Uber Admits it Made an Accounting Error and Will Refund Nearly $50 Million to Drivers
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Uber's rocky relationship with its drivers has resulted in the company offering olive branches and occasional compensation, and that pattern continues with a colossal error the ride-hailing company admitted to on Tuesday: drivers in New York City were shortchanged by nearly $50 million in payments, The Wall Street Journal reported.
Uber had apparently been calculating New York City drivers' earnings based on an incorrect formula. Instead of subtracting taxes and fees before collecting its 25 percent commission as per its nationwide agreement with drivers, Uber was collecting its take based on a ride's total fare, the Journal reported.
It's unclear exactly how much Uber pocketed thanks to the incorrectly-applied commission, which lasted for more than two years. The company says it will refund the entire amount plus interest, which amounts to an average of $900 per driver. Using an independent estimate of 50,000 New York City-area drivers, the Journal calculated that the blunder will cost the company $45 million.
Uber is a tech company that prides itself on fine-tuning its smartphone app based on the data that it collects from both riders and drivers, so it's hard to fathom how an apparently simple arithmetic error could have persisted for more than two years. The company said it uncovered the mistake as it was overhauling its driver receipt system.
"We made a mistake and we are committed to making it right by paying every driver every penny they are owed, plus interest, as quickly as possible," Rachel Holt, regional general manager of Uber in the U.S. and Canada, said in a statement to the Journal. "We are working hard to regain driver trust, and that means being transparent, sticking to our word and making the Uber experience better from end to end."
Regaining trust won't be easy given Uber's checkered past when it comes to dealing with drivers, especially those in New York. In January, the company agreed to pay a $20 million settlement to the Federal Trade Commission to resolve charges that it misled prospective drivers about how much they could earn by signing up. Uber claimed on its website that the median annual income for drivers in New York City was more than $90,000, when in reality less than 10 percent of all drivers in the city made that much, according to the FTC's complaint.