Ride-sharing company Lyft entered into a proposed settlement with the U.S. Federal Trade Commission (FTC), which included a payment of $2.1 million as penalties, after allegedly making deceptive claims to drivers on how much they could potentially earn.
For instance, the company claimed that drivers in Atlanta could make up to $33 per hour; in Portland, Oregon, $41 an hour; and in Los Angeles, $43 an hour. However, the company did not disclose that these amounts “did not represent the income an average driver could expect to earn,” the FTC said.
Instead, the figures “were based on the earnings of the top one-fifth of drivers.”
“The complaint notes that these figures overinflated the actual earnings achieved by most drivers by as much as 30%,” the FTC said.
Moreover, these earnings also included tips made by passengers.
“Many drivers would assume any tips they received would be in addition to an hourly pay figure,” the FTC stated.
Lyft also provided “earning guarantees,” insinuating that drivers would be paid a fixed amount provided they complete a certain number of rides during a period. In one guarantee, the conpany said drivers finishing 45 rides in a weekend would earn $975.
However, these guarantees did not mention that drivers would only make the difference between the guaranteed amount and what they actually earn.
For instance, Lyft advertised that drivers get $2,200 when they complete 140 rides. Drivers believed they would get the amount as an extra payment from the company when they completed this quota. So, their total earnings would be the sum collected from the customers for the 140 rides in addition to the $2,200 promised by Lyft.
So, if a driver earned $2,000 from customers, they expected Lyft to add this amount to the promised amount for a total of $4,200 in earnings.
However, Lyft only paid $200, the difference between the guaranteed amount and the actual earnings from customers.
If the driver in this instance earned $2,200, then Lyft would not pay them anything. This promotional tactic was found to be misleading to drivers.
The FTC quoted a complaint Lyft received from a driver back in November 2021.
“This [is] unacceptable and not fair. ... [Lyft] is misleading their drivers. [Lyft] should pay their driver[s] as stated, it shows I completed the task. As the driver, I expected to be paid for the service I rendered,” the complaint said.
The agency said the company received “tens of thousands” of similar complaints from drivers who believed the guaranteed amount was their bonus payment.
The FTC earlier sent a Notice of Penalty Offenses to Lyft, warning the company that deceptive claims about earnings were unlawful. However, Lyft continued to make such claims.
The commission eventually filed a complaint, with Lyft agreeing to a proposed settlement that requires the company to pay $2.1 million in civil penalty.
In addition, the settlement bans Lyft from making any claims unless it has “meaningful evidence” to support such statements. The company cannot include tips in claims regarding hourly earnings. It also has to disclose to drivers that under the earnings guarantee, workers will only receive the difference between the guaranteed amount and what they actually make.
Lyft’s Wage Policies
Following the settlement agreement, Lyft said that it agreed to the deal since the company recognizes “the importance of transparency in maintaining trust in the communities” it serves, according to an Oct. 25 statement.“We agreed to take steps to ensure that what we say about driver earnings in our advertising is clear,” it said.
The company claimed that in February, it became the “first and only” company to provide drivers with guarantees of rider payments. Under the Earnings Commitment initiative, drivers will earn 70 percent or more of rider payments minus external fees.
If the driver makes less than 70 percent by the end of the week, the company will pay the difference between the earned amount and the guaranteed amount.
“The complaint’s interpretation of ‘up to’ as meaning ‘likely’ is incorrect. For one thing, its interpretation of ‘up to’ as ‘likely’ is categorically false. ‘Up to’ in the English language denotes the limit or boundary on the described item,” he wrote.
For instance, in a July 21 advert, Lyft claimed that drivers in Miami could earn up to $31 an hour and in San Francisco up to $44 per hour, the commissioner noted. The figures Lyft used to make these claims were based on earnings of the top 20 percent of the drivers.
“Twenty percent is a substantial proportion of any population. Telling a consumer that he or she may earn up to what 20 percent of others earn—meaning that 20 percent earned even more than that—is consistent with the ordinary meaning of the phrase ‘up to,’” Ferguson said.
