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New High-Stakes Lawsuit Could Change the Business of Food Delivery in the West Village

By Justin T. Kelton, Esq.

The West Village is one of the City’s—and indeed, the country’s—premier food destinations. It contains a robust and ever-changing lineup of restaurants performing at the top of their game. And increasingly, those restaurants have been utilizing delivery apps to expand their scope and provide patrons a new degree of convenience and service. But a recent law altering the payment structure for delivery workers has ignited a high-stakes lawsuit between delivery app providers and the City, casting a shadow of uncertainty over the industry. The outcome has the potential to reshape the landscape for restaurants, delivery workers, app providers, and patrons.

With the proliferation of app-based delivery throughout New York City, stakeholders have grappled with ways to ensure that delivery workers are paid fairly for the difficult and important work that they do. Last month, New York City passed a law that would increase pay for certain app-based delivery workers to nearly $20 per hour, with additional increases set to take effect in the future. The law was praised by many delivery workers, who believed that it would improve working conditions and provide fairer pay. On the other hand, restaurants and delivery companies argued that the law would be too costly in an industry with razor-thin margins, and could lead to job losses.

Just days before the new law was set to take effect, on July 6, 2023, several app-based delivery platforms, including DoorDash and Grubhub, filed a lawsuit in the New York State Supreme Court arguing that the law “ignor[es] mountains of hard data and analysis” and was enacted “over emphatic objections from a range of constituents.”

The delivery platforms also filed a motion for a Temporary Restraining Order, asking that the defendants be enjoined from enforcing the new law until the Court conducts a hearing. On July 7, 2023, Justice Nicholas Moyne granted the Temporary Restraining Order and barred the City from implementing the changes until the Court conducts a hearing on July 31.

Whatever the outcome, the table is set for a major impact on the local restaurant industry.

If the law is upheld, it could lead to higher prices for food delivery. Restaurants may pass on the increased costs to their customers, making it more expensive to order food from home. This could discourage people from ordering delivery, which could hurt businesses in an industry that is already one of the most competitive and costly in New York.

If the law is stricken down, it could lead to a shortage of delivery workers, who may be discouraged about the lack of years’ worth of mandatory pay increases that had been built into the law. This, in turn, could lead to delays and shortages, affecting business and consumers who rely heavily on delivery.

In short, the recent litigation over the law raising wages for app-based delivery workers may have a significant impact on the local restaurant industry. With a hearing scheduled for later this month, restaurant workers, owners, and fans await an indication of whether they’re in for a taste of change.

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Justin T. Kelton is a partner and Co-Chair of the Litigation Department at Abrams Fensterman, LLP. His practice focuses on complex commercial litigation. He can be reached at 718-215-5300 or jkelton@abramslaw.com. This article represents Mr. Kelton’s personal opinions only, and does not constitute legal advice.

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