Food delivery companies, namely DoorDash (NYSE:DASH), Uber Eats (NYSE:UBER), and Just Eat Takeaway.com’s (JTKWY) Grubhub, have sued New York City over the recently passed minimum wage laws for delivery workers. Per the new law, delivery workers are required to receive compensation of $17.96 per hour for the duration of their activity on the application, or alternatively, pay a rate of 50 cents per minute during their journey. Companies claim these increased wages will result in higher costs for food delivery, ultimately compelling them to transfer the financial load onto customers. Following the news, DASH stock fell 2.6%, UBER slipped 3.55%, and JTKWY lost 5.4%.
Details of the New Law
The new law will take effect on July 12. Delivery companies allege that the assessment of hourly wages is flawed, highlighting several reasons to support their claim. The most important one is that food delivery workers often work for multiple apps and will end up getting paid double or triple the amount for the same time spent on the apps. Plus, workers are at liberty to decline the orders, making it unjustifiable to base payments solely on their activity on an app.
The increased wages will mean companies will have to deliver a higher number of orders per hour. Consequently, this will likely lead to a reduction in delivery coverage areas and ultimately hurt restaurants and consumers. Food delivery companies are already facing several challenges, including a decline in order quantities following the post-pandemic period. Plus, there is an ongoing lawsuit between the delivery companies and New York City over the caps on commissions charged to restaurants.
Disappointed that delivery companies are retaliating against the new wage structure, New York City’s Department of Consumer and Worker Protection said, “These workers brave thunderstorms, extreme heat events, and risk their lives to deliver for New Yorkers—and we remain committed to delivering for them… The minimum pay rate will help uplift thousands of working New Yorkers and their families out of poverty.”
Which Stock is Best for Delivery?
Below are the comparison results for the three food delivery companies. Based on the TipRanks Stock Comparison tool, Uber Technologies is currently the most favored delivery app. Also, bear in mind that Uber is not just a food delivery company; it is also one of the most popular ride-hailing service providers.
