Wednesday, September 8, 2010

Leasing: An Idea Whose Time has Come ... and Gone? II

"The Lease" is a Reagan era relic that has been used primarily to bust unions and take away worker's rights. Leasing of course has existed in various forms for hundreds (thousands?) of years but the practice wasn't used in employer/employee situations until the late 1970's. The change was brought about after a Federal court judge (supposedly Supreme Court reject Robert Bork - although I've been unable to track this down) ruled that independent contractors could not legally unionize.

The ruling turned the "Independent Contract" into one of the most effective (and under-reported) political documents in American history. As one of the instruments of Vodoo Economics (The theory that giving tax breaks to the rich improves everyone's lives.), it helped transfer massive amounts of money from the middle and working classes to the rich during the Reagan era - a trend that continues today.

The Lease was introduced into the San Francisco taxicab industry by Jim Steele, the manager of Yellow Cab, in the late 1970's and was soon taken up by every other cab company in the city. When Luxor and Desoto switched to The Lease, they allowed the drivers who already belonged to the union to continue doing so until they either retired or died off, but no new drivers were permitted to join.

The Advantages of Leasing

There are two major advantages to leasing for an employer.

     1. The first is economic.
  •  Without a union to deal with companies no longer have to provide: medical benefits, sick leave, maternity leave, paid vacations, retirement benefits.
  • The saving go far beyond that, however, because workers are not only forbidden to unionize but are no longer employees; and thus lose the protections and benefits that 150 years of labor history and law have won for employees. There obviously is no minimum wage and the company no longer has to pay half of the driver's Social Security tax or unemployment taxes etc. When The Lease was originally morphed into an anti-labor document, companies did not have to pay for Workers Compensation either. The government forced them to start paying for this ten or fifteen years ago.
  • In addition, the companies no longer need as many bookkeepers, accountants, payroll clerks, supervisors and other staff as they would if they were dealing with salaried employees.
      2. The second is power.
  • I'm not going to give you a long list on this one. The simple fact that a cab company can cancel the lease with the driver at any time for any reason what-so-ever or no reason at all, the fact that there is no such thing as an unjust firing, gives the companies almost absolute power over their drivers.
  • And you know the old saying, "Power corrupts and absolute power corrupts absolutely." Never truer than in the taxi business.
Taxi Company Scams

In over 25 years of attending meeting about cabs, I've never heard the hidden realities of the taxicab business seriously discussed and hardly ever even mentioned. I think it's time. We're trying to set up the business on a new footing. It's time to talk about our dirty little secrets.

I've thought of naming names but I'm already looking for motorcycle cops in my side and rearview mirrors, I don't particularly want to see a fleet of hybrids behind me. Besides, certain corrupt practices are so widespread in this industry, it would be almost rude to point out one person instead of another. Instead, I'll just take a tactic from Hansu Kim and say, "everybody knows" that what I'm saying is true.

The major corrupt practice in this business of course is enforced tipping. As far as I know the only taxi companies that don't force their lease drivers to tip are Metro and Green Cabs.

I'm not talking about the scenario where a driver slips a dispatcher a ten or twenty for a long ride but the fact that a driver has to tip five dollars in and five dollars out plus two dollars for the gas man just to be given a car to drive. In other words, if the official gate at a company is $100 per shift, the actual gate is $112 per shift.

This is the way that it has worked at every company I've worked for; and any driver who refuses to tip as required will be given bad, often dangerous, cabs to drive or won't be able get out when he or she is scheduled.

With good reason. Dispatchers, people answering the phones and other office personnel are paid minimum wage by the companies with the expectation that the rest of their pay will consist of tips from drivers. If they let one driver go without paying the whole system would eventually collapse. Drivers who persists in not tipping will often find that their leases will be cancelled for some apparently unrelated reason.

I expected to catch flak for writing this piece but I'm already getting criticism before publishing the post.  My proofreader asks, "How do cab companies force drivers to tip in and tip out? I have only known three drivers who refused to give anyone a tip ... and they got shit cabs and shifts but ... their leases were never cancelled.

How can I respond? How about with two blasts from the past? (I should point that these stories are from 15 or 20 years ago and Desoto is now under different management).  Alleged Tipping and More Alleged Tipping. If being giving bad shifts and dangerous cars to drive doesn't fit your definition of "forced", would "extorted" be more precise? In any case, two managers at two different companies told me, not only that I should tip, but how much. Their point was clear enough to me.

We're not talking chump change here. I know one dispatcher who used to clear $400 a shift. Industry wide, the lowest figure I can come up is the ridiculously, absurdly low number of $10,000,000 a year in revenue from "forced" tipping.

Over the years various other scams have been forced upon the drivers by one company or another.
  • Some companies have forced their drivers to buy overpriced gas at company pumps.
  • Back in the days when it was legal for cab companies to ask for insurance deposits, at least one company used to take the deposit if there was an accident regardless of whether or not their driver was at fault. If the driver complained, his or her lease would be cancelled.
  • The latest scam is for companies to illegally pass credit card charges on to their drivers. At least one company is making the drivers pay 10% of the charge when it only costs the company less than 5% to process the cards. I guess you could call that a value added tax.
"We all know" that there are more scams of various kinds but I feel no need to list them all here. Corruption is part of the culture of taxi drivers under the lease and it will remain so unless, or until, drivers are given back their legal rights.

Next: Why the lease is dysfunctional.


    1. What you are saying is completely true. I tip the dispatcher $5 every time I get out to get a shitty cab most of the times - after a long wait. If I don't tip $10 or $15 I do not get a good cab. When I tip more than other drivers I get out within 30 minutes.

      Gasmen pump an extra force-fill of $1 to $2 if I do not tip.

      Cashiers are not happy to deal with me if I do not tip $2.

      Also I know many drivers who tip $5 to get airport rides or $10 to $20 for longer fares.

    2. I'm not sure yet if I agree with you're overall analysis but ethics, ethics, ethics. I can't say it enough. We need to define them, we need to understand them, we need to believe in them and we need to practice them. Solid leadership carries from the top down.

    3. Now there's an attitude that's a refreshing change is this business.

      Go for it!