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Tip or Bribe? Taxi Drivers Say Illegal Payments to Dispatchers Are Routine

| December 19, 2013
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Brad Newsham, 62, a San Francisco cab driver since 1985, says "all the recent turmoil drove me out of the industry." In May, he sold his taxicab medallion, and left a job "I loved from day one." (Photo: Brad Newsham)

Brad Newsham, 62, a San Francisco cab driver since 1985, says “all the recent turmoil drove me out of the industry.” In May, he sold his taxicab medallion, and left a job “I loved from day one.” (Photo: Brad Newsham)

Brad Newsham drove a cab in San Francisco for nearly three decades and says he loved nearly everything about the job from the first day he got behind the wheel: the people, the city’s beauty, the independence, the sense of experiencing something new every day.

Newsham quit the business this year because he was down to earning a net income of five bucks an hour. Newsham’s experience isn’t unique — others in San Francisco’s taxicab industry say they know drivers who are only netting $5 to $10 an hour. A big part of the tough economics for drivers has to do with ride-service companies like Sidecar, Uber and Lyft siphoning off business from the traditional cab companies.

But part of the money problem for the great majority of taxi drivers, those who rent their vehicles, is the way the business is structured. They start out in the hole every day, needing to make $100 or more just to pay the “gate,” or rental fee, for a 10-hour shift. They pay gas on top of that, which could easily come to $20 or $30 a shift or more. You can do the math yourself: To clear San Francisco’s minimum wage of $10.55 an hour, they’ve got to bring in something north of $200, and probably significantly more than that, during their 10 hours on the road.

Drivers get no benefits, and may be held responsible for their gate fees when they’re too sick to drive. Sometimes they must pay insurance deductibles and they face fines from city taxi regulators when they violate rules.

If you wonder how they survive, well, lots of them are just scraping by. Richard Hybels, owner of San Francisco’s Metro Cab, says, “Cab drivers can’t even get their teeth fixed. They’re poor people. It’s not an easy way to make a living by any stretch of the imagination.”

If the financial odds against drivers aren’t long enough already, they face another daily cost that industry veterans like Newsham alternatively call “the tip” or “the bribe.” That’s the unofficial, and illegal, five to ten bucks or more that many drivers say they pay cab company dispatchers and gas attendants every shift.

“Whoever bribes the dispatcher the most tends to get the best shifts,” says Newsham. “I’ve been in situations at companies where if you don’t tip, the dispatcher says, ‘Nice to see you … I don’t have any cabs right now … why don’t you sit on the bench for awhile until I get one?’ I have sat there for three hours waiting for him to find me a cab when I have seen people walk in, give him 20 bucks and walk right out. It’s just a fact of life in the cab world.”

Longtime San Francisco cab driver Ed Healy says the practice is standard throughout the industry.

“I once had a dispatcher come out there and I gave him $3 and he threw it back in my face and said, ‘That’s not a tip,’” says Healy. “I stopped tipping them completely, and I regularly got cars without any brakes or (that) broke down in various ways. I had one where a huge pipe dropped out of the cab and onto the ground. I had so many breakdowns, and I wondered why I had to wait three hours for somebody to come and tow. So I would say that pretty much enforced tipping is the rule.”

John Han, who drives for Yellow Cab, breaks down his tipping routine: $1 to the gas guy, $5 to the dispatcher in charge of issuing cabs when he goes out and $1 more when he returns to file his paperwork. That’s somewhat lower than a lot of drivers, he says. “Many drivers say $5 going out and $5 coming in to dispatchers and cashiers.”

Emil Lawrence, a driver since 1996 who wrote the popular Night Cabbie column in the old San Francisco Examiner and the San Francisco Chronicle, lays out basically the same scenario in terms of pressure to make these payments:

“If you don’t want to piss off anybody that can cause you problems, you have to pay it,” he says. “The system that’s pervasive is tips and payola before you get your taxi.”

Lawrence says radio dispatchers will also sometimes demand money for sending lucrative airport calls a driver’s way. He says at one company he used to work for, the radio dispatcher had a black book. “He came up to me … and said, ‘Emil, I looked at my book, you owe me for two airports.’”

Whatever you call it, this kind of payment, voluntary or involuntary, is against the law in San Francisco, and each violation carries a $633 fine for firms that allow it. Perhaps it’s not surprising, then, that when you talk to San Francisco taxi companies, virtually all of them say that they don’t allow tipping (six of the biggest companies — Yellow, Luxor, DeSoto, Metro, Royal and Town told me tipping is prohibited in their shops; two other companies, Arrow Checker and NationalVeterans, didn’t return my calls).

Jim Gillespie, general manager at Yellow Cab, said any reports of tipping at the company aren’t true. “It’s not happening at Yellow Cab. If that happens I would fire the employees.”

Has it ever happened? “Not to my knowledge,” he says.

‘I have sat there for three hours waiting for him to find me a cab when I have seen people walk in, give him 20 bucks and walk right out.’
—Brad Newsham, cab driver

Charles Rathbone, assistant manager at Luxor, told me, “Nobody is forced to tip.” He says the company has signs up saying tipping isn’t allowed. “Nobody has to tip to get a better shift or cab. The cashiers and the dispatchers know we’d come down on them like a ton of bricks. If you know of somebody who says there is (a tipping requirement) please tell them to come in and see me and I promise no retaliation for complaints. Absolutely.”

What about voluntary tipping, which is also prohibited?

“It’s the kind of thing that is almost impossible to stop” he says. “How do you prevent somebody from passing somebody else a dollar? It’s a very difficult thing to prevent from happening. I’m not going to say categorically that there is no tipping, but it’s certainly not anything the company gets any money from.”

Tipping is an Expensive Reality

Dan Hara has little doubt that these payments are a reality in San Francisco cab companies.

He’s an economist whose firm, Hara Associates, compiled a report last year on the city’s taxi industry for the San Francisco Municipal Transportation Agency, or SFMTA. The firm’s survey of 621 San Francisco cab drivers found that 61 percent said they always pay daily tips to other company employees. More than half of that group, 55 percent, said they pay those tips because they have to.

Of the companies for which more than 30 drivers were surveyed, the reported tips ranged from an average of $4.47 for a non-Friday or non-Saturday night shift to $8.95 for a Friday or Saturday night shift.

Tipping can be expensive, the report added, with 21 percent of drivers reporting they gave daily tips of between $10 and $20 and another 8 percent saying the gave more than $20 per shift. The highest tips came from those working lucrative weekend night shifts.

Not everyone who drives a cab and tips dispatchers and gas attendants see that as a problem. One longtime driver who asked to remain anonymous recalls a variation on the usual practice of tipping.

“We would have to go into a lottery, put our names in a hat, and they’d pull out these numbers, and your number would determine your chances [of getting a cab],” he says. “Your chances would be better if you decided to give money to the dispatcher. If you tipped, your chances are much greater to get out.”

But this driver says he thinks that kind of tipping is OK.

“I think most people realize they should tip at least 10 to 15 percent if they like the service,” he says.

‘It’s not happening at Yellow Cab. If that happens I would fire the employees.’
— Jim Gillespie, Yellow Cab general manager

Barry Korengold, the president of the San Francisco Cab Drivers Association, says there are worse things happening in the industry right now than pressure to give dispatcher and gas attendants a tip. “It’s not one of my big issues,” he says.

Korengold and one other driver told me that because drivers live in part on tips, it would be hypocritical not to do the same.

Emil Lawrence, for one, says he currently tips because he wants to, but that’s only because he owns a cab medallion (which is essentially a license to drive a cab in the city) and has greater leverage. He also said he doesn’t blame all cab company employees for taking tips, as they make very little money. “They have no benefits whatsoever, so this is the way they get their income up.”

The Law and How It’s Enforced

When I asked Christiane Hayashi, director of taxis and accessible services for the San Francisco Municipal Transportation Agency, whether drivers tipping taxi company employees was legal, she read from the San Francisco Transportation Code, Section 1105, sub-section A10, in effect since 2011.

“No Permit Holder or agent of a Permit Holder may accept or solicit gifts and/or gratuities or anything of value from any Driver, other than Gate Fees, Lease Fees, payments for goods actually received, or other payments authorized by this Article. A Permit Holder or agent of a Permit Holder shall issue a receipt for any payment received from a Driver.”

The ordinance covers voluntary payments, too. That means all tipping is illegal.

That absolute ban notwithstanding, Hayashi says she’s aware tipping is happening and thinks the practice varies widely from company to company.

In addition, she adds, “The salary structure set up by the companies relies on tipping — it is my understanding that many taxi company employees receive San Francisco’s minimum wage and are required to rely on tips to make an adequate salary. … So it is a deeply ingrained institutional issue that has proven difficult to root out.

“In some companies, drivers tip because they genuinely have a relationship with the dispatcher and it’s no big deal,” Hayashi notes. “In other companies, it’s definitely more of a culture where you’ve got to do this or else. And the driver who doesn’t tip might find himself having consequences.”

Taxis in downtown San Francisco. (Sara Bloomberg/KQED)

Taxis in downtown San Francisco. (Sara Bloomberg/KQED)

But to do something about those “consequences,” Hayashi says, a driver would have to file a formal report with the SFMTA. To date, she says, no one has ever been cited for violating Section 1105, sub-section A10.

“The drivers may complain to us, but it’s quite another matter to ask them to sign a declaration and go to an administrative hearing,” she says.

Veteran driver Brad Newsham says that kind of reasoning is akin to expecting victims of the system to enforce the law. “You’re going to blame the cab driver who makes a paltry wage for not taking down the system that has been winked at by every regulator that’s ever been,” he asks, “and who has thrown up their hands and says, ‘There’s nothing we can do’?”

Other drivers say blowing the whistle would be risky. “A driver would be afraid because they’d get fired,” says Ed Healey, who drives for DeSoto Cab. “Nobody could survive.”

John Han, a Yellow Cab driver, agrees. “I wouldn’t want to go through that process,” he says. “I basically would be going on the record with something that does not look very good for the people who I depend upon to issue me a cab every day.”

Luxor driver Jeremiah Cushing says filing a formal complaint would be like asking, “Who will step forward so [they] can be shot first? Why don’t I just emboss a scarlet T on my chest? I would just be a total outcast.”

Bucking the System

Cushing’s got another solution to the tipping problem, though: Just refuse to do it.

“Most people do five dollars in, five dollars out,” he says, citing what a company cashier told him, i.e., tipping $5 both at the beginning and end of their shifts. “I started doing the math on it. … At the end of the year, it was a lot of money in my pocket going to the unknown … I said, ‘Screw this, I’m not paying any of these guys. … Other drivers have told me, ‘You’re going to need these cashiers, they’re going to provide you a car.’ I said, ‘No — I do not need them, they need me.’”

Cushing said he hasn’t been tipping anyone but the gas guys for more than a year. “If you ask me why I tip the gas guys, I can’t give you a logical answer,” he says.

I asked him if there had been any consequences to his one-man rebellion. He said there had been some minor incidents, including one in which he was assigned a spare cab, typically the vehicle in the worst condition on the lot. He refused to drive it and went home, he said, but there were no other repercussions. “They have such a shortage of drivers now, I don’t get messed with.”

Ray of Hope for Drivers?

Metro Cab and Green Cab are two taxi outfits drivers routinely mention as prohibiting tipping. When I asked Metro owner Richard Hybels what’s behind his policy, he said:

“Most of the people who work for me are supporting families, or supporting families in another country. It’s a tough business as it is. I make enough money in the normal parts of the business; I don’t need to squeeze any more out of them. … I want it on my headstone: I’ve never taken a penny from a cabdriver as a tip.”

Former “Night Cabbie” columnist Emil Lawrence says many gas-and-gate cab drivers are on the economic margins and that he knows drivers who are living in Section 8 housing and receiving food stamps.

“They pay the cab company nonstop, they pay everybody tips nonstop,” Lawrence says. “They don’t even make minimum wage on some nights, and if they don’t pay, they don’t have gas, they don’t have a job the next day. … What they make after paying the SFMTA and cab companies, you couldn’t make a decent living in downtown Baghdad today.”

“I’ve been in that situation,” he says. “It’s like quicksand.”

But the balance of power between cab drivers and cab companies may be starting to tilt in the drivers’ favor.

SFMTA consultant Dan Hara says a downturn in the cab business brought about by the rise of ride-service companies has at least temporarily reduced the pressure to tip, because cab companies are having problems filling shifts, a reality confirmed by others in the industry. (Though I recently asked three different drivers during cab rides if they currently tipped taxi company employees, and they all said they did.)

While many cab drivers are irate about Sidecar, Lyft and Uber cutting into their business, many others are quitting the cab business to drive with what regulators call “transportation network companies (TNCs)” — the very ride-service companies that compete with their cabs.

“Before TNCs, some drivers tipped extensively to get out faster in nicer cars,” says John Han.  “Now, I’m guessing some of those drivers have gone to TNCs.”

Indeed, one of my recent cab drivers cited the requirement to tip as a major reason he was quitting to go work for Uber. (“If you get an airport call, the guys ask you for money after and if you don’t give you won’t get another airport call,” he said.)

‘The drivers may complain to us but it’s quite another matter to ask them to sign a declaration…’
— Christiane Hayashi, Director of Taxis at SFMTA

I kept asking the drivers if the Lyfts and Sidecars of the world could actually end up helping them, as they potentially give drivers more leverage in dealing with the cab companies. John Han, for instance, says Yellow recently lowered its Saturday night gate fee for drivers.

Some scoffed at the notion that anything good could result from the competition or that they would ever switch to a TNC, citing the insurance risk, among other reasons. But not everyone felt that way. Brad Newsham said if he were giving advice to a young would-be driver today, he’d tell them to skip traditional taxis and go to work for a ride-service company.

Emil Lawrence told me there might be something for the average driver to gain from going to work for a ride-service firm.

“I know drivers right now who work for cab companies at the same time they work for Uber,” he says. “Radio calls are down probably 70 percent now. They’re down on Friday even more. You’re talking about 10-15 minutes sometimes with no call at all. It’s all on the apps. If you’re a cab driver with a taxi, at the same time you have an Uber setup, that may be the new industry. But you can (also) do that same business in your own car at your own hours without paying the taxi company one dime.”

SF Taxi Driver Survey

KQED’s Lisa Pickoff-White, Bryan Goebel and Katrina Schwartz contributed reporting to this article.

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Category: Technology, Transportation

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  • http://www.desotogo.com Athan

    I appreciate the effort but the blog is mostly anecdotal and contains minimum data. The drivers quoted are mostly older and are mostly citing scenarios that barely exist in today’s taxi marketplace. Tipping can be a problem but don’t forget, most taxis are owned by working taxi drivers. In today’s industry a medallion holder must be a full time driver and medallion holders can freely move their medallions between fleets. So fleets who mismanage or abuse drivers will eventually find themselves at a great disadvantage.

    As for quotes like, “radio business is down 70%”, again, it’s anecdotal. Apps like Flywheel, Taxi Magic or Uber dispatch many of the taxi orders now (to taxis). The SFMTA has also added several hundred new taxis this year so of course the pool of drivers is thinner and for a period, while the market absorbs the new taxis, margins are thinner. The industry had an identical experience when Mayor Brown added 500 new taxis several years ago.

    My data from October and November 2013 proves that an experienced taxi driver, working four evening shifts, ten hours each, Sunday through Wednesday can net about $30 per hour (for the sake of my research I excluded Friday and Saturday evening shifts).

    Drivers should restrict their tipping based on service quality but at the same time cab companies must reinvent their model. They should examine the idea of paying staff a higher wage, create more transparency (so that drivers will have faith in the processes) and automate driver scheduling. The dispatching of orders and vehicles must be transparent and the drivers should believe that it is. The taxi companies must work to accomplish that.

    • Ed Healy

      Hi Athan,

      I don’t know if I like being called older and it would be nice if tipping “barely existed” in today’s marketplace but I don’t know if that is true. I do know that certain cashiers look at like dogs that haven’t been fed scraps off the table if I don’t tip them enough.

      I certainly hope that cab owners will be intelligent enough to pay their staffs better and voluntarily stop tipping as a few companies have already done.

      I would also suggest that they split the meter with the drivers on slower shifts. The split could be topped off at the current gate fees. In this way companies will have a much better chance to fill their slow shift and hang on to their drivers.

      • http://www.desotogo.com Athan

        Hi Ed,

        Thanks. I couldn’t think of a way to make my point without touching on age so I apologize, lol. As you know, I respect everyone mentioned in the blog but to an extent the stories are a little misleading. I agree though, sometimes a cashier can say with a look or a gesture what they’re forbidden from saying with words. Cashiers and dispatchers in many ways have an appearance to drivers as having authority over them. This is a problem. Cashiers and dispatchers should not be disciplining drivers, they should be reporting issues to management and management should hear both sides then make a decision.

        I think we certainly agree in principle that the industry needs to continue to evolve and that in many cases it’s apprehensive about doing so.

    • Anon

      Athan you have always been an apologist for the tipping regimen.

  • Dean Clark

    This is very true. I know working over at National Cab Company in order to work on a Friday or Saturday night you were forced to tip an additional 20 – 40 dollars just to get a cab. Michael Murphy who use to work the window in the evening on Fridays was very animated about this. If you did not tip you did not work. Other shifts during the week a tip was also expected up to 10 per shift. Cab drivers are treated poorly and always have been over the nine years I worked in the industry. The best thing to happen in this industry is for gates and gas workers go out and work for one of the ride shares, Lyft, Sidecar, or Uber and let the medallion owners fend for themselves to make their money!

    • Dean Clark

      I brought this to the attention of Chris Hyashi along with some other issues and she looked the other way. I would not listen to anything she has to say i this article. She claims she wants to help the drivers it has been over 2 years since I filed a complaint with her and she did nothing.

  • I have to be anonymous

    Jim Gillespie is a bald faced liar and a convicted Felon.

  • Travis

    Drivers put a minimum of $2500 re day through the windows Yellow. If anybody believes Jim Gillespie lets the dispatch crew leave with all that I have a bridge I would like to sell them. Rathbone is another liar.

  • Travis

    If Hayashi gave a damn she would at minimum ask Companies to post a sign at the prohibiting tipping. She won’t and She has always hidden behind the myth that she can’t find a witness. Same with Town Taxi collecting %5 on cashing credit cards. She knows it and does nothing. She won’t lift a finger in general on enforcement. Good riddance to her and her new career at the company she just got MTA to sign a 3 million dollar contract with.

  • Ed Healy

    This article has a misleading title. It should it should be Extortion, Tips or bribes although I consider bribing to be a minor problem. Some drivers have an in with dispatchers and will tip $10 or $20 to get airports or meter & 1/2 rides. But this necessarily involves a relatively small number of drivers. If some drivers are going to bribe to get an advantage over other drivers the number has to stay small.

    As for tipping. Many drivers feel that they like this or that dispatcher and realize that the office staff depends upon tips to earn a living. My feeling about this is that the company’s responsibiltiy and the owners should be paying the salaries not the average driver. I personally tipped as little as possible when I was a regular driver and only began tipping the $5 in and the $5 out when I became a medallion holder because the the dispatchers were then working for me.

    But both the tipping and bribing are minor aspects of this subject. The major thing is the extortion. For instance, when I started at Luxor cab 15 or so years ago the general manager, John Lazar, told us that the “tip” was $5 in and $5 out with $2 for the gas men. He said that you didn’t necessarily need to tip the gas man but he might not help you if your car broke down.

    This is extortion. There was no choice. You tipped or else. I think that Lazar had about 200 cabs at the time. At $12 a shift and 2 shifts a day this = $4,800 per day = $1,752,00 per year. If you add the 500 cab of Yellow and do the same math you get = $12,000 per day & $4,380,000 per year. Industry wide the figure would equal $15,000,000 a year. This is a low estimate because of the bribing and other scams that go or went on at cab companies.

    The sheer figures alone show that “tipping” is not voluntary. But I also have an anecdote for Athan. Lazar was charging his cashiers a $100 a shift gate in order to work for him. Plus, If they couldn’t fill a medallion holder’s shift, they had to pay for it. I know this because one of the cashiers became very upset with me when I didn’t cover a shift and gave me a lot trouble because of it. But, being an medallion, I didn’t have to worry. But before i was a medallion holder the company changed me for a shift that was covered and forced me to pay it. If I hadn’t paid it i wouldn’t have been able to work. The first thing I did when I became a medallion holder was get the money back.

    So who gets the extorted money? Cashiers were getting between $300 and $700 depending upon the shift and the company. But this was small because of the above math.

    At Yellow the company got $6,000 a shift and Luxor $2,400 a shift. Where does the rest of the money go. Well, I don’t have the definite proof for the following that i do for the above but I’ve heard that one company owner started a shuttle business just on the amounts he took from the tip jar. Others have built swimming pools and such.

    In short, the article missed point which is that the owners of cab companies have historically extorted 10% to 20% of the incomes of their drivers. With the money they took from me I could have developed a retirement fund.

    But Athan is probably right. With the competition from Lyft etc, the companies probably can’t insist upon tips like they used to. When i spoke with Lazar about a month ago he told me that he was upbeat about his ability to compete with Uber.

    “But,” I told him, Uber doesn’t make his drivers tip.”

    Lazar looked at me with a thoughtful expression on his face.

    As for Hayashi – she’s the one who wrote the law against tipping. I guess, given the intelligence of some cab drivers, its natural that they should attack her for the greed of cab companies and a systemic problem that goes back 30 years to the death of unions. Also she does not have a job waiting at FTI. When she goes it will be an huge loss to cab drivers, honest company owners and the San Francisco riding public.

    • Ed Healy

      Note to Travis. Like most drivers you seem to be confused with your attacks on Hayashi. Your bit about the tipping attacks her for being against drivers. Your bit about her future employment is attacking her for creating a citywide app that will benefit the drivers but that companies hate because they think it will cut into their income.

      I personally tried to get the companies to put up the “No Tipping” signs that you desire and of course none of them did. But if they had it would have little or no effect. The corrupt companies would either ignore the sign or do everything back door.

      Hayashi is right. It is the drivers that have to stop the practice. What she has done is create a law that makes stopping the practice possible. It’s true that one driver making a protest isn’t going to be very effective and he or she could expect retaliation.

      But what would happen if guys like you stopped your misogynist slanders of Hayashi and talked 20 or 30 guys into protesting, into turning the companies in for violating Hayashi’s law?

      At this point in time, it very well might stop the practice.

      In short, stop bitching and organize. The time is ripe.

      • Travis

        There is not one word in my comment that would give anybody an inkling that I am a misogynist.
        I guess if she was Asian you would have called me a racist as well.
        You asking companies to put up a sign is by no means the same as her doing it. She should have mandated it long ago.

        • Ed Healy

          It would make no difference. Two things will make a difference. 1. cab companies realizing that they can’t hand on to driver by continuing their extortive policies. 2. Cab drivers organizing.
          Perhaps misogynist is the wrong word and perhaps not. As I pointed out: you attacked her for supporting cab companies in the first part of your smear and then basically attacked her for going against cab companies in the second.

          You will admit that this lacks rationality.

          I guess I should have used the word slanderer. If you have any proof that she is going to be employed by FTI lets see it.

  • Old timer

    In the early eighties I was driving at Yellow. I would call in on Friday or Saturday nite often and say I would not be in. There were always takers for the shift so no harm to anyone.
    Management thought I was being greedy and told me to stop calling in. Weeks later I called in on Saturday night and they charged me for the shift. I knew I was quitting in a couple of weeks so after I was gone I took them to small claims court. The manager lied thru his teeth and said they did not fill my shift that night. Judge did not buy it and I got my money back. It is called “unjust enrichment”
    They have many ways of stealing a drivers money

  • Joe Blow

    At a MTA Board meeting when the current rules on tipping were adopted. Jim Gillespie told the Board that drivers typically gave “a buck or two” and that was “no big deal”
    For him to say that does not happen now is laughable. Anybody could see it happening any day of the week at shift change including MTA.
    Make no mistake: refusing to comply with extortion will be noted and there will come a time when you will get punished.

  • taxidriver

    In the old days at Vets a guy used to work the window and he basically auctioned off taxi shifts whoever paid the highest got the cab. On New Years Eve every year he must have made $1000.