Friday, January 6, 2012

Jim Steele's Legacy: Part 1

Happy New Year!  I'm baaaack!
Jim Steele leaves a double legacy behind him. Yellow medallion holder Art Lembke describes him as, “a little man who was a giant in the industry.” Richard Fogel says that “the taxicab industry today would not be the same had it not been for Steele." Fogel goes on to say that Steele “wanted to create the best place for owners, drivers and customers. And he was successful.”
I have no trouble with the earlier statements. Steele clearly was an astute and brilliant businessman. He took over Yellow Cab after it had gone bankrupt and, within a few years, turned it into the largest and most successful taxicab company in the city. There’s no doubt that he made San Francisco’s taxi companies and medallion holders lot of money. It’s the contention that Steele’s guiding hand was good for the ordinary drivers and customers that I intend to dispute.    
Since I didn’t like Steele personally and think that his leadership was disastrous for both drivers and the cab riding public, I’m going to balance my post by putting Lembke’s praise of Steele at the end of the article.
The Independent Contract and Gas & Gates.
A picayune debate has been taking place on cab sites as to who first started the above systems. I’m not an historian. But I do know that Steele, along with the Lazars at Luxor Cab and Marvin Gralnick at Desoto Cab, either broke or undermined unions, put an end to employee status by forcing drivers to sign “Independent Contracts” and installed “Gas & Gates” as the only option for a taxi driver.
Yellow Cab was the first major company to completely eliminate employee drivers and have all cabs go “Gas & Gates,” so why not give the credit to Steele?
The Independent Contract.
The “Independent Contract,” as it relates to non-medallion holding drivers, is a fictional legal device that has been used to cheat San Francisco's cab drivers out of at least 200 million dollars over the last 30 years.
This figure comes from estimating the amounts that cab drivers have been forced to tip during that period.
  • I cab with 2 shifts at $10 per shift = $20.
  • $20 per day * 365 days = $7,300.
  • $7,300 * 1,000 cabs = $7,300,000 per year.
  • $7,300,000 * 30 years = $219,000,000.
I’m using the 1,000 number as a rough average. There were 814 cabs on the  street 30 years ago and there are 1,500 now. Lazy me, I didn’t go year by year to research the matter accurately. The figure might be 1,100 in which case:
  • $7,300 * 1,100 cabs = $8,030,000.
  • $8,030,000 * 30 years = $240,900,000.
However, this is a low figure. Some companies insist on higher tips and many companies have used numerous other scams to separate drivers from their money.
In addition, these estimates do not include the money drivers have lost in terms of benefits like: unemployment insurance, the lower tax rates paid by employees and the loss of Workers Compensation benefits that cab companies refused to pay until they were forced to  do so by the State of California. Many of these drivers will also have little or no Social Security benefits when they reach old age.
A Fictional Legal Device?
There are numerous ways to determine whether people should be classified as employees or independent contractors. I think the most meaningful one is simply a test of power. An “independent contract”, as the first word implies, is supposed to be an agreement between equals.
The relationship between a medallion holder (which I am) and a taxi company is a perfect example of a real independent contractual agreement. I have a medallion that they want to use and they are willing to pay me for it. If we don’t get along, I can easily take my medallion and go to another company. 
In fact, I recently worked for a company where I said something to the manager that he didn’t like. He retaliated by breaking our financial agreement and started cheating me out of $15 a week (I kid you not). I gave him two warnings and then went to another company where they gave me a $300 per month raise. 
The fact that losing the use of my medallion cost the manager about $1,500 a month, by the way,  is yet more proof that having power doesn’t make you smart. He was apparently so used to abusing ordinary drivers that he didn’t think I’d leave.
Compare this to my situation prior to holding a medallion. I've always believed that a good dispatcher deserves a good wage and that his salary should be paid by the company for which he or she works. The reality is that companies pay their dispatchers minimum wage (if they pay them at all) and insist that the drivers tip to pay the the salaries - which go as high as $700 to a $1,000 per shift. As an ordinary driver I tipped about $40,000 over a twenty year period just to be able to work. 
Company reps are fond of saying that no one is forced to tip but this is a lie. If I hadn't been coerced, I wouldn't have tipped one-tenth of the above amount. All exceptions noted, if a driver doesn’t tip he or she will be retaliated against.
My experience when I stopped tipping at the old Desoto is hardly unique.
In the taxi business, the “Independent Contract” exists primarily to take the employee rights away from cab drivers. It strips drivers of all power. For Steele and his cohorts, the  “Independent Contract” was a piece of paper designed to make taxi drivers independent of all labor laws.
Of course, simply because people have the power to swindle somebody doesn't mean that they have to do so. Plato believe that power was best exercised by "benevolent dictators" who worked for the good of the many. But this idea that was obviously foreign to Steele and his pals. What they believed, along with W. C. Fields, is that you should "never give a sucker an even break."
When the  MTA outlawed tipping a few years ago Yellow Cab refused to comply with the law. Yellow spokesman Jim Gillespie argued that "tipping was part of cab culture." Sounds very sociological doesn't it? The “culture of tipping” actually started when the unions were busted and thus belongs to the culture of corruption that is part and parcel of Jim Steele's legacy.
Jim Steele According to Art Lempke

Jim Steele, a little man who was a giant in our industry. He was honest and fair minded, and knew more about the taxi industry than anyone before his time or since.
Jim knew the California code of insurance relating to the transportation industry by heart. Every word of it he kept in his head, and could quote any page of it by memory. Before he retired he knew every particular about every accident that Yellow Cab ever had. The amount involved in the accident, the driver who had the accident, and the passengers who were involved, and the amount paid out. This information he carried around with him in his head, and didn't need to look it up. He knew all this by heart.
In World War II Jim was the boxing champ for his weight class in the Sea Bee's. I remember fondly a night in a bar near De Soto Cab Company on Gary street when Steele was in his fifty's, a man came into the bar causing trouble, as we were involved in figuring out the process of buying of the Yellow Cab Co Op from the bankruptcy court, and playing liars dice. Jim Steele knocked out this trouble maker who was about 6'4" and weighed about 250 lbs with one punch.
For his distractors who blame him for bringing an end to the employee status to the taxi industry. They are both misinformed and wrong. Prop K effectively ended the employee status before Prop K, if one bought a medallion from someone they would also have gone into the cab company from the parson who sold them the medallion. This provided stability to the taxi industry. Prop K changed this. There is no way a taxi cab company could stay in business if they had employees rather than independent contractors who were their taxi cab drivers. As the medallion holders would leave a company who had employee drivers and go to a company where the drivers are independent drivers, as they would make more money being in a company that had independent contractors instead of employee drivers. Look! That's just the way it is! Myself, I made a lot more money as an independent contractor than I did as an employee. Also, as an employee driver you are told what to where, when you can take your lunch and dinner breaks, where to go, etc... I believe that most drivers who worked under both systems preferred to be independent contractor's. I remember one time I was forced to stay near the S.F. Zoo for over two hours before I was allowed to leave, as an employee at old Yellow Cab. I would have never stayed in the taxi industry as an employee. 
Shortly after Prop K was passed there was a certified election held at the Yellow Cab Co Op for the drivers to choose between being an independent contractor or an employee. The drivers overwhelmingly chose to be independent contractors. So don't blame the loss of the employee status on Jim Steele.
I served on the board of Directors of Yellow Cab Co Op with Jim Steele for thirteen years. Although I had some miner disagreements with him, he was usually right. He was the most honest and straight forward man I have ever met who put his whole heart and soul into the taxi industry. I am a far better person for the time I spent with Jim Steele. Thank you Jim for all you did for all of us in the taxi business. May the Lord take you in his arms and may you find peace and happiness in Heaven. 
Sincerely Your friend Arthur Lembke, and family.


  1. Hi Ed,

    This is a very good commentary on a decades old issue that is still important today. I'm glad you wrote this.

    It is important that the MTA understand that even though non-medallion drivers are classified as "independent contractors", just like medallion holders are independent, non-medallion holders, on the other hand, do not function independently of the cab companies, They are in fact, heavily dependent, and one could argue that in certain respects, solely dependent upon the decisions of management (i.e., scheduling, which cabs they can drive, etc.).

    Thanks for writing this essay. I hope you had a good holiday and new year. Keep up the good writing.

  2. Anybody that allowed and profited from the cruel treatment of drivers at Yellow or anywhere deserves a special place in hell as far as I'm concerned. When I was there drivers would be fired by the dozen to Wieners unbridled glee as he handed out the notices.
    It's not just tipping but also ripping drivers off over accidents. Fixing cars for $100 and charging the driver $500 is as common as spitting on the sidewalk at Yellow.
    Jim Gillespie likes to come off as as gentleman but I've seen his rap sheet and there is more than one felony for fraud.
    Google "20 questions IRS" if you think drivers are independent contractors.
    I could go on and yellow may not be the worst. I think the Russian's at Checker probably take the cake for utter ruthlessness.
    Good job Ed.

  3. Dear Ed,

    Of course your figure of $200,000,000 bilked from the drivers is very conservative since you do not include medical benefits that are owed by law for several years, and ought to have been included all along. I anticipate complaints, for example from the ever-complaining Mr. Lembke, that $10 per shift is too much for thirty years ago. But this possible margin of error is more than compensated if we consider actual benefits denied, and Mr. Lembke thinks that anyone who does not agree with him is monstrously unfair.

    You have heard me say many times, "Whoever can fire you, that person is your boss." So the Independent Contractor status is indeed a legal fiction. Industry wants to use this maneuver more, not less, as it dispossesses more and more workers. If there is an understanding between equals, at most cab companies, the attitude is, "Worker and management are equally capable of quitting this place any time they like."

    Jimmy Steele was like the manufacturer of shovels who made sure to include a shovel for each soldier in No Man's Land. Every "Lucky soldier" should thank Jimmy Steele for his shovel. When you arrive in this industry, there is nowhere to go but into a foxhole. If Yellow Cab had included even one single class in how to operate the cab computer we might have had a fighting chance. My taxable income for 1993 was $2882. My last forty working days there in 2001 I was averaging $44.85. There ought to be a law against ten years in boot camp. How is it that with the "independent Contractor" agreement workers can be allowed to make less than minimum wage? A fiction is one thing. A lie is another.

  4. Happy New Year Ed!! I love this blog best. Thank you for addressing the tipping issue. If the drivers were to unite against one unfair practice in the taxi industry, I believe that this this is the one that would save them the most money. This attitude of, “it’s been going on forever and it’s just part of the cost of doing business” is making fat-cats out of several color scheme execs via the hard work of drivers. How does that not anger the masses?