Seattle City Council Passes US’s First Minimum Wage Guarantee for Gig Workers

Labor activists and gig workers in Washington State are celebrating this week after the Seattle City Council approved new rules designed to ensure that companies such as DoorDash, UberEats, Grubhub, Instacart and Amazon Flex are paying their couriers, delivery drivers, and other gig workers the city’s minimum wage, which is set at $17.27 for most Seattle workers.

The rules are the first in a series of reforms known as “PayUp” that supporters say would make Seattle the first city in the United States to set standards around pay, flexibility and transparency for app-based delivery workers. If Seattle Mayor Bruce Harrell signs the legislation, which was unanimously approved by the city council, app companies will have 18 months update their practices in Seattle to ensure these gig workers are paid the city’s hourly minimum wage after expenses for each job they work are taken out. Tips would be added on top. The rules would also require payroll transparency and prevent app companies from punishing gig workers based on which jobs they accept or the hours they work.

Companies including DoorDash and Instacart pushed back on the PayUp proposal, including with emails and pop-up ads warning workers and customers that the new standards would raise prices, create new “fees” and reduce earnings. Instacart said in an emailed statement that the Seattle City Council ignored “serious concerns” raised by shoppers, drivers and “business leaders,” but the council says it held 10 large stakeholder meetings on the proposal last year. Critics said the industry’s warnings are misleading and fail to mention that gig workers often rely on unpredictable tips and routinely take home less than Seattle’s minimum wage after paying for gas and other expenses.

A recent analysis of 400 job reports from Seattle workers for on-demand delivery apps by Working Washington, a labor rights groups that is working with gig workers to promote PayUp, found that the average pay for a gig was $9.58 per hour after basic expenses such as gas and vehicle maintenance. About 92 percent of gigs paid less than Seattle’s $17.27 hourly minimum wage, which ranks among the highest local wage floors in the country but also reflects Seattle’s notoriously high cost of living.

The standards are designed to ensure gig workers take home at least the hourly minimum wage before tips and after expenses. App companies would be required to provide a 64-cents-per-mile reimbursement to cover expenses such as fuel, car repairs and driving between jobs, according to Working Washington. A 38-cent-per-minute “cost factor” would cover previously unpaid work between gigs and costs such as payroll taxes and medical leave. For PayUp supporters, the standards are about ensuring gig workers can afford to live in the city they work in.

“When I started working on Gopuff, I had no idea what I’d be facing,” said Wei Lin, a Seattle gig worker who delivers groceries through the Gopuff app, in a statement. “I have to put in 70 or 80 hours a week just to get by. Each order pays only $4. Sometimes that doesn’t even cover our gas and mileage costs.”

Companies such as GrubHub, UberEats and DoorDash saw their revenues balloon during pandemic lockdowns as consumers stayed home, and restaurants and stores had no choice but to sign up with delivery apps, according to Marketwatch. DoorDash, the largest food delivery app, reported $4.89 billion in revenue in 2021, up 69 percent from the previous year. However, competition among apps is stiff, and some companies are struggling to stay profitable as pandemic restrictions fade.

In a statement to the Seattle Times, a spokesman for DoorDash called PayUp “untested and hasty,” and said the standards would lead to higher costs for customers, fewer orders from businesses and reduced earnings for gig workers. Delivery “dashers” in Seattle make an average of $28 per hour when on delivery, the company boasted.

In a pop-up ad displayed to app users, DoorDash also claimed the “Seattle City Council’s proposal” may cause “fee increases” of up to $5. However, the PayUp ordinance does not include any language about “fees” or “fee increases.” Assuming the average DoorDash delivery takes 20 minutes, a $5 fee on each delivery (imposed by DoorDash) would provide a Seattle gig worker with $15 per hour, which is $2.27 short of the local minimum wage. According to Working Washington’s calculations, an additional $5 fee would amount to an admission that DoorDash currently only pays its deliverers $2.27 per hour after expenses, and thus, would pass the cost of paying a minimum wage on to customers.

App companies dodge minimum-wage requirements by hiring workers as independent contractors rather than employees, a model they defended in California by pumping millions of dollars into a campaign to pass a statewide referendum in 2020. The companies claim their model provides workers with flexibility, but critics say it allows apps to pay as little as $2 per hour after expenses. In an email, Instacart said the “disastrous” policy would raise prices for consumers.

Labor organizers see it differently. The PayUp standards would “level the playing field” from company to company and job to job, according to Sage Wilson, a spokesperson for Working Washington.

“It’s an absurd loophole that gig companies have built a business model to exploit, and we shouldn’t be incentivizing business models that rely on that kind loophole,” Wilson said in an interview.

Working Washington says the PayUp standards would still allow apps to offer payment above the wage floor for a given job, adjust pay to match consumer demand, and offer bonuses and other incentives — as long as each gig meets the new pay minimum-wage standards. Organized gig workers in Seattle were central to creating the standards, Wilson said, and with support from the city council, they hope the policy will inspire efforts to raise wages and benefits for gig workers in other cities.

“There is really strong overall consensus among workers and the public at large that people should be taking home the minimum wage after expenses from their work,” Wilson said.