Close Ad

The Spoon

Daily news and analysis about the food tech revolution

Postmates

New York Court Rules That Postmates Couriers Are Employees — and Eligible for Unemployment

The New York Court of Appeals has ruled that Postmates couriers are employees and therefore eligible for unemployment benefits during the COVID-19 pandemic. 

The ruling is actually a reinstatement of a 2015 decision, which found that former Postmates courier Luis A. Vega was eligible for unemployment benefits after he was terminated from the service. Postmates had appealed the decision. The New York Court of Appeals this month reversed it, stating, “Because there was record support for the Board’s finding that the couriers were employees, we reverse the Appellate Division order and reinstate the Board’s decision.”

The ruling states there is “substantial evidence” that Postmates “exercised control over its couriers sufficient to render them employees rather than independent contractors operating their own businesses.” 

The document goes on to explain that the third-party delivery service “could not operate” without couriers, that Postmates “controls the assignment of deliveries,” and that if the courier is unavailable, Postmates, not the courier, is responsible for finding a replacement. Technology-wise, Postmates tracks deliveries in real time. However, “That the couriers retain some independence to choose their work schedule and delivery route does not mean that they have actual control over their work or the service Postmates provides its customers . . .”

All of these elements — which largely focus on how much control Postmates has over its workers — factored into the decision findings that Postmates couriers can be treated as employees, rather than contractors. 

How third-party delivery companies classifies their workers is a major issue up for debate right now, and this isn’t the first time Postmates has wound up with a ruling favorable to its workers. In December, the service, along with Uber, filed a lawsuit claiming California’s Assembly Bill 5, which classifies gig workers as employees, was unconstitutional. A U.S. District Judge rejected that bid last month.

The current COVID-19 pandemic intensifies the flame under this debate, as these workers are more at risk of infection by virtue of the fact that they are out and about delivering food when the huge swaths of country are being told to stay at home. Classifying gig workers as employees, rather than contractors, means couriers would have access to paid health benefits and sick leave. At the same time, the restaurant industry is experiencing a meltdown of epic proportions, with the National Restaurant Association predicting the loss of millions of restaurant-related jobs over the next few months. With no guarantee that there will be enough demand for delivery to ensure all couriers keep their jobs, those folks driving and biking food to customers need something of their own guarantee that they’ll have access to assistance if they lose their gigs. 

That, of course, means that services like Postmates would have to pony up and pay into unemployment insurance funds. In the case of this ruling, Postmates will have to contribute to New York’s Unemployment Insurance Fund. It’s entirely possible this decision will have a ripple effect, and Postmates along with other delivery services will wind up having to make similar moves in other states, too.

“Today’s decision is a huge victory for thousands of gig workers across New York,” New York Attorney Letitia General James said in a statement. “The courts have solidified what we all have known for a while — delivery drivers are employees and are entitled to the same unemployment benefits other employees can obtain.” 

Report: Sales From Third-Party Delivery Apps Are Slowing. Might It Be Those Fees?

Despite dining rooms being closed and delivery being one of the few sales channels on which restaurants can rely, the numbers are down as far as third-party platforms like Grubhub and DoorDash are concerned. Data from Earnest Research shows that these platforms are “declining in growth,” according to an article today on Nation’s Restaurant News.

Earnest Research analyzes credit and debit card purchases. Its findings, which end with numbers from March 18, show that instead of ordering more restaurant delivery, consumers are instead spending their money on grocery store purchases.

From NRN:

Earnest Research recorded national restaurant spend down 17% year-over-year for the week ending March 18, specifically driven by declines in QSR (-12% YoY), fast-casual (-24% YoY), and casual dining (-34% YoY). Spend with delivery aggregators (how Earnest defines third-party marketplaces and delivery app services) decelerated to +11% YoY from mid-twenty percent growth year-to-date.

Brick-and-mortar grocery stores, on the other hand, saw a 79 percent year-over-year growth, while online grocery orders were up 66 percent year over year. “This suggests a shift in shopper behavior as customers are trying online grocery for the first time, increasing their frequency, or both,” the report notes.

You can hardly blame consumers for wanting to spend their money on grocery items that can stretch across multiple meals. I, too, had a recent experience that really underscored how expensive restaurant food delivery actually is. Over the weekend, I ordered a $20 pizza from a local place here in Nashville. The shop only delivers through Postmates, and between delivery fees, service fees, and a tip, I dropped about $38 for that pizza. (Part of that did go towards a larger-than-normal tip.) Fast-forward to yesterday when I swooped into a grocery store to pick up enough for a few meals plus a week’s worth’ of oat milk. The goods cost about $30 total.

Many more are probably making similar comparisons right now. More than 3 million people filed for unemployment benefits in the last week, and that number could rise. Federal Reserve Chairman Jerome Powell said today that we “may well be in a recession” and that economic activity will substantially decline from April to June.

All of which is to say, this isn’t exactly the climate in which to regularly cough up $10-plus in fees on delivery orders, which makes it not all that surprising that numbers are down for delivery platforms. 

It’s a bummer, to be sure. In an ideal world, everyone would have the funds to support local restaurants and regularly purchase delivery and takeout meals from them while COVID-19 has us all on lockdown. It’s unrealistic to expect the majority of Americans to do this, though.

Some restaurant chains have gotten hip to the issue of high delivery fees. Subway, McDonald’s, Del Taco, Chipotle, KFC, Taco Bell, and others have all announced free delivery promotions through some of their third-party partners. Still, even with waived fees, for most of us, our money goes a lot farther when we’re spending it at Publix.

Another week or two of lockdown should tell us if such deals are enough to reverse the declining numbers for third-party delivery platforms. With no seeming end in sight to either the pandemic or the economic roller coaster we’re currently on, more people willing to spend their bucks on delivery is far from guaranteed.

Uber Eats Waives Delivery Fees for Independent Restaurants

Uber Eats is waiving delivery fees for all orders coming from independent restaurants in the United States and Canada. The move is a response to the operational and financial strain restaurants are feeling as governments order statewide shutdowns of hospitality venues in the wake of the COVID-19 pandemic. 

Effective now, customers can find independent restaurants in the Uber Eats app by looking for the EAT LOCAL banner. Delivery fees will be automatically waived. This will help alleviate some of the financial strain restaurants are currently under as they are forced to close dining rooms and adopt or expand off-premises ordering. To further assist with monetary burdens, Uber Eats is also allowing restaurants to opt into daily payments, rather than billing weekly, as is normal.

All the major delivery companies now offer some form of relief to both independent restaurants and those driving/biking food to customers’ doorsteps. Grubhub/Seamless has suspended commission fees for these independent restaurants and set up a fund for drivers and couriers impacted by the COVID-19 pandemic. Postmates, too, has a fund for workers and will waive commission fees for new restaurants signing up with the platform in San Francisco. DoorDash just unveiled a boatload of initiatives for both its drivers and its restaurant partners.

Uber Eats will offer two weeks of pay to its drivers who test positive for COVID-19 and those who have to quarantine. The service has also said it is providing products with which they can sanitize equipment used to make deliveries. 

DoorDash Makes Moves to Help Workers and Restaurants Impacted by Coronavirus

Third-party delivery service DoorDash today announced a series of moves aimed at protecting workers and customers, and helping restaurants survive in the wake of coronavirus. In a letter sent to The Spoon today, CEO and cofounder Tony Xu outlined the steps his company has taken as more restaurants shutter their dining rooms and states mandate social distancing initiatives that include restaurant closures.

Xu noted that DoorDash has changed its app so that it automatically defaults to the contactless delivery option upon checkout to minimize person-to-person contact between drivers and customers. 

To better protect drivers, DoorDash is also shipping 1 million sets of free hand sanitizer and gloves to its drivers and couriers, as well as consulting with restaurants and health officials to improve safety around food preparation protocols. 

DoorDash is also providing financial assistance to DoorDash/Caviar drivers diagnosed with or quarantined because of COVID-19. The COVID-19 Financial Assistance Program means drivers in the U.S., Canada, and Australia can submit a claim and be eligible for up to two weeks of assistance. It’s an important offering from delivery companies at this time, as most drivers (and gig workers in general) do not get health benefits through their companies and do not qualify for paid sick leave. DoorDash’s program comes on the heels of announcements from Postmates and Grubhub, who last week set up their own financial assistance funds to assist drivers.

Relief funds have also been set up for restaurants, many of whom will suffer financially, and in some cases close permanently, because of mandated (and necessary) closures across the country.

Many major chains have already shuttered their dine-in service and switched to delivery and takeout models. That sounds straightforward enough for Starbucks or McDonald’s, but for smaller, independent restaurants, a switch to delivery is considerably more challenging, especially on the financial front. Delivery companies like DoorDash typically charge a commission fee for each transaction. Those costs — which have been and still are the subject of much controversy — can stretch as high as 30 percent per ticket, making delivery prohibitively expensive for small restaurants, whether or not there’s a pandemic unfolding.

DoorDash has addressed this issue. As of today, independent restaurants in the U.S. can sign up with DoorDash or Caviar and pay zero commission fees for 30 days, according to Xu’s letter. Currently, this option runs through the end of April.

Existing DoorDash partners will pay no commission fees on pickup orders, and Xu’s letter mentions “additional commission reductions for eligible merchants that are already on DoorDash,” though it doesn’t delve into specifics. DoorDash also said it is “earmarking up to $20 million” in merchant marketing programs for existing restaurant customers. 

Finally, the service is adding 100,000 independent restaurants to its DashPass subscription program for free. While we don’t have hard numbers yet, it’s highly possible more people will sign up for subscription memberships to delivery services as more cities require folks to stay home and people look for ways to cut costs on their delivery orders. So getting added to a platform like DashPass could provide a big boost in sales to smaller restaurants. 

DoorDash also said it is working with United Way Worldwide to delivery groceries to food-insecure households, senior citizens, low-income households, and persons with disabilities. For organizations that want to get involved with these efforts, DoorDash has set up an intake site where they can sign up.

Updated: Grubhub Defers Commission Fees From Independent Restaurants, Sets up Charity Fund

Update: According its terms and conditions, Grubhub’s “relief” program defers rather than waives restaurant fees. Restaurants that sign up for the program are required to pay back fees at the end of the relief period. While that has no solid date yet, Grubhub “anticipates that such date will be no later than March 29, 2020.” At that point, restaurants have four weeks to pay back those commissions. 

Grubhub announced this morning at a press conference in Chicago that it is setting up a charity fund and also temporarily suspending its collection of commission fees for qualified independent restaurants in the U.S. The initiative, which is a response to the COVID-19 pandemic now impacting daily life around the world, is in collaboration with mayors of large cities around the country, according to a press release emailed to The Spoon.

In the release, the delivery service noted that not collecting these commission fees will provide cash flow relief to independent restaurants, who along with bigger brands can expect to see as much as a 75 percent drop in sales because of the pandemic. More customers are choosing (or mandated) to stay home, which means significantly less foot traffic headed to restaurants. And some cities are putting restrictions on the restaurants themselves. In NYC businesses, for example, must reduce their capacity by 50 percent beginning today at 5 p.m. 

Bigger brands (think Chipotle, McDonald’s) have billion-plus-dollar digital businesses to fall back on in this scenario. For mom-and-pop restaurants as well as smaller chains, the slowdown due to coronavirus could be life-threatening to business.

More delivery orders would help, but as I wrote earlier today, third-party services like Grubhub and DoorDash collect per-transaction commission fees that can absolutely gut a business’s bottom line. Which is why it’s encouraging to see Grubhub stepping up and acknowledging the changes it needs to make during this time. Currently, the company is working with mayors of Chicago, New York City, San Francisco, Boston and Portland.

At the same press conference today, Grubhub also said it is setting up a fund that will let proceeds from its Donate for Change program go towards charities that support drivers and restaurants impacted by COVID-19. Through the program, customers can round up the change from each order and donate it. The service will match donations from its subscription service members.

Most of the major delivery services are now offering features like contactless delivery. Some, like Postmates, have set up their own funds to support workers affected by coronavirus. The hope is that others will follow with further measures to protect local businesses as well as the workers transporting our food.

Postmates Launches Funds for Drivers and Restaurant Partners Affected by COVID-19

Postmates is launching two new programs this week meant to assist the delivery service’s drivers and restaurant partners impacted by COVID-19, according to an announcement from the company.

The company has set up the Postmates Relief Fund, which will cover the cost of medical check ups for its driers and couriers regardless of whether they have been diagnosed or quarantined. As of right now, drivers who have made at least one delivery in the last two weeks in any of the following states will be eligible for a credit from the fund: Wash., Ore., Calif., Nev., Utah, Colo., Ariz., Texas, Neb., Wis., Ill., Ind., Fla., Ga., Tenn., N.C., D.C., Penn., N.Y., Maine, Mass., and N.J.  

In the same announcement, Postmates also noted it is launching a pilot program that will temporarily waive commission fees for new merchant partners operating small restaurants. The idea behind the move is to give these smaller businesses a boost at a time when foot traffic to restaurants is down due to COVID-19. According to the announcement, “This Small Business Relief Pilot will waive all commission fees for businesses that are not currently delivering on the platform and operate in the City of San Francisco, but want to expand into on-demand delivery to help drive revenue as on-premise dining is impacted.”

Postmates has said it will “potentially” take this program to other cities in the U.S. as well.

Both of these efforts come just days after we learned Postmates as well as Uber, DoorDash, and other gig economy companies are in talks to see how they can band together to set up a potential fund to assist drivers/couriers infected by or quarantined with the COVID-19 virus. 

Some of these services, including Postmates, have also taken measures like implementing contactless delivery features to limit face-to-face human interactions. DoorDash joined that list this week, saying on Monday it is testing features for contactless delivery that will be launched soon. Uber, meanwhile, said it will compensate drivers — for both rideshare and Eats services — who can’t work for 14 days because of coronavirus diagnosis or quarantine.

With cases of COVID-19 on the rise in the U.S. and more employees now being mandated to work from home, we’re likely to see further demand for food delivery in the coming weeks. Stay tuned . . . 

Uber, DoorDash and Others ‘In Talks’ to Compensate Drivers Affected By Coronavirus

Under pressure to offer more protection to workers, major gig economy companies are considering setting up a fund to compensate drivers affected by the coronavirus, according to The Wall Street Journal. Uber, Lyft, Instacart, DoorDash, and Postmates are “in talks” to see how they can come together to set up a fund to pay workers infected by or quarantined with the virus.

Food delivery drivers are in high demand right now as more Americans are working from home or simply staying away from restaurants in the wake of the COVID-19 outbreak. Postmates and Instacart have responded by implementing contactless delivery options where drivers simply leave food on the doorstep instead of handing it off directly to the customer.  

Those measures mitigate some risk. However, they don’t account for the fact that gig economy workers are classified as contractors in most states, which means they don’t get paid for time off, including sick leave. In some cases, taking time off for illness could drastically affect workers’ livelihoods. One worker told the WSJ that “staying home won’t pay the bills.”

That puts delivery drivers in a tough position: stay home and miss earning essential income, or work even when you’re feeling sick and potentially risk further spreading coronavirus. While this conundrum is true of many, many types of workers right now, gig workers are in especially high demand as more people order food in, rather than go out to restaurants. 

The aforementioned companies are expected to make a decision about this potential fund in a few days.  Uber has already said it will compensate up to 14 days for both rideshare drivers and delivery drivers diagnosed or quarantined with coronavirus.

Compensating affected drivers is just one of many issues around worker treatment for which delivery companies have come under fire recently. Uber, Lyft, and Postmates are on the list of gig economy companies currently fighting California’s Assembly Bill 5 — also known as the “gig worker bill” — which reclassifies those workers as employees and entitles them to certain benefits — including paid sick leave. DoorDash and Instacart famously made a lot of enemies in 2019 over their worker tipping policies. Meanwhile, advocacy groups like Gig Workers Rising and Gig Workers Collective are putting pressure on tech companies to enact better labor policies.

One possible result of the current outbreak is that it could prioritize the issue of gig workers’ rights and spur both regulators and tech companies into action faster. Coronavirus isn’t the last public health crisis we’ll see in our lifetimes. As gig economy jobs become the norm for a growing number of the population, ensuring better protection for workers’ health needs to be built right into the job description. 

Postmates, Instacart Join No Human Contact Delivery Efforts in the U.S.

Food delivery service Postmates today announced what it’s calling Dropoff Options, a function that lets customers choose how they want to receive their deliveries. According to a company blog post, users can “choose to meet their Postmate at the door, as they have before, meet curbside, or go non-contact and have deliveries left at the door.” 

Postmates customers order their meals as usual then select their delivery method during the checkout process (see image above).

The post itself doesn’t mention coronavirus, but it doesn’t have to. Around the world, delivery services now offer various forms of this contactless delivery, where couriers and customers have no physical contact and in some cases don’t even see one another face to face. 

The bulk of the efforts so far have been in China, where the outbreak originated. Restaurant chains and delivery services — Ele.me, Meituan, McDonald’s, and KFC, to name just a few — are working together to limit the amount of human contact that happens during food delivery dropoffs. Drivers and couriers must wear masks, have their temperature taken, and disinfect their hands and delivery bags before and after each run.

South Korea’s top two delivery services, Baedal Minjok and Yogiyo, have also seen an uptick in food delivery orders and requests for couriers to leave packages on the doorstep.

Stateside, Postmates isn’t alone in its efforts to introduce more contactless delivery. As Business Insider noted, Instacart has also implemented contactless delivery with a service called “Leave at My Door Delivery.” The grocery delivery company told BI that it has actually been testing this service for several months and decided to make it available to all customers after seeing a “surge” in demand for it.

With “Leave at My Door Delivery,” Instacart customers can opt to have their grocery orders left at their doorstep during the designated timeframe for their order. 

Other food delivery companies, including Grubhub, DoorDash, and Uber Eats, have not yet implemented any kind of contactless delivery for their operations.

These new services from Postmates and Instacart so far only address the issue of one human getting close to another. They do not yet address steps like disinfecting the insulated delivery bags couriers use or taking workers’ temperatures — actions that are as much about the safety of drivers and couriers as they are about customers. One Instacart worker told the Financial Times that the company still wasn’t providing items like hand sanitizer or disinfectants. While Instacart’s new contactless delivery is “a step in the right direction,” it doesn’t “reduce our overall risks of exposure because most of our risks we actually encounter while shopping,” the worker said. 

Instacart workers in particular are exposed to more germs because part of their job involves moving around a grocery store, touching a shopping cart, and picking up items from shelves. But all gig economy companies should be factoring in the safety of their workers as they implement contactless delivery services.

Which is where the robots may come in. My colleague Chris Albrect has written more than once, we live in a time when delivery robots and driverless vehicles are actually available. Undelv has already said it would make its driverless delivery vans available to deliver food, medicine, and other supplies to quarantined areas. And as Chris pointed out, rover bots like those from Starship or Kiwi “could be an easy humanless way to deliver meals and medicines around the clock in densely populated areas.” I would add drone technology to that list of possible solutions.

Granted, outsourcing delivery jobs to drones would eat into gig workers’ pay. As well, a number of regulatory issues around autonomous delivery vehicles have yet to be addressed, which limits how widely these technologies can even be used. But whether by robot, masked workers, or some other solution that’s yet to be thought of, the contactless delivery method will get way more popular in the next few months — and probably alter the food delivery landscape for good in the process.

West Hollywood Approves Delivery ‘Bots, Missouri Mulls its Own Robot Regs

In addition to random celebrity sightings, residents of West Hollywood, CA will soon be spotting autonomous delivery robots in their neighborhood. Last night the West Hollywood city council approved the use of delivery robots on its city streets (hat tip to WeHoVille).

A trial of the program will start next month with Postmates’ Serve robot and run for 90 days. Serve is a cooler-sized robot that scurries around on four wheels, and while it can run autonomously using sensors and cameras to avoid people and obstacles, the city council is requiring a human chaperone during the trial. Additionally, only three robots can be in operation at once, they can only run during the day, and they aren’t allowed on sidewalks deemed substandard.

Serve has already been making deliveries in the Hollywood neighborhood of Los Angeles since the tail end of last year, and the West Hollywood expansion illustrates how cautious local regulators are being when it comes to robots.

Across the country from West Hollywood, state lawmakers in Missouri introduced their own bill to regulate sidewalk delivery robots. The proposed legislation would limit a robot’s weight to 200 lbs, have autonomous driving capabilities, and require an insurance policy of $100,000 to cover any damages.

State and local governments across the country are grappling with rapid innovation like sidewalk robots essentially in real time. Lawmakers have to weigh the convenience of something like an autonomous sidewalk robot with the costs. Sidewalk robots could help reduce traffic congestion by getting delivery cars off the road, but then you have fleets of ‘bots crowding sidewalks. Robots could make meal delivery more affordable, but you have to make sure they are distributed in an equitable fashion. Then there are questions around liability and privacy when running robots on public streets, and more fundamental questions like where robots can recharge.

The point is, autonomous robot delivery technology is available and ready, now we just to wait and see how it will be integrated into our everyday lives.

Grubhub’s Subscription Program Is a Bid to Boost Customer Loyalty

Grubhub today announced the launch of Grubhub+, the food delivery service’s answer to a subscription service that offers members more rewards and free delivery on many orders, according to a company press release. 

A $9.99/month membership to Grubhub+ includes free unlimited delivery from restaurants participating in the new subscription service. (Grubhub hasn’t named specific ones yet.) A subscription also gets you unlimited 10 percent cashback deals, priority assistance when dealing with customer service, and dibs on exclusive perks and access to local events.

Grubhub+ is the company’s latest effort to win customers over with more rewards. Last year, the company launched the in-app feature Perks, which offers users more ways to earn loyalty points from restaurants via deals only available in the Grubhub app.     

Right now, anyone can sign up for a free 14-day trial of Grubhub+. And in what’s also a bid for customer loyalty — something of an elusive concept for third-party food delivery right now — Grubhub is also offering an extended 30-day trial to “diners participating in any other food delivery subscription program.” DoorDash, Uber Eats, and Postmates all offer subscription services. DoorDash even partnered with Chase bank recently to give certain cardholders subscriptions to the service, giving it access to a potentially even large pool of subscribers. 

There is no guarantee any of this will ensure customer loyalty for any third-party delivery service. Customers tend to chase deals, hopping from app to app in search of promotions, giveaways, and discount items. On that point, Grubhub isn’t slacking, as it grew its network of restaurants to 300,000 in the fourth quarter of 2019.

Some of those additions were controversial, though. Earlier this month, the company received widespread criticism for its practice of adding restaurants to its platform that have no formal agreement with the service. (DoorDash and Postmates do the same thing.) And that’s only one controversy of many the service has been at the center of in the last 12 months. So Grubhub might be doing all it can to have the most restaurants in the network, but it’s pissing owners and customers off in the process, which won’t exactly build loyalty.

But, as I said above, customers tend to chase deals, and if Grubhub can offer a better subscription package than its competitors, it could win more loyalty despite its many current controversies, present and future.

Rhode Island’s Proposed Bill Would Ban Delivery Services From Listing Non-Partnered Restaurants

Rhode Island legislators have introduced a bill that would ban the likes of Grubhub, DoorDash, and Postmates from listing non-partnered restaurants on their sites without prior written consent, according to Restaurant Dive.

The bill was scheduled for consideration on Tuesday evening. If passed into law, food delivery services would be fined a civil penalty of up to $1,000 each day they were not in compliance. Restaurants would also be able to bring legal action against the delivery service.

According to WPRI Eyewitness News, the bill came about when the Rhode Island Hospitality Association (RIHA) approached House Judiciary Committee Chairman Robert Craven for solutions to combat third-party delivery sites’ controversial practice of listing non-partnered restaurants without their knowledge or consent.

DoorDash, Postmates, and Grubhub all follow this practice, arguing that it helps local businesses attract more customers, and at a cheaper price point, since non-partnered restaurants don’t pay a commission fee for orders. 

To put it lightly, restaurants don’t necessarily see the practice as beneficial. The recent showdown between Grubhub and San Francisco restaurant Kin Khao resurfaced the point that restaurants’ reputations (and therefore, business) can suffer when a third-party site promises customers delivery and/or pickup orders the restaurant can’t actually fulfill. Case in point: Kin Khao is a Michelin-starred fine-dining restaurant. It’s food is meant to be experienced in the actual restaurant, not from a plastic takeout box. It was listed on Grubhub’s site without the owner’s knowledge or consent, and thanks to a technical mix up with another Grubhub restaurant, customers were led to believe Kin Khao would deliver.

That’s one example among many, and more restaurants are getting vocal about their feelings on the issue. “If we don’t know that the food is traveling 20 or 30 minutes out to a customer, we can’t prepare it accordingly,” one owner told WPRI. “If there’s a mistake made, we can’t rectify it. So for us, it’s about having control of the customer experience to make sure it’s of the quality and caliber that we want.”

The RIHA said it has received multiple complaints over the last year from Rhode Island restaurants that have been listed to third-party delivery sites without their knowledge or consent.

If the proposed ban goes into effect, other cities and states could follow with similar legislation, most likely major metropolises like San Francisco and New York, which are already cracking down on the Wild West tactics of third-party food delivery.

California Labor Law Remains for Now as Judge Denies Uber and Postmates’ Injunction

A California labor law that reclassifies gig workers as employees rather than contractors will remain in place for now, as a federal judge yesterday rejected a request from Uber and Postmates to prevent the law from taking effect.

Gig economy companies are vociferously against California’s AB 5 law, and on Dec. 31 of last year, Uber and Postmates filed their complaint, which my colleague, Jenn Marston reported on at the time saying:

The complaint, filed Monday in a U.S. District Court, argues that AB 5 violates multiple clauses in the U.S. and California constitutions, including equal protection. The suit points to the “laundry list” of occupations exempted from AB 5, which includes travel agents, grant writers, construction workers, and salespeople, and argues that AB 5 is designed to stifle gig-economy companies and their workers.

According to The New York Times, Judge Dolly M. Gee agreed that Uber and Postmates could face harm from the law, but the public interest in having living wages and regulating employment were more in the public interest. Judge Gee did not rule on the merits of the case.

At stake is the underpinning of gig economy model, which uses less-expensive contractors and not full-time employees for jobs like doing the actual delivery of food. The question over the viability of this model will become increasingly important as delivery from third-party services is expected to make up 70 percent of all food delivery by 2022.

Companies like Uber, Postmates and DoorDash are all under increased pressure from investors to become profitable. Laws like California’s AB 5 certainly complicate that path to profitability.

Yesterday’s decision does not mean the fight over AB 5 is over. Postmates and Uber both said they are considering an appeal of the judge’s decision. In addition to this court case, DoorDash, Uber, and Lyft have pledged $90 million to get a 2020 ballot measure passed that would counteract AB 5.