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

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.

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.

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.”

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.)

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.