Legal Update: New York City Announces Nation’s First Minimum Wage for App-Based Delivery Drivers

Seyfarth Synopsis: In what New York City has billed as the “first-of-its-kind minimum pay rate for app-based restaurant delivery workers,” gig economy delivery workers will be entitled to almost 20 dollars per hour by April of 2025. The pay rate will increase yearly. Effective July 12, 2023, the new Rule will also require enhanced recordkeeping obligations and will provide flexibility for app-based restaurants as to the pay period.

Pay for app-based workers has recently become a popular issue. Former President Obama’s new Netflix documentary series, “Working, What We Do All Day,” profiles an app-based delivery worker in Pittsburgh, Pennsylvania, who notes that she received $6.73 from two delivery trips and comments that a minimum wage for app-based delivery workers would be beneficial. App-based delivery workers are arguably the most prominent in New York City, which has estimated over 60,000 in the City. According to City figures, these workers earn an average of $7.09 per hour.

In response to a lobbying campaign by groups representing app-based delivery workers, New York City Mayor Eric Adams, along with the City’s Department of Consumer and Worker Protection (“DCWP”), announced on June 11, 2023 a minimum pay rate for app-based delivery workers in New York City. The new Rule, which was finalized after a notice-and-comment process, will take effect on July 12, 2023. It remains to be seen whether this Rule exceeds the scope of the DCWP’s rulemaking authority and will be subject to legal challenges.

As its main provision, the Rule sets a schedule for the app-based delivery worker minimum wage.  Upon the effective date of July 12, 2023, covered delivery services must pay covered delivery workers a minimum at a rate of $17.96 per hour for time spent on deliveries (e.g., 10 minutes spent on a delivery would result in 1/6 x $17.96 = $2.99). Effective April 1, 2024, covered workers will be entitled to trip time multiplied by $18.96 per hour. And, effective April 1, 2025, covered workers will be entitled to trip time multiplied by $19.96 per hour. In effect, the rates as outlined above are minimum hourly rates of pay for covered workers.

The Rule additionally sets an aggregate pay requirement, which accounts for delivery workers’ on-call time. Specifically, the Rule requires that a “third-party food delivery service or third-party courier service must pay, in aggregate, to the food delivery workers who engage in trip time or on-call time in a pay period no less than the sum of all such food delivery workers’ trip time and on-call time in that pay period multiplied by” the same rates and schedule as noted above ($17.96 per hour from the effective date until March 31, 2024; $18.96 per hour from April 1, 2024 through March 31, 2025; and $19.96 per hour starting on April 1, 2025). The rule specifies that a third-party food delivery service or third-party courier service may fulfill its obligation under the Rule using any basis of pay it chooses, including paying an hourly rate, a per-trip rate or other piece rate, a bonus or other lump-sum payment, or any other basis.

The Rule additionally notes that pay periods “need not coincide with the calendar week but may begin on any day and at any hour of the day.” Covered delivery services, however, “must establish a single pay period for all food delivery workers it engages.” And, “[o]nce the beginning time of the pay period is established, it must remain fixed, and may be changed only if the change is intended to be permanent.”

The Rule additionally imposes recordkeeping requirements on covered delivery services, including maintaining for a period of three (3) years data and records concerning the workers, notices sent to workers, delivery trip information, including on-call time, gratuity information, and overall pay information.

Finally, the Rule incorporates the City Administrative Code definitions of “Food delivery worker,” “food service establishment,” “third-party courier service,” and “third-party food delivery service.” Thus, the Rule does not create new categories of coverage.

For more information, please feel free to reach out to the authors of this alert, or your favorite Seyfarth attorney, if you have any questions.