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

The inside story of a union organizer, black car driver, and former Uber executive who came together to build a new ride-hailing platform that gives profit and control to drivers.

How the Drivers Cooperative built a worker-owned alternative to Uber and Lyft
[Photos: Vladimiroquai/iStock, Trevor Hayes/Unsplash, Zachary Shakked/Unsplash]
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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.

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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.

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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.

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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.”

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[Photo: Co-op Ride]

How to build a co-op

Forman didn’t come to the idea of a cooperative 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.

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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, ‘Can we do this? This doesn’t seem impossible; all we need is someone to organize it,” says Lewis, who was involved with the class and IDG. “[The idea] everyone came up with was: ‘If we only had an app, we can do this.'”

Eventually the class ended, and Forman ran into a roadblock with what next steps he could take at IDG. Though the roots of the co-op are in IDG, Forman had to start a co-op on his own. (IDG is a “firm believer in worker co-ops,” Brendan Sexton, the guild’s executive director, says in a statement. “Mr. Forman did excellent work in educating drivers about the meaningful impact of worker co-ops, and through IDG resources he was able to expand on that work. We are excited to see the co-op taking the next step with so many IDG members involved.”)

To help them launch in New York City, Forman began working with Eva, a Montreal-based company that franchises out its car-dispatch app to co-ops. (Eva currently has franchises in Montreal, Québec City, and Calgary). He incorporated Drive Eva NYC in April 2020, paying the incorporation cost out of pocket—but couldn’t raise capital or get grants, and it fizzled out. He tried to leverage a buyout of Juno, another rideshare service, that went under in November 2019. Juno initially pitched itself as a driver-friendly cooperative of sorts, promising drivers equity in the company, but ultimately did not deliver on that promise. He couldn’t get investors on board to raise the money needed for that purchase.

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“You don’t need to exploit people to survive as a business”

The idea for a co-op became a “nights and weekends” project for Forman and Lewis, who nearly gave up by summer 2020, Forman says. That’s when they met Orlando, who joined their efforts in August, after graduating from Stanford Business School in June. Orlando had worked for Uber as its operations manager in East Africa, after which she co-founded a portable-benefits company that would have allowed rideshare businesses to pay for benefits without actually having to reclassify drivers as full-time employees. The companies could just pay a percentage of a workers’ gross wage into an account, and the driver would then use it to buy, say, health insurance.

But it became clear after meetings with gig companies, she says, that they wouldn’t pay for portable benefits without regulatory changes. Her feelings were confirmed by the passage of Proposition 22, a California ballot measure. Underwritten by Uber, Lyft, and the food delivery app Doordash, it cemented drivers as independent contract workers instead of employees, overturning a state law known as AB5. That law would have forced gig companies to hire their workers full time and offer them benefits, including health insurance and paid sick leave. Prop 22, on the other hand, requires these companies to offer some benefits, like a stipend to buy health insurance, but doesn’t classify them as employees. In the wake of its passing, drivers saw their pay fall even as fares increased, and many found out they didn’t meet the thresholds to qualify for the new benefits.

Uber, Lyft, and Doordash ultimately spent more than $200 million to support Prop 22, and its passage was a breaking point for many in the industry. To drivers who wanted benefits and labor activists pushing for workers rights, that passage seemed to show Uber and Lyft could not be reasoned with. A path to better conditions for drivers would not be through those companies, but through something else entirely. “For us, it was a realization that we need to explore new and creative strategies to advance workers rights,” Forman says. “We’re hoping one thing our company can do is show that you don’t need to exploit people to survive as a business.”

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Seeing how hard Uber and Lyft worked to avoid offering benefits and restrict paid leave “made me really believe benefits weren’t the answer,” says Orlando, “and we need a more radical approach.” In her eyes, her business school professors had earned their wealth off the labor of other people. Spreading that wealth around, and ensuring those doing the labor had direct access to profits, seemed like the solution. Orlando reached out to institutions that build cooperatives, asking how she could help contribute with her background in the rideshare space—eventually connecting with Forman and Lewis.

Now officially separate from Eva, Forman and Lewis converted their business into a Worker Cooperative Corporation, relaunching as the Drivers Cooperative. With Orlando’s help, they were able to secure the financing that had been eluding them. So far, they’ve raised more than $350,000. That includes grants from the Workers Lab and the Emergent Fund, a rapid response fund for social justice movements; and support from the Lower East Side People’s Credit Union; a nonprofit called the Local Enterprise Assistance Fund; and a business accelerator called Start.coop. They also received $25,000 in donations from the crowdfunding platform Ioby. The biggest share of their funding came from Shared Capital Cooperative, a community development financial institution—basically a “credit union for co-ops,” Forman says—that invested $200,000. (These were all in the form of loans, grants, or donations; none of the investors have voting rights, only the workers do.) Now they’re also opening up investments to the general public on WeFunder; the shares can generate a return but also don’t offer any voting power over the co-op’s decisions.

To hear Forman say it, the hard work was over. The next step, getting drivers on board, was the easy part. “Word travels fast,” he says, “and people have been wanting for this for quite some time.” The pandemic spurred some of the sign ups; many initial drivers, Orlando says, came from black car businesses that shuttered during lockdown, due to losing steady work like shuttling business travelers to the airport.

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The rides begin

The Co-op Ride app officially began offering rides in New York City on May 30. More than 3,000 drivers  are currently on board (all are licensed through the city’s Taxi and Limousine Commission, for which they have to go through a background check), and more than 2,000 rides are completed. “We’ve been shocked by the scale of demand,” Orlando says, though she notes the co-op is still trying to strike a balance between supply and demand, so as not to overload the market and to find a price that works well for both drivers and riders. (Along with being a better deal for drivers, Co-op Ride says it’s about 5% cheaper for passengers, too. At the time of publication, a ride from Fast Company’s offices at 7 World Trade Center to Grand Central was $31.04 on Co-op Ride, including an automatic 20% tip; on Uber, it was $31.58 without tip.)

Eventually, the founders see this co-op expanding. “We want to make this available any place where drivers are struggling for a better life,” Forman says. (There is another recently-launched driver-owned cooperative that mainly operates in Denver, Portland, and Los Angeles; called the Driver’s Seat Cooperative, it’s not a separate rideshare company from Uber and Lyft but a collective that allows drivers to share their trip data, so they can maximize their earnings and better understand what factors affect their income.)

And to them, the co-op is about more than helping drivers earn more money on each trip. The Drivers Cooperative has also earmarked 10% of profits to a community grant program and is in the process of developing relationships with nonprofits and arts organizations. “Our goal here is not just to put more money in drivers pockets but to keep more money in our community in general,” Forman says. Another ideal is to help drivers transition to electric vehicles and help build out the EV infrastructure in the city, which would help both the planet and driver expenses, since electric cars are cheaper to maintain.

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But that’s for the future—and will need to be put to vote before they can embark on that path. Right now, they’re focused on New York City, and a different kind of success than expanding cross the country. “If it even moves the needle so other rideshares can be fairer to drivers, we would have had some success,” Lewis says. “Yes, we would like it to expand, but it’s also a movement that’s going to be positive on the lives of drivers.”