Ride-sharing company Lyft entered into a proposed settlement with the Federal Trade Commission (FTC), which included a payment of $2.1 million in penalties, after allegedly making deceptive claims to drivers about 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 agency stated.
“The complaint notes that these figures overinflated the actual earnings achieved by most drivers by as much as 30%,” the FTC stated.
Moreover, these earnings also included tips given 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,” implying that drivers would be paid a fixed amount provided they complete a certain number of rides during a period. In one guarantee, the company said drivers finishing 45 rides in a weekend would earn $975.
However, these guarantees did not mention that drivers would make only 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 that they would get the amount as an extra payment from the company when they completed this quota. In that case, their total earnings would be the sum collected from the customers for the 140 rides in addition to the $2,200 promised by Lyft.
As a result, if a driver earned $2,000 from customers, they expected Lyft to add this amount to the promised $2,200 for a total of $4,200 in earnings.
However, Lyft paid only $200, the difference between the guaranteed amount for that number of rides 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 that Lyft received from a driver in November 2021.
“This [is] unacceptable and not fair. ... [Lyft] is misleading their drivers. [Lyft] should pay their [drivers] as stated, it shows I completed the task. As the driver, I expected to be paid for the service I rendered,” the complaint stated.
The agency said the company received “tens of thousands” of similar complaints from drivers who believed that 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, and Lyft agreed to a proposed settlement that requires the company to pay a $2.1 million 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 receive only 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 because 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,” Lyft stated.
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 ad, 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 that 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.
