Without any discussion, the Los Angeles City Council on Friday approved an emergency ordinance to let the city's 10 taxicab companies reclassify their drivers as independent contractors in a move to keep the financially ailing L.A. Taxi Co. in business.
About 75 cab drivers and industry officials, anticipating a long debate, were caught by surprise by the swift 13-0 vote, which would allow L.A. Taxi to end fringe benefits and employer contributions to Social Security.
The move would help stem the losses--approaching $1.5 million--that the company has suffered since going into business before the start of the Olympic Games last summer.
The ordinance, which still must be approved by Mayor Tom Bradley, also lifts a requirement that L.A. Taxi pay the minimum wage to its drivers. As independent contractors, drivers would be paid no wages and would have to rely for income solely on their share of fares, city Transportation Department officials said.
The ordinance constitutes an admission by city officials that the traditional employer-employee relationship is not suited to the Los Angeles taxi industry, which has been dominated in recent years by drivers who own their own cabs, several council members said.
Independent owner-drivers had bitterly opposed the ordinance during hearings, calling it a "bail-out" for L.A. Taxi. They said L.A. Taxi's 247-cab fleet means that Los Angeles is flooded with too many cabs--1,200 of them.
However, Donald Howery, Transportation Department general manager, and others said L.A. Taxi's presence has helped clean up the taxi industry, prompting other cab companies to look critically at their own operations.
Faced with L.A. Taxi's initial investment of $4.1 million, used mostly to buy new vehicles, some cab companies in Los Angeles quickly agreed to form cooperatives, with drivers owning up to 49% of the companies. One result was that drivers had more incentive to provide better service. In addition, many agreed to wear uniforms with baseball-style caps to improve their public image.
The city's other franchises are likely to take advantage of the independent contractor status when their permits come up for renewal in September, executives of several cab firms said.