How the Drivers Cooperative built a worker-owned alternative to Uber and Lyft

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Erik Forman doesn’t claim he was the first person to have the idea of starting a driver-owned alternative to Uber. “The idea for a co-op belongs to everyone and no one,” he says. Drivers in New York City say they have always yearned for an alternative to Uber, since it first came to the five boroughs in 2011. It was in the ether, Forman says, mentioned in conversations between rideshare drivers and labor organizers.

But together with Ken Lewis, a black car driver, and Alissa Orlando, former head of operations for Uber’s business in East Africa, Forman took that nebulous idea and turned it into something tangible: the Drivers Cooperative, which has now been operating its own rideshare app, called Co-op Ride, since May 30.

When Uber first launched, the flexibility in choosing when and where to work—versus a cab, with set hours and the high startup costs of getting a medallion, serving as a barrier to entry—attracted drivers in droves, spurring the growth of the gig economy. But cracks soon showed in that promise of freedom: Drivers were independent contractors and not employees, so were not eligible for benefits; they became burdened with vehicle maintenance, expenses like gas, and loans for higher-end cars that were supposed to lead to better rider ratings and pay. Additionally, Uber’s and Lyft’s cutthroat political actions across the country began to make clear that there were no solutions coming from the company. “There was a honeymoon period…and then the honeymoon ended,” Forman says, “and the reality is drivers were stuck with vehicle expenses and variable pay.”

Attempts to fix those cracks soon faltered. In. 2018, New York City set the nation’s first minimum pay rate for Uber and Lyft drivers; at the time, Uber warned that the move would lead to “higher than necessary fare increases.” Fares did go up, but it didn’t discourage rides, and drivers did earn more—but Forman says that because the law stipulates a “minimum,” the company doesn’t pay above that. Now, fares are skyrocketing again amid a driver shortage, but drivers aren’t getting a bigger share, in some cases making less per trip.

Co-op Ride, the app from the Drivers Cooperative, takes the freedom and independence that Uber and Lyft promised rideshare drivers, and adds in worker ownership. Each driver is also a member who owns one share of the company, with one vote toward leadership and business decisions. And importantly, profits will be shared among all those driver-owners. The co-op upends the traditional model where the profits generated by workers accrue to executives and shareholders, instead redistributing them back to the drivers. Now, after the founders went through a complicated path to bring the co-op to life, the question is whether they can attract enough drivers—and riders—to make the effort worthwhile for its worker-owners.

[Screenshots: Co-op Ride]

What makes the co-op run

Co-op Ride says that drivers earn more on each trip—8 to 10% more than Uber and Lyft rides, according to the cooperative, because it takes a smaller commission—and all profits go back to the drivers in the form of annual dividends, based on how much labor they contributed; the more trips they complete, the bigger their share of profit. The Drivers Cooperative takes a 15% commission for operating costs, which will go toward driver onboarding, licensing, customer service, engineering, and so on. Uber, in contrast, claims to take a 25% fee on all fares (though research has found additional fees often make that cut even higher; some drivers claim it’s up to 40%).

Currently, the co-op is led by its founders—though they weren’t elected. The current board, which includes staff and drivers and is in its first term, was also appointed. Forman describes the trickiness of electing leadership without first organizing as a “chicken-or-egg situation that was somewhat of a ‘chicken-and-egg’ situation.” But that board will serve a two-year term, and elections will take place from then on.

The co-op also has a driver board, for which there will be elections this year. Those representatives will have control over the things that affect drivers most in their day-to-day work, including adjudicating customer complaints. If there is a customer complaint, there will be a hearing. “No driver gets disciplined without being able to tell their story to a jury of their peers,” Forman says. (Uber drivers have reportedly been dropped from the app after fake DUI complaints, with drivers claiming passengers abuse the report feature in order to get free rides.)

There are more benefits to the co-op, too. It partnered with the Lower East Side People’s Federal Credit Union in order to help drivers refinance their car loans, which could cut some of those overwhelming expenses. More than 90% of drivers are immigrants who don’t have a history of credit, or don’t have good credit for various reasons, and then get stuck in predatory financing situations. By partnering with the credit union, which is a member-owned bank, Forman says they’ve been able to help drivers refinance to lower rates; one member, he says, went from paying $1,900 a month for his car to $500 a month. It’s an example of the way the cooperative’s members can pull its purchasing power together to get better prices on all sorts of expenses.

The promise of sharing profits is surely alluring, but how profitable can a rideshare company be, especially considering how many years Uber and Lyft operated in the red? To Forman, there’s a clear path to profitability, particularly if it doesn’t spend millions on legislation, like Uber and Lyft have. “If you’re not trying to bankroll an assault on workers rights in the United States, it turns out you save a lot of money,” he says. To break even, he says, they need to complete about 1,300 trips a day. In New York City, there are more than 400,000 rideshare trips daily. “We only need to claim a small sliver of the market to have a self-sustaining operation.”

[Photo: Co-op Ride]

How to build a co-op

Forman didn’t come to the idea of a c
ooperative from personal experience as a driver, though he’s heard firsthand from many. His background is in labor organizing. He helped organize unions for about 15 years, from the fast food industry to his own school, when he was a high school teacher in New York. From there he became a labor educator, working with the Independent Drivers Guild, a union that represents more than 80,000 for-hire vehicle drivers across the city (and receives some funding from Uber.) IDG, which was founded in 2016 by the Machinists Union, led the campaign for that minimum pay rate in New York City and pushed for Uber to offer in-app tipping. Currently, it’s working on addressing driver issues from carjackings to lower insurance policies.

IDG followed the typical union strategy, fighting for collective bargaining agreements with the big, established employers—and has won some concessions like tips and a minimum pay. But hearing from drivers, Forman noticed that what resonated most deeply with many was the idea of ownership. “I decided to look for ways to help workers make their dreams come true,” he says. In May 2019, he applied for and won, a co-op innovation grant from Capital Impact Partners, a nonprofit that provides financial services to community development; and the Workers Lab, an organization that funds experiments to build worker power. To run a workshop for drivers at IDG, as Forman says, “imagine how worker-ownership could transform the industry.”

That effort had a specific focus on the expenses that so burdened drivers, and which often weren’t addressed by bargaining agreements. Unions often focus on the top line of pay, but in the rideshare industry, “that’s only half the battle,” Forman says. “Half of every dollar drivers make is eaten by vehicle expenses. If we’re looking to increase pay, it makes sense to focus on both sides of the problem.” The grant funded research into what impact worker-owned co-ops could have on drivers—co-ops in all sectors of the driving ecosystem like gas stations, car washes, insurance, and so on.

Though that workshop looked at all the ancillary sectors to rideshare, the drivers who participated were “so adamant,” Forman says, that the most important way to reduce costs and expenses was to get control of their own rideshare app. “A lot of drivers were saying,…

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