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NYC proposes $24 minimum wage for app-based delivery drivers

Proposed rate would be first of its kind for delivery workers

App-based drivers on DoorDash, Grubhub, Uber Eats and more could soon be making $24 an hour (Photo: DoorDash)

Updated at 3:00 p.m. EDT Thursday with comment from Grubhub.

A little over a year after the New York City Council approved a legislative package aimed at improving working conditions for app-based delivery drivers, city officials are following through on one of the legislation’s key provisions.

Uber Eats (NYSE: UBER), DoorDash (NYSE: DASH) and Grubhub (OCTUS: JTKWY) drivers in the Big Apple could earn a minimum wage of nearly $24 an hour by 2025 if the city approves a proposal passed down by the Department of Consumer and Worker Protection (DCWP) on Wednesday.

For the 60,000-plus app-based delivery drivers in New York City, the DCWP proposes enacting an initial $17.87 minimum wage that would rise to $23.82 by April 1, 2025. The rate would be paid based on the time the driver spent delivering as well as the time spent connected to the app and waiting for a trip offer.

A public hearing on the proposed rule will take place on Dec. 16, 2022, at 11 a.m. EST. Following the hearing and a consideration of public comments, the rule would take effect.

“This new proposed minimum pay rate would help ensure a fairer pay for delivery workers for third-party apps, providing more stability for 60,000 workers across our city,” said New York City Mayor Eric Adams. “We look forward to hearing public comment on the new proposed rules as we prepare to implement the law.”

Added Brooklyn Borough President Antonio Reynoso: “It’s absolutely unacceptable that the restaurant delivery workers who provide for so many in this city are not justly compensated for their time, reimbursed for their expenses or provided essential benefits. Especially since the pandemic began, delivery workers have emerged as essential to the thriving food scene our city is famous for, and it’s time that our city shows its gratitude in real, material terms.”

The eventual $23.82 minimum wage would be composed of three components. The first is earnings, which would account for $19.86 and matches the minimum earnings standard for ride-hail drivers set by the New York City Taxi and Limousine Commission (TLC).

Another $2.26 is based on driver expenses, reflecting the average expenses incurred by e-bike workers. The final $1.70 comes from workers’ compensation, which reflects the benefits drivers would receive were they classified as full-time employees in a comparable role.

“Restaurant delivery workers serve our city every day, in all weather conditions, only to earn less than minimum wage with no benefits,” said DCWP Commissioner Vilda Vera Mayuga. “This proposed minimum pay rate would help guarantee delivery workers a more dignified pay and rightfully establish pay equity with other workers who earn a minimum wage.”

The current situation

As it stands, New York City’s app-based delivery drivers on average make less than the city’s minimum wage of $15. Estimates vary, but nearly all agree that even with tips, drivers earn less than that threshold.

According to a new report from the DCWP, workers earn an average of $14.18 per hour, split equally between payments from apps and tips. But when expenses are factored in, drivers are only taking home $11.12 an hour with tips — and just $4.03 without them.

Another estimate from Cornell University’s Worker Institute put the average hourly wage for app-based drivers at $12.21, falling to $7.87 without tips.

As a result of those low wages, one-third of delivery drivers said they need to work seven days a week to make ends meet, while another one-third said they need to work six days a week.

Some of the apps have pushed back on these earnings figures, arguing that their drivers make more than the minimum wage. DoorDash, for example, claims its drivers earn close to $29 per hour on average, including 100% of their tips.

App-based platforms respond

Just like food delivery apps pushed back on the city’s efforts to implement caps on the amount of commission they could earn from restaurants, they’re already doing the same with this week’s proposal.

DoorDash told Modern Shipper in an email that while it is not opposed to establishing a minimum wage, the company believes New York City’s proposal could have unintended consequences.

“Dashing allows so many across New York City to earn when, where and how often they choose,” a DoorDash spokesperson said in a statement. “Unfortunately, the proposed rule does not appropriately account for this flexibility or that Dashers are able to choose which deliveries they accept or reject. Failing to address this could significantly increase the costs of delivery, reducing orders for local businesses and harming the very delivery workers it intends to support.

“We will continue to work with policymakers on a reasonable approach that better reflects the way Dashers use the platform for flexible earning opportunities and keeps these services within reach for businesses and consumers.”

One of DoorDash’s chief concerns with the proposal is that pay would be based in part on the amount of time drivers have the app open and are waiting for an order. The company argued that because drivers can decline any order, they could theoretically keep the app open and be paid while doing other activities, including delivering for a rival app.

DoorDash said that if this were the case, app-based delivery platforms could be forced to limit driver numbers, remove the ability to accept or decline orders or even prohibit delivering for another platform.

Watch: Incentivizing the gig economy

The Flex Association — which represents Uber, Lyft, DoorDash, Grubhub and other app-based delivery platforms — also chimed in, echoing some of the concerns raised by DoorDash.

“The earnings standard proposed by the Department of Consumer and Worker Protection will lead to damaging consequences for earners, consumers and small businesses throughout New York City,” Flex CEO Kristin Sharp told Modern Shipper in an email. “Notably, the rule would require a company to pay for any time an earner has their app open, even if that person is providing deliveries for another platform or doing other activities unrelated to delivery. It is critical that DCWP reconsiders this problematic proposal.”

Uber Eats also had its qualms with the proposed rule individually.

“The day after repealing a rule that was universally hated by TLC drivers, the city is proposing a nearly identical one for delivery workers that would force apps to block couriers from working when and where they want,” Uber spokeswoman Freddi Goldstein told Modern Shipper in an email.

Goldstein is alluding to a proposal published by the TLC on Wednesday that would raise per-minute and per-mile earnings for drivers. 

The rule would also decrease the commission’s emphasis on utilization rates — calculated as the time spent on a trip versus the time spent without a passenger but available for dispatch — which had the unintended effect of “locking them out” of the app in certain areas. Uber and Lyft drivers took to the Brooklyn Bridge in protest of the decision in 2019. 

This week’s minimum wage proposal, though, does not appear to include any metrics around how utilization rate would be determined. The DCWP argues that raising the minimum wage will naturally raise utilization rates since drivers are less incentivized to be on standby.

Grubhub voiced the same concern as Uber Eats, suggesting that doing so will lock drivers out of certain areas at certain times.

“Grubhub knows our delivery partners are essential to New York City’s businesses and communities,” a Grubhub spokesperson told Modern Shipper. “But the DCWP’s proposed rule does not account for our delivery partners’ wish to work when and where they choose, and we do not support it as written. It would also markedly and problematically lead to fewer opportunities both for drivers and for the city’s small businesses.”

Some observers have also raised concerns that restaurants could lose money as a result of the new rule. Because each trip would cost more for the apps, managers worry that they will be forced to sell to them at a discount in order to keep costs low for consumers. They’ll have the opportunity to voice those concerns on Dec. 16.

Click for more Modern Shipper articles by Jack Daleo.

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One Comment

  1. Stephen Webster

    A non profit group is also pushing for the sqme for truck drivers that go into new york city or california. A very good idea to solve the shortage of drivers and reduce over too many delivery units

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Jack Daleo

Jack is a staff writer for FreightWaves and Modern Shipper covering topics like last mile delivery and e-commerce fulfillment. He studied at Northwestern University, majoring in journalism with a certificate in integrated marketing communications. Previously, Jack has written for Backpacker Magazine and enjoys travel, the outdoors, and all things basketball.