Dive Brief:
- DoorDash and Uber Eats filed suit against New York City in federal court on Thursday over forthcoming regulations that would require the delivery aggregators to display their tipping prompts before consumers check out.
- The suit alleges that New York’s requirements constitute a compulsion of speech and an endorsement of specific tipping amounts.
- The lawsuit is the latest maneuver in a back-and-forth battle between the city and the aggregators stemming from New York’s gig worker minimum pay law, which first passed in 2021 and took effect in 2023 following an extended rulemaking process and industry litigation.
Dive Insight:
For years, DoorDash and Uber Eats displayed their tip screen option before checkout in New York, according to the court filing. But the companies moved away from that policy as a result of New York’s Minimum Pay Law for gig workers. The city’s new tip prompt regulation is a response to that shift.
In a press release announcing the suit, DoorDash called the prompt law “essentially an added tax” on delivery orders. The company claimed its operating costs per delivery are 95% higher in NYC than the national average.
The complaint also alleges that New York City passed the law as a form of retaliation for delivery aggregators changing their tipping prompt practices as a result of the Minimum Pay Law, which currently mandates the services pay workers $21.44 an hour.
Currently, consumers using DoorDash “are still welcome to tip their Dashers in New York City, and are prompted to do so once their order is delivered,” according to the press release.
Uber and DoorDash said in the lawsuit that “suggested tip amounts and suggested pre-service tipping can convey the hotly debated message that tipping should not just be a recognition of good service but an expectation regardless of service quality.”
The complaint alleges that the city’s tipping rules violate both state and federal protections, exceed the city’s policing power, contradict due-process requirements and abridge First Amendment rights. The companies are seeking injunctive relief — asking the court to scrap the laws — and “damages to the extent appropriate, to prevent and remedy these violations.”
In DoorDash’s most recent 10-Q, the delivery giant specifically highlighted New York’s minimum pay law as a risk to its business model.
“Minimum earnings standards, and other regulations can increase the cost and complexity of operating, which has caused, and may in the future cause, us to increase the fees we charge to consumers,” DoorDash said. “Consumer demand for our services could be reduced, which would further harm our business.”
