyist, you can buy this Western Digital 200MB hard disk from an advertiser as a consumer, and you'd pay VAT. But actually they advertise in our magazine because many readers work in IT, so while they might get 10 hobbyist orders for that 200MB disk, they also get one or two business orders for a hundred drives, and those customers don't pay VAT so why must we show VAT prices ?
Americans also don't know how much their taxes are. Retailers often use taxes to hide extra charges by bundling both into a "taxes and fees" section, which if enumerable always includes more fees than taxes. Uber Eats, GrubHub, etc all do this.
> The trouble is that Americans seem to be onboard with not adding taxes, and so that's your slippery slope right there. In Europe regulators are like "If the headline price is €10 but actually nobody pays €10, that headline price is wrong and must be fixed" and they're including taxes in that.
Again the problem is that the taxes are different in every municipality and state which presents a calculating nightmare. I mean you do the math on 0.0625% of $17.23. It's super difficult to do and can change frequently anyone that wants to run a business in more than one or two municipalities would have to hire someone full time. Plus there's the extra headache of running a sale, etc.
It is more helpful to think of the US as 50 different states that have a common federal government rather than a single united whole.
Gee, if only ride share apps had access to both your starting and ending locations so that they could accurately assess taxes and fees. This is not an intractable problem when your product is a software platform that can look at the location data and do the math for you.
> anyone that wants to run a business in more than one or two municipalities would have to hire someone full time.
Yes, when you're trying to operate a nation-wide business, you should generally hire accountants and lawyers, or at least consult with them and take their good advice.
Yep, if it's "too complicated" to follow the laws in the areas where you have chosen to do business, then you should not do business in those areas, or you should hire someone smart enough to work it out.
They can and do (airline tickets for example). Most hotel web sites will also give you an "all-in" price, although they retain the dark patterns of displaying the ex-tax rate by default, and slipping in a "resort fee" when you check in.
Airline tickets and hotels are straightforward because everyone will pay the same sales tax.
At least not too many hotels or airlines offer “$99 at any of our locations in the country” deals. Dunno how it works for “free” stays paid with points in fixed amounts.
I’ve never been sympathetic to the American argument that we want people to constantly feel how much they’re paying in taxes, but VAT might be a good point in their favor. VAT is very high (20-25% in many countries) and horrifically regressive. It would be a nonstarter for even people like me, who support raising taxes in the US, because of that.
VAT has other benefits though that would fix a lot of weirdness that traditional sales tax has. Taxing the value added makes a lot more sense than taxing the "sale", IMO. It distributes the tax fairly among all businesses in the supply chain and eliminates double-taxing that can happen when the local mom and pop shop resells soda from Sam's Club.
There is of course no national US sales tax and every state does it differently - some even have no sales tax at all - but generally speaking, it’s already structured to prevent double-taxing situations like the one you’re describing (plus groceries are usually exempt anyway in both cases.)
The issue is VAT is astronomical compared to the US and hits the poor hardest because consumption taxes are regressive. If it were more apparent on on pricing how much was tax, I could see people who make that argument here having a point. I find it hard to believe Europeans would not blink at seeing such a regressive tax day after day.
It certainly matters to the poorer people who could buy more stuff if their tax burden was shifted more fairly. This has concrete effects: VAT has no impact on a wealthy person say, stocking every room in his house with a 80” 4K TV, while it makes a big difference to the poor person who wants just one TV. The effect compounds over time, obviously, and for more important purchases as well.
The US state and federal governments spend 1.5 trillion per year on Medicaid, Medicare, CHIP, and VA health care. The actual number is even higher than this by a fair margin because many US health systems are owned by local governments, and US government employee health spending isn’t accounted for either. With 330million US citizens, that means per capita US government health care spending is 4500. Most countries are able to fund their entire public health care systems with very similar per capita numbers; America doesn’t have universal public healthcare because the system is broken, not because it needs the money. So very high consumption taxes aren’t the reason Europe can afford good health policies - the American government already spends the same amount, and could stand to dramatically increase income taxes on high earners.
But somehow this isn't a problem in the EU. I can order from Germany? Spain? Italy? Yet the price is what is shown 'on the sticker'. Of course there are delivery charges, which seem to vary quite a lot (though often free for big ticket items).
In the US the sales tax rate can vary by city, county, and state. Aside from shipping charges, the shipping address is needed to know which governments need to be paid how much.
I suspect it might be how taxes are organised - in the EU we have VAT, so paid to the government where the good/service was created, but in the US it is sales tax, so paid to the government where the good/service was purchased. That's my guess anyway.
Although VAT ultimately flows to where the value was created the consumers are paying tax when they purchase the final product. If I buy a loaf of bread, a sausage, a "home made" cake and a bottle of Coke at the Polish store, the tax for me, the consumer, is local tax.
It isn't necessary for me to know that the sausage actually came from Poland, the bread from a specialist bakery six miles away, the "home made" cake actually was made in the proprietor's home surprisingly albeit at some scale, while the Coke travelled second furthest in its current form, from Wakefield in Yorkshire, over an hour away. These things matter in terms of the onward destiny of the tax money -- Poland gets tax revenue for producing sausages, but not for the bread made to a Polish recipe in a foreign country -- but to me the consumer they're irrelevant.
If they do something illegal and don't get caught they win.
If they get caught, but the fine is less than they made breaking the law, they win.
If they have to pay back the same amount of money, but can pay it years later, they win.
If the only punishment for bank robbery were paying the bank back if you got caught, we'd probably see a lot more bank robberies.
The Pinto Memo is a great exposition of this... $140M cost to retrofit a modification to the fuel system against a $50M "benefit to society" (ie. legal costs) saving 180 deaths and 180 serious injuries per annum.
Same for US hospitals and health insurance. They constantly make “mistakes” in their favor and the worst thing that can happen is that they have to pay what they are required to pay anyways.
"obviously it's going to eventually turn into a legal suit and they're going to lose."
I'm not convinced that's obvious. I'm guessing for every story of "large corporation held to account for breaking wage laws / committing wage theft" there are 5 stories of them not being held to account. (I could be wrong - it could be 2 stories, it could be 10... but I'm willing to bet they get away with it more than they don't.)
Also - is the amount they pay out more than or even equal to what they grabbed, or less? If I read the settlement correctly this means that there won't be a full investigation, e.g. - a deep dive to find out how much money they actually skimmed. This is a settlement so I don't think they ever actually got an absolute tally of how much money was in question.
I'd also consider that the corporation may face consequences but the individuals who green lit the decisions are unlikely to suffer. In fact, by the time the bill comes due, legally, isn't there a good chance the folks have already updated their resume with glowing current numbers and moved on to another company? The time period in question was 2014-2017. How many people are even still at those companies from that time period that made these decisions?
Barring evidence to the contrary (internal emails/discussion), I definitely would assume mistake over malice.
I've worked in Monetization at 3 SaaS cos (admittedly all smaller than Uber, O(100-1000) employees), and at all of them I've seen mistakes of a similar proportion of revenue (~1%) made in both directions (overcharging and undercharging customers) in violation of the letter of our contracts with absolutely zero intent or malice.
Wage law adds several additional layers of complexity beyond that.
at least one cloud provider service over (and sometimes under) charged customers for several years on a particular product due to a misinterpretation of some complex rules. it happens at all orders of magnitude.
To these companies, the law is just another cost of doing business to be accounted for and amortized whenever possible. If they can feign success in the early years, they get a bunch of investor dollars that they can then use to pay off or bribe their way out of legal situations later, when they're much bigger.
After all, they did get away with it, didn't they? 290 million is like 4% of one quarter's revenue for them, to pay back 6 years of operating illegally. Seems like a slap on the wrist if there ever was one.
The way it would usually go is that one or more higher-ups whose job it was to optimize pricing decided to get "creative" with the law. People who eventually noticed that things seemed shady/irregular probably spoke up but their concerns were dismissed (with the same reasoning you mention - "the lawyers probably looked at all of this - of course it must be perfectly legal!") and so they stopped wasting their breath.
(Probably also on some level Lyft felt like they needed to follow suit in order to compete on price in their most populous and important customer region.)
Keep in mind that the lawyers aren't software engineers - if you tell legal that you're doing A but in the code you're actually doing B, they will tell you "A is perfectly legal, keep doing that." They're not going to review the code for themselves.
The worse thing of all is that these companies dont care for its drivers. On what kind of earth do we live. Hopefully these kind of companies will be seen as pure evil in history books in 100 years from now.
Isn’t wage theft the most common and largest form of theft? The reputation of business in the US precedes itself
Odd that when this common thievery impacting the hardest working among us shows up among business inclined folks the reaction is oh it must have been in good faith, must be some kind of mistake. When lower stakes lower impact shoplifting occurs, people are immediately discussing punishments and outcries for jettisoning groups of people to preserve our social fabric.
This is a wage theft. From the sheer scale of wage theft going on in this country, yes, they do think they will get away with it. And the punishment if they don't is inconsequential.
Fraud/theft only happens to the common man. When a company does it it's either good business acumen or (if they got caught) a "technical glitch affecting a small percentage of users".
It's a loan to the Uber at t=x, issued by Uber at t=y+x. The interest on the loan is legal fees and penalties. When the value of the money at t=x is greater than the predicted cost of interest, and you aren't bound by ethical scruples, you take the cash.
Sure, a couple drivers might have needed to take out predatory loans to cover their stolen income, but hey at least the company still exists today to fund their future, unbridled income! They should be thankful, actually.
Yep, it is the mental gymnastics of might-makes-right.
It surely can't be legal incompetence -- a large company like this has lawyers to review these things, and who know the contracts they've created.
But it's hard to imagine Uber/Lyft thinking they're going to get away with it -- obviously it's going to eventually turn into a legal suit and they're going to lose.
I really don't get it. Often these kinds of situations happen when the law is ambiguous or unclear, and the company it taking a calculated risk that the courts would rule in their favor. But this doesn't seem to be that, unless I'm missing something?