Economy First Look

Did Uber swindle its drivers? Fib complaints cost company $20 million

Uber agrees to pay a $20 million settlement for misleading recruiting strategies. 

The Uber app logo is seen on a mobile telephone. The ride-hailing company announced a $20 million settlement with the Federal Trade Commission on Thursday.
Toby Melville/Reuters/File
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How much can you really earn driving for Uber? Not as much as the company says, according to federal regulators.

The popular ride-hailing service has agreed to settle charges from the Federal Trade Commission (FTC) that it exaggerated drivers' earnings potential and understated lease costs. In addition to paying $20 million dollars in refunds to drivers, Uber says it will improve the accuracy of its advertising and reform various business practices.

In order to increase its geographical reach and stay ahead of competitors like Lyft and Fasten, Uber recruits aggressively on platforms such as Craigslist. The FTC’s investigation covered the period from 2013 to 2015, and found that such statements routinely exaggerated how much money drivers could expect to make.

For example, a statement from chief executive Travis Kalanick published on Uber’s website claimed that the typical driver in New York City could make more than $90,000 a year, when the FTC found that the actual mid-range income was almost a third less, at $61,000.

The FTC took issue with advertised hourly rates in 18 other cities nationwide, including Boston, Chicago, San Diego, Seattle, Phoenix, Philadelphia, and Atlanta. Drivers in such cities who managed to reach the stated hourly rates of $15 to $29 fell in the top 10 percent to 30 percent of Uber earners in their respective locations.

Additionally, the complaint found that the company misled drivers with respect to the financial burden of leasing a car. Advertisements aimed to entice potential drivers promised leases as low as $119 per week with the “best financing options available,” but in reality, weekly payments were closer to $200, CNET reports.

In a statement, Uber expressed its desire to improve working conditions for drivers.

"We've made many improvements to the driver experience over the last year and will continue to focus on ensuring that Uber is the best option for anyone looking to earn money on their own schedule," the San Francisco company told the Associated Press.

The company says a team of economists is working to ensure advertisements accurately state average earnings, according to Business Insider.

This settlement comes three months after a London court ruled that British drivers are entitled to standard rights such as minimum wage and paid holidays, a potential threat to Uber's business model classifying drivers as “contractors,” rather than “employees.”

Drivers' rights are a contentious issue in the United States as well. Two months ago, Uber contractors joined the national "Day of Disruption," striking alongside other part-time workers in a handful of industries as part of the "Fight for $15" labor movement. At the time, drivers' comments foreshadowed the FTC's conclusions, arguing that despite advertisements of $19 per hour, take-home pay was closer to $7.25 after factoring in expenses such as gas, maintenance, and insurance.

Other recent controversies include allegations of sabotaging competitors and public debates about whether drivers should be tipped, among others.

Will the US follow Britain in moving to hold Uber more accountable for the wellbeing of its contractors? The FTC views this settlement as a measure of protection for drivers.

"Many consumers sign up to drive for Uber, but they shouldn't be taken for a ride about their earnings potential or the cost of financing a car through Uber," said Jessica Rich, the director of the FTC's Bureau of Consumer Protection.

This report contains material from the Associated Press.

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