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Lyft to give some drivers $10,000 in bonuses, or the option to buy stock

Posted at 8:35 PM, Mar 01, 2019

Lyft will pay some of its drivers up to $10,000 in cash bonuses ahead of the company's forthcoming IPO -— an unusual benefit for a portion of the independent contractors who are critical to the company's business model.

The drivers who receive a bonus will be given the option to put that money toward stock in the company.

Lyft detailed the program in IPO paperwork it filed Friday. It's raising as much as $100 million in its public offering, beating competitor Uber to the punch.

The bonus program will provide one-time cash rewards to "recognize drivers who have contributed to our success." Drivers can use those cash bonuses to buy stock in its "directed share program" when the company goes public. Because drivers are independent contractors, they wouldn't traditionally be eligible for such a program, unlike certain employees, investors and board members.

Drivers will be rewarded for hitting certain milestones as of February 25, 2019. Drivers who have completed at least 20,000 rides as of that date will get $10,000, and drivers who have completed between 10,000 and 20,000 rides will get $1,000.

Money will also be reserved for drivers who've served on the company's Driver Advisory Council. They could get $1,000. (If a driver is eligible for multiple cash bonuses, they'll receive the one payout — whichever is the largest.)

It's a token of goodwill for the drivers who are indispensable to the company's core ride-hailing business. It also sets a precedent for rival Uber, which is also expected to go public this year.

Uber is working on its own program to distribute cash bonuses to some drivers, with the option to put that money toward stock, according to a source familiar with the matter. It plans to take a tiered approach as well, granting bonuses to drivers based on various trip thresholds, the source said.

San Francisco-based driver Jay Cradeur says he is eligible for $1,000 because he has given 14,000 rides to date. He plans to use his bonus to buy stock in the company "just for the giggle."

"It is money I was not expecting. Let's see if and when the IPO happens. If it does, that will now be a more interesting day," Cradeur said.

Some experts are already expressing concerns about the gesture, suggesting it could be an olive branch intended to mitigate a potential public relations nightmare about how the company treats its drivers.

"I see it as an effort to ward off negative publicity when they will be most vulnerable to publicity," said Thomas Kochan, George Maverick Bunker professor at the MIT Sloan School of Management, told CNN Business.

Kochan told CNN Business that it's "clear" that both Uber and Lyft are worried the drivers will use the IPO filings as "an opportunity raise their voices and ask how will this benefit them."

"I don't think it will be enough to silence the increasing number of drivers and organizations beginning to organize and call for better treatment and more equitable sharing of the gains they help produce," he added.

The ability to attract and retain drivers is essential to the success of ride-hailing companies.

In its filing, Lyft made mention of this: "We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including ... our ability to attract and retain qualified drivers and riders."

According to Harry Campbell, author of The RideShare Guy blog and a ride-hail driver, getting to 10,000 rides "is quite a lot for Lyft."

"It looks like Lyft's cash bonus will reward mainly full-time or very veteran drivers, which I think is fair," he said, adding that he expects cash rewards to go mainly to San Francisco drivers and those in other big cities.

Bhairavi Desai, executive director of the New York Taxi Workers Alliance, suggested that a one-time cash bonus won't help the vast majority of drivers.

"Uber and Lyft have built their business model off the sweat of drivers, paying the vast majority of New York City drivers less than minimum wage in their quests to go public," Desai said in a statement. "Now, instead of raising wages in anticipation of their windfall, they only want to offer stock grants to a small minority of drivers?"

While Lyft has long been viewed as the friendlier alternative to Uber, its image has been put to the test in recent months.

The company filed a lawsuit against New York City just days before a first-of-its-kind minimum-wage law for drivers went into effect February 1. Lyft argued that the formula for determining the pay is flawed and unfairly advantages Uber.

Labor law expert Veena Dubal worried that drivers having equity in the company could change the dynamic.

"I'm worried that giving shares to drivers may also impede independent worker organizing because the workers become committed to the well-being of the company — as opposed to their own immediate well-being — in a different way," said Dubal, an associate law professor at the University of California. "As a result, I'm skeptical that these shares will raise compensation in the short or long run."

Lyft says eligible drivers will get paid around March 19, or may elect to use the bonuses to purchase shares in its IPO.