In large part, the nature of the food delivery business is not much different from that of for-hire vehicle (FHV) transportation. Food Delivery Persons (FDP) log onto an app and get paired with a person/consumer seeking food delivered to them. The leading companies – whether it be Door Dash, Uber Eats, or GrubHub – all have relationships with consumers seeking food to be delivered. Much like a black car or livery base, they act as an intermediary. They are an intermediary between the restaurant and the person seeking food. Much like a FHV driver, the FDP is the person who provides the actual service.
The New York City Department of Consumer and Worker Protection (DCWP) – formerly the Department of Consumer Affairs (DCA) – was created to protect and enhance the daily economic lives of New Yorkers to create thriving communities. DCWP licenses more than 45,000 businesses in more than 40 industries and enforces key consumer protection, licensing, and workplace laws that apply to countless more.
In September 2021, the New York City Council signed into law a package of legislation directed at food delivery platforms. Among the relevant measures was Local Law 115, which required DCWP to study the pay and working conditions of food delivery workers, and based on the results of its study, to establish a method for determining the minimum payments that third-party food delivery services and third-party courier services (together, “apps”) must pay to food delivery workers. The rule is complicated, and the basis for it relies upon limited studies and data. Suffice it to say that the pay basis is somewhat similar to the rules for High Volume For-Hire Vehicle Services (HVFHVS).
On June 12, 2023, DCWP issued a Final Rule setting a minimum pay rate for app-based restaurant delivery workers. The rule was scheduled to go into effect on July 12, 2023. On June 7, 2023, Uber Technologies, Inc. filed an order to show cause in the New York County Supreme Court seeking a temporary restraining order (TRO) to enjoin the DCWP from enforcing the new pay rule.
Of course, the City of New York opposed Uber’s application for a TRO. On July 7, 2023, New York County Supreme Court Justice Nicholas W. Moyne issued the TRO enjoining the CDWP from enforcing the new rule pending a hearing on Uber’s application for a preliminary injunction that was then set for oral arguments on July 31, 2023. A copy of the lawsuit and other supporting documents can be found at: http://www.shankerlawfirm.com/blog.
So, what does all this mean, and how does it apply to the FHV industry? First, as stated above, the way the FHV industry operates is quite similar to the way the food delivery business operates. Second, while the rule does not affect the FHV industry, there is something lingering in the shadows that I do not like: The City of New York and its regulatory agencies have a tendency to overreach in their authority.
Regulators would like to regulate everything possible within their domain. If they didn’t issue new rules to regulate businesses, the jobs of the regulators would have no purpose. By the same token, just because an industry should be regulated, that does not mean it should be overregulated, as is typical of almost all NYC agencies.
While NYC already has a rule mandating a minimum amount the largest FHV companies must pay FHV drivers for each trip, this new pay rule is the first time, outside of the FHV industry, that an NYC agency is seeking to set minimum pay for independent contractors in another industry. This sets a dangerous precedent.
Food delivery persons are independent contractors. Such categories of workers typically do not receive benefits or job/worker protections. Also, like it or not, regulations are expensive because compliance is expensive. In the end, consumers wind up paying for that compliance in the form of higher costs for services.
As I have often said, the old worker model of employee versus independent contractor is broken. You simply can’t use that construct in the modern labor market as it is no longer applicable. With the rise of the gig economy came the rise of the need for what I call “a 3rd way.” Gig workers, such as food delivery persons and even FHV drivers, are not employees, but they are not entirely independent contractors either. The gig worker should receive some employee-type protections, but not all. On the other hand, in the modern workplace, independent contractors shouldn’t receive zero benefits.
There is a 3rd way… a middle ground between all and nothing.
In promulgating a rule, a City administrative agency must examine the relevant data and articulate a satisfactory explanation for its action, including a rational connection between the facts found and the choice made. An agency cannot ignore the evidence and merely rely upon the agency’s general authority to administer a rule.
So, where does that leave Uber and the DCWP? A lawsuit is not always the best way to resolve disputes, but the City loves to fight, and sometimes companies like Uber have to take legal action to protect their rights. I think there is another and much better way.
The Black Car Fund has proven to be an excellent way to provide benefits to independent contractors. When the Black Car Fund was created well over 20 years ago, it was way ahead of its time. Providing portable benefits to independent contractors was truly revolutionary and has proven to be a roaring success… so much so that the Black Car Fund now provides more than just Workers’ Compensation benefits to FHV drivers.
Also, the Black Car Fund operates like a well-oiled machine. So, why can’t the City mandate or encourage the creation of a fund that provides benefits to food delivery persons just like the Black Car Fund provides benefits to FHV drivers? The reality is that it can be done, and the Black Car Fund has the template to follow.
In my opinion, requiring Food Delivery apps and their customers to pay into a fund on a per-transaction basis is a much better solution. Providing certain benefits to food delivery persons would be the best and most logical place to start. Rather than mandate a minimum hourly wage or a minimum amount per trip, provide food delivery persons with certain benefits they would otherwise have to pay for out of pocket.
In the end, this puts more money in the hands of the food delivery persons without all the hoopla surrounding minimum pay, utilization rate, waiting time, lawsuits, etc. Perhaps this is a baby step and not an overall solution, but it is better to have all parties on the same page trying to craft a reasonable and acceptable solution, rather than the City mandating a solution and then fighting it out in court.
So, back to the FHV industry… My concern is that if the DCWP is so brazen to craft this new rule without having the data and studies to support it, then what is there to prevent the DCWP or even the TLC from crafting some perceived similar solution for the entire FHV industry? A minimum pay rate or minimum per job would be a disaster for the livery industry and even the traditional black car industry.
Perhaps I have too much of an Orwellian view of government. Government involvement and regulation is not always the solution. Political resolutions are not always the solution. Politicians and regulators are not always the best people to craft solutions for industries. Just as the black car industry created the Black Car Fund and the livery industry created the Livery Fund, perhaps the food delivery industry should have created its own fund before the City intervened.
It is never too late to devise a solution that makes everyone happy. You just have to look to the future, think outside the box, and be reasonable.
As always, I remain committed to doing all I can to keep the FHV industry alive so it can thrive well into the future.
