(NewsNation) — Food delivery gig workers are set to receive an hourly minimum wage in two major cities, but legal challenges have halted the first rollout.
In New York City, app-based delivery workers were set to make almost $18 an hour starting Wednesday but lawsuits by Uber, DoorDash and GrubHub have prevented the new rules from taking effect for the time being.
A New York state judge issued a temporary injunction Friday after the three companies sued to stop the minimum pay rate, which local officials have touted as the first of its kind anywhere in the country.
Under the recently announced rules, app companies would be required to pay their delivery workers in New York City $17.96 an hour before tips. That rate would rise to $19.96 an hour by April 2025.
Apps have the option to pay workers per trip, per hour, or develop their own formulas, so long as earnings meet the minimum rate, the city said.
Delivery workers in the Pacific Northwest will likely be paying attention. The Seattle City Council passed its own minimum wage law for app-based delivery workers back in May 2022. That rule is set to take effect next year.
Labor advocates point to operating expenses, delivery dangers
New York’s more than 60,000 app-based delivery workers currently make an average of $7.09 per hour without tips and $14.18 per hour with tips, according to an analysis by the city.
But a labor advocate and delivery worker said those rates only capture part of the story.
As independent contractors, food delivery workers are responsible for covering their own expenses.
“If you’re on an E-bike that’s an investment of about $2,000 just to break into the industry and start working,” said Joshua Wood, a 25-year-old who has been doing deliveries since 2016.
After adjusting for work expenses, the city estimates the hourly rate for delivery workers falls to about $11 with tips and just $4 without tips — well below the city’s $15 minimum wage, which doesn’t apply to independent contractors.
“Bumping this up to $18 an hour would at least give us some type of recognition that this is a legitimate part of the economy,” Wood said. “We deserve the same base minimum wage that the rest of the city gets.”
He said making deliveries on busy streets can be a dangerous job and pointed out that many delivery workers don’t have health insurance because they have to pay for it themselves.
A 2021 survey funded by the Worker’s Justice Project — a labor advocacy group that pushed for the new law — found half of delivery workers had been in an accident or crash while on the job.
Ligia Guallpa, the executive director of the Worker’s Justice Project, said those risks are a daily reality for delivery workers, many of whom are struggling to make ends meet.
“This is about the livelihood of New Yorkers who are essential to the city, who are delivering food and taking care of every New Yorker through the difficulties of the weather, traffic and others hazards,” she said.
Guallpa said a minimum pay rate is the least companies can do to support workers who “are left at the mercy” of algorithms and have to rely on inconsistent tips.
Companies warn of higher prices, lower demand
The delivery apps argue the new minimum pay rate will lead to higher prices for consumers, lower demand and less flexibility for workers.
DoorDash and Grubhub called the new rule “ill-conceived” in a joint legal filing and said it will have “drastic” and “immediate” consequences for all parties involved.
According to the city’s own estimates, fees could rise as much as $5.18 per order.
DoorDash said the higher prices “will often be felt by those who can least afford them,” like “busy families” and “small restaurants working tirelessly to grow their businesses,” in a statement.
In a separate lawsuit, Uber called the law a “grand marketplace experiment” that risks “crushing restaurants.”
The city acknowledged that the “higher fees will moderate growth” in its report but projects the number of app deliveries will still increase by 35% by 2025.
All three companies argued that the new pay rate is based on “biased” and “unreliable” survey data that will hurt delivery workers.
Uber said it’s already started developing “gating technology” that would limit couriers’ access to the Uber Eats app outside a scheduled period of time, according to the lawsuit.
The rule also incentivizes companies to shrink the delivery radius around restaurants, which reduces order volumes and limits restaurants’ ability to gain new customers, Uber argued in its court filing.
An industry group on the other side of the country is also worried about higher prices and what they will mean for business.
“Our biggest concern is that costs will go up in such a dramatic fashion, that it will just simply reduce demand,” said Michael Wolfe, executive director of Drive Forward, an industry trade group in Seattle.
The Seattle policy — which requires delivery apps pay workers equivalent to the city’s minimum wage ($18.69 an hour in 2023) — is scheduled to go into effect next January.
Wolfe said a minimum earning standard was “absolutely needed” but thought the final rule raised the rate too high and didn’t “meet the goal everyone was looking for.” He’s worried higher delivery prices could lead to lower tips.
When asked if he shared that concern, Wood said he would rather have the higher base pay because tips are “fundamentally inconsistent.”
For now, food delivery workers in New York are in wait-and-see mode.
A hearing has been set for July 31 to determine whether the injunction in New York will stand while the other legal challenges play out.