NYC's $18 wage for third-party delivery workers allowed to stand

Third-party delivery workers in New York City are once again in line for a big raise after a judge denied delivery companies’ efforts to stop a mandatory pay hike.

New York State Supreme Court Judge Nicholas Moyne on Thursday struck down motions from DoorDash, Uber Eats and Grubhub to block the city’s new minimum pay rule, which will raise couriers’ pay to $17.96 an hour before tips, up from an estimated $7.09. The delivery companies argued the new rule will damage the food delivery market.

A similar motion by a fourth delivery company, Relay, was allowed to stand because the company has a different business model than the other three. 

In their initial lawsuits, DoorDash, Uber Eats and Grubhub gave seven reasons why the law should be blocked. They argued, for instance, that the rule was based on biased surveys and a flawed economic model. They also said it would hurt demand for restaurants because it would force the delivery companies to shrink their service areas.

The judge, however, dismissed all of the delivery companies’ arguments and ruled that the city’s wage law is “reasonable and rational.”

One of the delivery apps’ key arguments was that a pay hike would force them to limit their delivery zones in order to increase the number of deliveries couriers could do per hour. That, they said, would in turn hurt demand for restaurants and lead to fewer opportunities for couriers.

The judge responded that the rule doesn’t explicitly require the delivery apps to use smaller delivery areas. He added that the city will continue to review the rule and could adjust the rate to account for negative impacts.

Workers’ Justice Project, a group that has been pushing for the wage increase, celebrated the decision. 

"Despite their desperate attempts to sow division and pit workers against each other, Uber, DoorDash, and Grubhub continue to lose over and over again in their fight against a living wage for New York City’s 65,000 delivery workers,” Executive Director Ligia Guallpa said in a statement. 

Delivery apps, meanwhile, lamented the ruling. 

“This is a deeply disappointing outcome for delivery workers, merchants, and customers who look to our platform,” a DoorDash spokesperson said in a statement. “The City’s insistence on forging ahead with such an extreme pay rate will reduce opportunity and increase costs for all New Yorkers. We will continue evaluating our legal options moving forward.”

“The City continues to lie to workers and the public,” an Uber spokesperson said in a statement. “This law will put thousands of New Yorkers out of work and force the remaining couriers to compete against each other to deliver orders faster.”

The new rate represents a roughly 150% raise for delivery workers, who currently earn an average of $7.09 an hour before tips, according to the city. It will rise $1 next year and another $1 in 2025. That poses a major challenge for delivery services, which operate on slim margins as it is. 

Uber Eats in its lawsuit determined that the wage hike will translate to a $4.94 increase in its per-delivery costs, eclipsing its current average gross margin of $4.19. The figures are based on data provided by the city.

The delivery apps have been locked in an intense battle with New York City over a number of issues, including the city’s delivery fee cap and a law that would force the apps to share more customer data with restaurants. 

They scored a victory last week when a federal judge allowed their lawsuit against the delivery fee cap to proceed.

This story originally appeared in WGB sister publication Restaurant Business Online.