Uber, Other App-Based Food Delivery Firms Sue New York City's Law on Minimum Wage

Uber Technologies, DoorDash and other app-based food delivery companies filed lawsuits on Thursday seeking to strike down New York City's novel law setting a minimum wage for delivery workers.

The companies filed separate complaints in New York state court claiming the law, which takes effect July 12, is based on a misunderstanding of how the food delivery industry works. Grubhub joined DoorDash in its lawsuit. 

The law will require companies to pay delivery workers $17.96 (nearly Rs. 1,500) an hour, which will rise to nearly $20 (nearly Rs. 1,650) in April 2025. Companies can decide whether to pay workers hourly or per delivery, which would be based on the hours workers are logged into the app.

Delivery apps would need to increase the number of trips completed per hour to absorb the new labour costs, forcing them to shrink service areas and harming consumers and restaurants, the companies said.

Uber and DoorDash in May both raised their annual earnings forecasts after beating quarterly revenue expectations, stemming from an increase in orders for food, groceries and convenience products.

Relay Delivery also filed a lawsuit in the same court claiming the law will put the New York-based company out of business unless it raises the fees it charges to restaurants. 

Vilda Vera Mayuga, head of the city's Department of Consumer and Worker Protection, said the law will help lift thousands of workers out of poverty. 

“Delivery workers, like all workers, deserve fair pay for their labor, and we are disappointed that Uber, DoorDash, Grubhub, and Relay disagree," Mayuga said in a statement.

Supporters of the law, which is the first of its kind in the US, say it is needed because delivery workers in the city earn about $11 (nearly Rs. 910) an hour on average after expenses, far below the city's $15 (nearly Rs. 1,240) minimum wage.

App-based delivery workers are usually treated as independent contractors rather than company employees, so general minimum wage laws do not apply to them.

The companies in the lawsuits filed on Thursday say city officials justified the law based on flawed studies and statistics. 

The city's surveys of delivery workers were biased and designed to elicit responses that would justify a minimum wage, the companies said.

The lawsuits also claim the law is based on the unsupported assumption that restaurants make little profit from app-based orders, and that it imposes burdensome recordkeeping requirements.

"This fatally flawed and subjective rulemaking process unsurprisingly worsened these already problematic policies," DoorDash said in a statement announcing its lawsuit. 

The companies accused the city of violating a state law barring rules that are "arbitrary and capricious." They are seeking orders blocking the law from taking effect while the lawsuits proceed and rulings permanently striking down the law.

© Thomson Reuters 2023