Uber and Lyft threatened to leave Minneapolis or curtail services if Mayor Jacob Frey signed the plan. (Gene J. Puskar, Associated Press file/The Minnesota Star Tribune)

Minneapolis Mayor Jacob Frey on Tuesday vetoed an ambitious plan to raise pay and protections for Uber and Lyft drivers — but also announced an agreement with Uber over pay minimums.

The plan, approved by the City Council last week, was cast by supporters as a means to protect drivers from being exploited by international rideshare companies and prompted Uber and Lyft to threaten to leave the city or vastly curtail services if Frey signed it.

"The ordinance needs more work," the mayor said in an interview Tuesday.

Frey said Uber has agreed to raise the effective pay of drivers in Minneapolis to at least minimum wage — the same base standard that organized drivers who supported the City Council plan said they wanted. But it wasn't immediately clear how much of a boost that would be for many drivers; Uber compensation, and how it's calculated, is disputed by the company and critics.

Uber also agreed to pay drivers a minimum of $5 for every ride, regardless of how short, according to Frey and a letter from the company.

As of Tuesday, there was no agreement for any guarantees for Lyft drivers, Frey said.

Shortly after Frey announced the veto, Lyft released a statement praising the mayor for his decision to reject a "deeply flawed" plan.

"We support a minimum earning standard for drivers, but it should be part of a broader policy framework that balances the needs of riders and drivers," the statement said.

A Lyft spokesman said if the veto stands, the company will remain in Minneapolis.

Frey had earlier hinted at a veto, commenting that the the regulations approved by the council would have unintended consequences. Proponents of the ordinance will likely attempt to override the mayor's veto.

That will be an uphill battle. The ordinance was approved 7-5 with one member absent who expressed reservations about it. Nine votes are needed on the 13-member council to override a mayoral veto.

Tuesday afternoon, Council Member Robin Wonsley, the lead sponsor of the rideshare ordinance, issued a statement denouncing Frey's veto as "an inexcusable betrayal of Minneapolis workers."

"As a Council Member, Jacob Frey voted to approve a $15 minimum wage, but evidently he is ready to abandon any commitment to living wages or workers' rights under the pressure of lobbying by multibillion-dollar, out-of-state corporations. This fight is not over," she said.

Eid Ali, president of a group of drivers advocating for changes, said he was "devastated" by the news.

"I am just trying to take some time to process why and how this happened, and what we did that was not right that we deserve to get this vetoed," said Eid, who founded Minnesota Uber/Lyft Drivers Association, which says it represents 1,300 local drivers.

What the plan said

The primary thrust of the plan, modeled after others in Seattle and New York, was for drivers to earn at least minimum wage. Because drivers are not employees of rideshare companies, they are not protected by city and state minimum wage requirements, which are either $14.50 or $15.19 an hour in Minneapolis, depending on company size. The state minimum wage is lower.

The ordinance would set a number of pay minimums for drivers toward that end.

Additionally, the plan would insulate drivers' tips from company deductions, and create a process to protect drivers from being terminated without advance warning and a chance to appeal.

The plan also seeks to create layers of transparency, with the city able to monitor any rideshare company for how they pay drivers and which drivers and neighborhoods they serve, as well as an envisioned but not-yet-funded "driver resource center" to answer questions and potentially resolve disputes.

The ordinance would only affect portions of rides within Minneapolis' borders.

Why the veto?

Before last week's council vote, Frey sent a letter outlining a number of objections to the plan. Among them were that people who are poor, older or rely on wheelchairs would be effectively priced out of hailing a ride. Frey also pointed to a lack of clear data on how much the companies pay and how much they keep for themselves, as well as who uses ride-hailing companies and what other options they have.

On Tuesday, he said, "Any time you strike complex legislation it's a balance, and in getting that balance right, you gotta know what the consequences are … and clearly here, we didn't yet."

His concerns were similar to those of Gov. Tim Walz, who vetoed earlier this year similar state legislation approved by lawmakers. Instead, Walz created a commission to study the issue and make recommendations to lawmakers by Jan. 1.

The committee, which includes representatives from Uber and Lyft, as well as drivers who have advocated for pay hikes, has met twice so far.

Frey said he thinks a statewide approach would make more sense, if agreement can be reached.

What's next

Several council members who supported the ordinance have said they plan to try to override a Frey veto.

An override will likely require changing the minds of at least two council members.

Council President Andrea Jenkins and Council Members Elliott Payne, Wonsley, Jamal Osman, Jason Chavez, Aisha Chughtai and Jeremiah Ellison voted in favor of the ordinance, while council Vice President Linea Palmisano and Council Members Michael Rainville, LaTrisha Vetaw, Emily Koski and Andrew Johnson voted no. Council Member Lisa Goodman was absent for the vote; she told the Star Tribune she has "concerns" with the ordinance.

The next scheduled City Council meeting is Sept. 7.