Uber, Lyft say they'll leave May 1 after Minneapolis City Council overrides Frey veto

Rideshare giants Uber and Lyft said they will leave Minneapolis on May 1 after the City Council voted Thursday to enact a pay raise for drivers.

The council voted 10 to 3 to override Mayor Jacob Frey's veto of the ordinance, which sets drivers' minimum pay for rides in the city starting May 1.

In statements after the vote, Uber said it will "stop operating a transportation network in the entire metro area including the airport," and Lyft said it will be "shutting down operations in Minneapolis."

The vote was met with cheers from an organized group of drivers, and council members who support the plan declared it a victory for workers and scoffed at the ride-hailing companies' threats. Meanwhile, a forlorn Frey said, "We've got a lot of work to do" to prepare for a city without Uber.

Frey had pleaded with council members to lower the minimum pay to a level that would significantly boost driver incomes, but still be acceptable to the ride-hailing companies.

Thursday's vote means the ordinance will go into effect as-is, although the council could change it before May.

The council approved the plan last week with a veto-proof majority. Frey vetoed it the next day and called Thursday's special meeting to get the override vote taken care of quickly.

Uber and Lyft are Minneapolis' only licensed rideshare companies, although several entities — both local startups and existing companies — have said they would be eager to fill the void. None have formally applied for a license, and it's unclear if any could scale up operations in a matter of weeks.

On Thursday, Uber competitor Empower announced it could do so — and would — before May 1. That could open a new legal fight; Empower's business model is different, and CEO Joshua Sear told the Star Tribune he doesn't believe the company needs any special licensing. However, in December, Washington, D.C., accused Empower of operating illegally there, according to local media reports. The irony: A decade ago, Uber burst into many markets, including the Twin Cities, illegally before cities created a licensing regimen.

Why is this happening?

For several years, an organized group of drivers has complained that Uber and Lyft have cut drivers' earnings to the point where some say they can't make ends meet. Many were cab drivers before Uber entered the market, leading to massive shrinkage of the local taxi sector. The companies only recently started reporting profits, and critics have said their business model depends on exploiting drivers, many of whom locally are East African immigrants.

These organized drivers found allies among the more liberal members of the City Council and state Legislature. New minimum standards were approved last year in Minneapolis and at the State Capitol, but Frey and Gov. Tim Walz vetoed them. In Minneapolis, the political makeup of the council changed in November's election.

Supporters on the council said their goal was for drivers to earn the equivalent of the city's $15.57 hourly minimum wage. However, a state-commissioned study, released a day after their vote, concluded that drivers could be paid far less than the Minneapolis plan to earn the minimum wage equivalent — even with benefits like health insurance and paid time off.

The Department of Labor and Industry study suggested that drivers could be paid 89 cents per mile and nearly 49 cents per minute to reach minimum wage equivalency for rides across the metro. A minimum of $1.21 per mile and 49 cents per minute for such rides would afford drivers a suite of benefits, including paid leave, health insurance and retirement savings.

By contrast, the plan approved by the City Council guarantees a floor of $1.40 per mile and 51 cents per minute. The driver of a wheelchair-accessible vehicle would get $1.81 per mile. Frey had pushed for a minimum payment of $1.20 per mile and 35 cents per minute. The approved plan, which includes identical rates to those approved last year and successfully vetoed by Frey, includes additional provisions, including a $5 minimum payment for any ride, annual increases for drivers, and restrictions on how money can be deducted from drivers' wages.

City Council members who supported the higher minimums seemed oblivious to the state study, or discounted it.

Council Member Robin Wonsley, the chief sponsor, pointed to a city council-commissioned study that examined three options and concluded the minimums contained in the council-favored plan were the most likely to guarantee at least minimum wage equivalent. That 29-page study, however, did not include any actual data from the rideshare companies.

Next: State Capitol

Frey, Uber and Lyft have all pointed to the State Capitol for a possible route to avoid the companies' departure, since a state law could essentially override the city ordinance.

Organized drivers are turning their attention there as well in their attempt to garner pay minimums statewide. A Democratic-controlled Senate committee Wednesday approved a plan to adopt statewide minimums that, according to the state study, would be appropriate for greater Minnesota, but above the level necessary for the metro. (The state study recommended higher minimums for greater Minnesota than the metro because there's more down time and distance between rides in rural areas.)

After Thursday's vote in Minneapolis, Republicans who represent suburban districts in the Minnesota House said they plan to introduce a statewide bill to preempt local governments from passing similar rideshare pay ordinances.

"This is clearly unacceptable to Minnesotans, it jeopardizes the quality of life of our state, the freedom of mobility for seniors and limits the opportunity for people to get around," said Rep. Pat Garofalo, R-Farmington.

Garofalo said he believes the rideshare companies threats to leave the state on May 1.

"It's important that we not let the far-left extreme of the DFL dominate the debate," he added.

Republicans said Democrats in the majority in the Legislature should work with them to pass the bill, which they can't do without DFL votes.

How they voted

Voting in favor of the override were Council President Elliott Payne, Vice President Aisha Chughtai and Members Robin Wonsley, Jeremiah Ellison, Jamal Osman, Katie Cashman, Andrea Jenkins, Jason Chavez, Emily Koski and Aurin Chowdhury.

Voting against were Council Members Michael Rainville, LaTrisha Vetaw, and Linea Palmisano.

That's the same breakdown as last week's original vote, except for Koski, who originally voted against the ordinance.

Staff writer Briana Bierschbach contributed to this report.