Rideshare companies Uber Technologies Inc. and Lyft Inc. announced they will stop operating in Minneapolis starting May 1 after passing a new minimum wage law requiring rideshare drivers to be paid $15.57 per hour.
The City Council last week overrode a mayoral veto of the minimum wage measure, which requires ride-hailing companies to pay their drivers at least $1.40 per mile and $0.51 per minute for the time spent transporting a client to ensure they can earn the local minimum wage of $15.57 per hour.
The City Council, which voted 10-3, argued that the ordinance would support the city's East African immigrant community, many of whom work as drivers for rideshare companies. On the other hand, Uber and Lyft argued that they would be forced to pass the increased operating costs to riders, which would result in drivers eventually earning less.
After the veto, Uber and Lyft said they would stop operating in Minneapolis on May 1, the same day the law takes effect. Additionally, Uber said it would leave the city's metro area, making it the first in the country without Uber services.
"We're leaving Minneapolis. Despite our efforts and your support, the Minneapolis City Council passed an ordinance that would make rides on the Lyft platform unaffordable for the majority of Minneapolis residents. This drastic drop in rides means the thousands of drivers who rely on the platform for earnings will ultimately earn less, creating an unsustainable situation for our customers," Lyft said.
Behind the Minimum Wage Ordinance
The ordinance comes after rideshare and delivery riders staged protests in February, demanding fair pay and better working conditions. It also comes after Uber paid $290 million and Lyft $38 million to resolve an investigation into wage theft in November.
Uber and Lyft are now expected to push for a state bill that could overturn the Minneapolis ordinance and prevent local officials from enacting such regulations.
Meanwhile, several upstart rideshare companies said they are considering expanding operations into Minneapolis. This includes Texas-based Wridz, Empower, and Minneapolis-based startup Pikkapp, according to Axios. Unlike Uber and Lyft, which take a cut of every ride from the drivers, Wridz and Empower operate on a subscription-based model.
