A federal judge in Manhattan ruled on Friday that a New York City law requiring food delivery apps like Uber Eats and DoorDash to include a tip option at checkout will remain in effect.
The ruling means the city ordinance will take effect on Monday. This new law mandates that delivery apps prompt customers for a tip before finalizing their orders, with a suggested minimum of 10%. City officials believe these changes are crucial for safeguarding workers’ earnings, especially after a drop in tips following a new minimum wage law that began at the end of 2023.
The updated minimum hourly wage for app-based delivery workers mandates companies like Uber and DoorDash to increase their pay to $21.44 an hour, excluding tips. City officials estimate that this policy has added approximately $1.2 billion to the overall earnings of delivery workers.
However, this law has faced criticism from shipping companies, who warn that it could lead to higher prices and disrupt the financial model of app-based shipping.
Regulators believe the law may have indirectly pushed DoorDash and Uber to alter their tipping strategies, resulting in a loss of hundreds of millions of dollars in tips for the city.
Uber and DoorDash assert that the new tipping regulations effectively pressure customers to tip upfront, which they claim undermines the traditional notion of tipping as a reward for good service.
Critics point out that requiring tips in advance seems more like a prerequisite for receiving service rather than a gesture of appreciation. Drivers can see the expected tip amount before accepting an order, which can result in them declining jobs with low or no tips. Customers who choose not to offer prepaid tips risk facing delays or cancellations of their orders.
This concern is central to lawsuits filed by DoorDash and Uber, claiming that the city is compelling companies to pressure customers on its behalf.
Both companies argue that this system could damage the relationships between customers and delivery personnel, potentially leading to resentment and price increases. In response, city officials claim that the app companies are the source of the issues.
After implementing the minimum wage at the end of 2023, DoorDash and Uber reportedly modified their applications to change tip payments to post-delivery, which the Department of Consumer and Worker Protection found reduced the estimated tips received by workers by $550 million, according to a report from January.
