Yellow Cab pushes driver prepayment plan that city officials say is illegal
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The largest taxicab company in San Francisco is trying to squeeze more money from its drivers, who say they're already being hit hard by increased gate fees and rising fuel costs.
Yellow Cab has ordered its drivers to prepay for the privilege of driving each month, amounting to thousands of dollars for full-time drivers. Compounding that financial hardship is the apparent intention of the company to use prepaid gate fees to change the employment status of its drivers from employees to independent contractors who are no longer entitled to unemployment insurance and workers' compensation coverage.
While local officials say Yellow Cab's new policy is illegal, they have little power to compel the company to abandon the plan, which was supposed to go into effect Aug. 15 but has now been moved to December under pressure from city officials and the United Taxicab Workers union. Drivers are also threatening to bring legal action to stop Yellow Cab, relying on a past ruling barring the company from requiring deposits from its drivers and misclassifying drivers as independent contractors.
Repeated attempts by the Guardian to contact Yellow Cab representatives were unanswered, but they had to talk to Jordanna Thigpen, executive director of the San Francisco Taxicab Commission. She found Yellow Cab's prepayment plan to be in violation of the Superior Court's decision. "I was not persuaded that the prepayment was not a deposit," Thigpen told the Guardian. "What they are actually doing is asking for a security deposit again under the guise of an Employment Development Department requirement. But the EDD guidelines are just that guidelines."
The EDD sets work rules and standards in California. According to its Taxicab Industry information sheet, taxi drivers classified as independent contractors "prepay to lease a taxicab for a period of at least 28 days." Yellow Cab used the line, which is posted prominently for employees to see, to justify requiring that all its drivers prepay up to $1,930.
Bud Hazelkorn, cab driver and chairperson of United Taxicab Workers, said UTW has "been talking to an attorney and hopes to bring an injunction against Yellow Cab." He takes little hope from Yellow Cab's recent decision to push its prepayment deadline from Aug. 15 to December, though he does think it was a response to the UTW's outcry.
For Hazelkorn, it matters little whether the deadline is a week or six months from now. "Any kind of prepayment policy is against the Tracy decision," he said. "They are trying to make themselves look better by pushing back the deadline. But the fact is that Yellow Cab wants to establish a precedent of prepayment and that is illegal."
The 1996 ruling in Joseph Tracy vs. Yellow Cab barred cab companies from demanding security deposits from drivers. The order, issued by Judge William Cahill of the San Francisco Superior Court, "permanently enjoins the defendant [Yellow Cab], from classifying plaintiffs and similarly situated drivers as independent contractors for purpose of denying such drivers any benefit under California law with respect to workers' compensation, unemployment insurance, and paying a cash bond to defendants as a condition of driving a taxicab."
The 1996 case also found that Yellow Cab drivers were being unlawfully misclassified as independent contractors, and ruled that the necessary control Yellow Cab exercises over its drivers requires that they be considered employees. For example, drivers have no control over the amount charged to passengers in fares, and often rely on dispatchers to notify them of potential customers. In addition, Yellow Cab keeps personnel files on each of its drivers, conducts orientation programs for new hires, and does not allow its drivers to advertise their services. The Superior Court also found drivers to be "an integral part of [Yellow Cab's] business," further solidifying cab drivers' status as employees.
Yellow Cab driver John Han explained that the prepayment fee is based on the number of shifts a driver works. He offered himself as an example: Han works eight shifts per month. Multiplied by the average daily gate fee of $96.50, Han's prepayment equals $772. Since Han said that cab drivers make between $100<\d>$150 per day, most of his earnings are eaten up by the end of his shift or before the shift even begins.
To coax its drivers into compliance, Yellow Cab posted a sign in its San Francisco office that reads, "Do not delay in completing your prepayment or you will be subject to being held out of service." Han says that being held out is equivalent to being a benched baseball player who is technically still on the team.
"We won't be fired, but we will be prevented from being able to work," Han said, noting that such threats constitute the exercise of control over the drivers by Yellow Cab. "Forcing drivers to do anything is having control over its workers, which is a employer-employee relationship."
EDD spokesperson John Stroot told the Guardian that the information sheet Yellow Cab uses to justify this policy does not compel companies to do anything new. What it does contain are guidelines for different taxicab business models: one for companies that have employees and another for companies that use independent contractors.
"These are not laws," Stroot said. "Cab companies can operate any way they choose. They are just guidelines for companies to follow to figure wage, hour, and tax issues." If Yellow Cab wanted to make drivers independent contractors, it would have to fulfill all requirements on the sheet, not just the one specifying prepayment. For example, drivers would be required to perform their business without any form of control from Yellow Cab, including foregoing the use of Yellow Cab's dispatch services. But Stroot said most drivers are employees under common law in California "because the company directs and controls the way drivers provide their services."
Misclassifying employees as independent contractors has become a national issue, particularly after Rep. Lynn Woolsey (D-Marin County) and Rep. Rob Andrews (D-N.J.) introduced a bill intended to crack down on the practice. If passed, the bill would impose penalties on employers who misclassify employees and inform workers of their right to challenge that classification. The bill also would require state unemployment insurance agencies to conduct audits to identify employers guilty of employee misclassification. In addition, the Department of Labor would be required to perform targeted audits of employers in some industries.
The UTW is currently working with Thigpen and Sup. Chris Daly's office to achieve some form of justice for drivers. "My office is very concerned by this policy," Thigpen said. "It couldn't have happened at a worse time for drivers. These guys are good people, and they work hard every day." Thigpen said Taxi Commission member Tom Oneto asked her to draft new rules that would apply to such policies. Other than imposing fines and revoking permits, however, there is little her office can do.
"We need serious overhaul of our penalties," Thigpen said. "Right now I can only charge them $25 in fines, which is pathetic. They know they are breaking the law and ripping people off. But how do you begin?" she asked. "We need to get legislation passed that would overhaul the rules." The strongest weapon city officials have against Yellow Cab is to seek an injunction. "Only the courts can decide if this is legal," Thigpen said.
Thigpen and Oneto met July 25 with Lena Gomes, one of Daly's legislative assistants, to discuss how the Board of Supervisors might take action. "We are creating a resolution urging Yellow Cab not to charge the drivers the fee," Gomes told us. "Yellow Cab appears to be trying to change their drivers classification to avoid certain financial responsibilities. This is one of their strategies."
If Yellow Cab succeeds in its plan, other cab companies may follow suit. "Right now they're just hanging back to see what Yellow Cab will do," said Han, who estimates that Yellow Cab stands to gain at least $2 million per year from this policy. For Han, not knowing what the company will do with the money is unnerving. "They should be investing it in a health care plan for drivers. But I can only assume the money will be used to buy a sailboat for the top management."
While Hazelkorn said that drivers are "100 percent opposed to this kind of extortion," some disagree. Tariq Mehmood, a Yellow Cab driver for eight years, believes most drivers would rather be independent contractors "because of the freedom it provides us to set our own hours." Mehmood said the UTW's fight against Yellow Cab is just another ploy to bankrupt the company, which "would be devastating to drivers. I would love to not pay anything not even gate fees and still be an independent contractor, but that's not the reality."
Regardless of how they feel about the policy, some have already begun making payments, while others are quietly saving money just in case. Han refuses to do either, hoping that Yellow Cab can be defeated if enough drivers join him. But 80 to 90 percent of Yellow Cab drivers are immigrants, Han points out, and many are still unacquainted with their rights. "They are afraid to defy the company," he said. "Yellow Cab is setting a trap for those who will fall for it."