Uber CEO says minimum wage law in Seattle has ‘hurt the people that it’s supposed to protect’

Uber CEO Dara Khosrowshahi speaks at the 2016 GeekWire Summit. (GeekWire File Photo)

Uber CEO Dara Khosrowshahi said he’s expecting a “positive outcome” from a potential vote this week in Seattle to move forward with a proposal that would revise recently implemented minimum pay requirements for food delivery drivers.

The controversial minimum wage standards were a topic of discussion during Uber’s quarterly earnings call with analysts this morning, demonstrating the attention on the regulatory debate over driver pay happening in Seattle.

The Seattle City Council’s governance, accountability, and economic development committee will meet Thursday to discuss and possibly vote on an ordinance aiming to lower minimum pay standards that went into effect earlier this year. If passed, the full council would vote on the legislation, likely later this month.

Uber and DoorDash responded to the existing law in January by adding a $5 fee for every order, paid for by the consumer. Demand has dropped considerably since then. Khosrowshahi said Wednesday that delivery order volumes have decreased 45% in Seattle.

Khosrowshahi said the existing regulation in Seattle and New York, which also recently passed a first-of-its-kind minimum pay law for delivery drivers, has “definitely hurt the people that it’s supposed to protect.”

Khosrowshahi took a similar stance to DoorDash CEO Tony Xu, who was also asked about the pay regulations on his company’s earnings call last week. “These regulations clearly are having the opposite impact of what they intend to do,” Xu said.

DoorDash said the current minimum wage law in Seattle requires the company to pay drivers at least $26.40 per hour of active delivery time, before tips and pay for mileage — well above the city’s $19.97 minimum wage.

The new proposal, CB 120775, would require companies to pay drivers at least $19.97 for each hour when making deliveries. It also eliminates the ability for the city to require certain data from the companies related to driver compensation and time worked, and restricts a rule that gave drivers a private right of action to sue the companies.

Seattle Mayor Bruce Harrell, who spoke at an event last week celebrating the 10-year anniversary of Seattle’s $15 minimum wage, told PubliCola that he has a lot of “unanswered questions” about the new legislation and noted that the city needs sufficient data from the companies to “make good decisions.”

(Uber Photo)

Working Washington, a nonprofit that helped pass the original legislation in Seattle, said in a press release last month that the new ordinance would “simply reduce worker pay well below minimum wage.” The organization released a report this week showing how the new ordinance would result in net pay of $13.17 per hour, due in part to expenses such as payroll taxes and mileage costs that drivers pay for on their own.

Since the current legislation went into effect, the impact on overall driver pay appears to be mixed. Some drivers who spoke at a City Council meeting on Tuesday said their income has dropped due to lack of orders. Others voiced support for the existing pay regulation, saying the extra pay helps cover their expenses.

One driver for DoorDash and Uber Eats said on Reddit that “offer frequency has gone down but I’ve been making more overall.”

Khosrowshahi said on the earnings call that “couriers may be making more per order, but they’re getting a lot less orders.” He said 30% of active couriers have left the platform in Seattle, “which I think is certainly not what the City Council had had in mind.”

DoorDash and Uber Eats — the top two food delivery companies in the U.S., respectively — have cranked up lobbying efforts in Seattle in a bid to change the existing regulations.

The Washington Alliance for Innovation and Independent Work, a privately-funded coalition supported by groups such as the Seattle Latino Chamber of Commerce and Washington Retail Association, took out a full page advertisement in the Seattle Times this week, encouraging people to sign a petition in support of changing the existing pay law.

Seattle and New York City have become testing grounds for the impact of labor standards in a growing food delivery market facilitated by tech companies that tout the flexibility and independence offered by their platforms, but have come under scrutiny for their impact on workers and restaurants.

Seattle’s minimum wage legislation was passed in 2022. It’s part of several unique “PayUp” laws approved recently in Seattle. Other “PayUp” policies include an ordinance related to the worker deactivation process and a 10-cent per-order fee approved in November that will help fund the implementation and enforcement of the “PayUp” laws. Seattle also passed a sick leave law for delivery workers last year.

Uber’s Delivery business, which includes Uber Eats, reported a 4% year-over-year increase in revenue to $3.2 billion for the first quarter, with adjusted profits of $528 million, up 83% year-over-year.

DoorDash set quarterly records for orders and revenue in the first quarter of this year, reporting $2.5 billion in revenue, up 23% year-over-year, with a net loss of $25 million.

Uber and Lyft are also fighting new driver wage regulations in Minnesota, where the companies have threatened to leave.