In a landmark ruling on Thursday, New York Acting Supreme Court Justice Nicholas Moyne rejected an attempt by Uber Technologies Inc (NYSE:UBER), DoorDash Inc (NASDAQ:DASH), and Grubhub (NYSE:GRUB) Inc to block a novel law setting a minimum wage for app-based delivery workers in New York City. With this decision, the law will now take effect, pending the outcome of the companies' ongoing lawsuit.
The new law mandates that companies pay delivery workers $17.96 per hour, a figure set to rise to nearly $20 by April 2025. Companies have the discretion to pay workers either hourly or per delivery, based on the hours logged into the app.
The lawsuit against the law was filed separately by Uber, DoorDash, Grubhub Inc , and a smaller food delivery service, Relay Delivery Inc, in July. The companies argue that the law will necessitate shrinking their service areas to accommodate increased labor costs, negatively impacting customers and restaurants.
Justice Moyne, however, blocked the city from enforcing the law against Relay Delivery Inc until the case's resolution. Unlike its larger counterparts, Relay cannot immediately increase fees charged to restaurants and requires time to renegotiate contracts.
Both Uber and DoorDash voiced disappointment at the ruling. An Uber spokesperson warned that the law could lead to thousands of job losses and intensify competition among remaining delivery workers. A DoorDash spokesperson echoed this sentiment, stating that such an "extreme pay rate" would reduce opportunities and increase costs for all New Yorkers.
Supporters of the legislation argue that it is necessary as delivery workers in the city currently earn about $11 per hour on average after expenses - significantly below the city's $15 minimum wage. As app-based delivery workers are usually treated as independent contractors rather than company employees, general minimum wage laws do not apply to them.
The companies allege that city officials based the minimum wage law on flawed studies and statistics and claim that the city's surveys of delivery workers were biased and designed to justify a minimum wage. Justice Moyne, however, stated on Thursday that the companies overstated the importance of these surveys in the city's legislative process.
The judge also dismissed several other claims, including that the law was invalid because it covers workers who deliver food from restaurants but not from grocery and convenience stores.
This ruling marks a significant development in the ongoing debate over wages and labor rights for app-based workers in the United States. It remains to be seen how this decision will impact similar discussions in other jurisdictions.
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