Will NYC’s New Pay Standard Deliver for Restaurant Delivery Workers?
On June 12th, New York City gave final approval to a minimum pay standard for 60,000-plus predominantly immigrant restaurant app-based delivery workers. It’s the first such delivery worker pay standard in the nation. (Next January Seattle will implement a minimum pay standard for “app-based workers,” including food delivery workers.)
A City study from late last year found that delivery workers were paid an average of $7.09 an hour, not including tips but before expenses the workers pay out of their own pockets. After-expense hourly pay came to just $4.03.
Under the pay standard, which takes effect this July 12th, the delivery workers will receive minimum pay of $17.96 for each hour they work. The hourly minimum will rise to about $19.00 next April 1st, and to about $20.00 on April 1st, 2025; both amounts will include an upward adjustment based on the change in the Consumer Price Index over the prior year. New York City’s minimum pay standard will be administered by the Department of Consumer and Worker Protection (DCWP) and is modeled in part on the Taxi and Limousine Commission’s minimum pay standard for for-hire vehicle drivers, in place since February 2019.
Because delivery workers are treated as independent contractors rather than employees by the app companies (including DoorDash, Grubhub, and Uber Eats), the pay standard includes an amount equal to the employer share of payroll taxes, a provision for paid time off, and an amount corresponding to the workers’ compensation premium that employers of such workers would pay.
Restaurant delivery work exploded during the pandemic, and delivery workers were widely heralded as among the most vital of all essential workers. Thousands of dislocated restaurant workers were among those who acquired e-bikes and began delivering food. Restaurant deliveries soared by more than 50 percent and continued growing well into the pandemic recovery. There was 17 percent growth in the first half of 2022 compared to the same 2021 period. In 2022 there were an estimated 132 million restaurant deliveries in New York City.
Despite widespread consumer appreciation for their services, delivery workers have endured poor treatment and paltry pay from app companies whose business has flourished. While workers pocketed $4.32 per delivery in 2022 before expenses, the app companies kept nearly as much for themselves ($4.19 per delivery). Until public outcry and legal action halted the practice, DoorDash counted tips paid by customers toward the fee the company owed delivery workers. Based on an analysis of data provided by the companies, a DCWP report found that delivery worker pay per hour had fallen by more than half between early 2021 and mid-2022.
To make matters worse, delivery work in New York City has been incredibly dangerous. Many workers have been criminally attacked or have had their e-bikes stolen. DCWP reported 33 delivery worker fatalities during the period January 2020-October 2022, including five workers killed during robberies. DCWP estimated an injury rate resulting in days away from work for local e-bike delivery workers of 32 per 100 full-time equivalent workers. That’s more than 15 times the rate for construction laborers and more than 25 times the average across all occupations in the United States.
Delivery workers came together in the fall of 2020 to organize Los Deliveristas Unidos (LDU) and garnered significant attention from the media and the public by marching on City Hall, and with other events and actions. LDU’s persistent organizing, and mounting delivery worker deaths, spurred the City Council to enact a package of bills in September 2021 to authorize establishment of a minimum compensation standard, require restaurants to provide bathroom access, require delivery apps to pay workers at least once a week and also provide insulated food delivery bags, and to limit the delivery area a worker serves to reduce their travel distances and times. The July 12th implementation date for the pay standard is more than six months later than the January 1st, 2023 effective date the Council had sought.
City Comptroller Brad Lander, who had introduced bills authorizing both the rideshare and delivery worker minimum pay standards when he was in the Council, criticized the delivery worker pay standard for a controversial adjustment made by DCWP that reduced the minimum pay standard by 15 percent (or $3.60 per hour) to account for “multi-apping.” This adjustment was sought by the app companies to reflect the extent to which workers have more than one app on at a time.
Some adjustment for time spent multi-apping would be appropriate under the “standard” payment option, requiring companies to pay for all the time workers had that company’s app on. However, under an “alternate” payment method DCWP expects most companies to utilize (where workers are paid 50 cents per minute for time spent delivering an order), there is little justification for any multi-apping adjustment. Nonetheless, the way DCWP specified the multi-apping modification also lowered the amount of the alternate minimum payment.
Lander also objected to the phasing in of the minimum pay standard over three years, stating: “There is simply no justification for allowing multi-billion dollar apps to continue to pay subminimum wages for the next two years.” Lander noted that the TLC’s rideshare pay standard had no such phase-in.
At DCWP hearings on the proposed pay standard, scores of delivery workers made the case for a higher expense allowance than the $2.26 per hour included in the adopted pay standard. The adopted pay rule requires DCWP to review the expense allowance, multi-apping adjustment, base pay, and other components of the pay standard by September 24th, 2024 to determine if further adjustments are needed.
The app companies responded to the final pay standard by raising the likelihood of “unintended consequences,” such as the companies limiting worker access to their apps and reduced tipping by customers. However, the DCWP report noted that apps already sometimes block workers’ ability to sign on to the app, and that to match supply of delivery workers to the availability of orders, some encourage workers to schedule their shifts, and also provide incentives for workers to hit production targets. And in the unlikely event consumers cut back on tipping, the combined amount of pay plus tips that workers would likely receive would still increase under the pay standard.
Local law caps the amount the apps can charge restaurants for deliveries, but it remains to be seen how much of the increased delivery worker pay will be passed onto consumers and whether the app companies will reduce the profits they keep for themselves from each order.
James A. Parrott is director of economic and fiscal policies at the Center for New York City Affairs at The New School.
Photo by: Julia Justo