Grubhub Outsourcing: Avoiding NYC Minimum Wage?

In 2024, food delivery service Grubhub began outsourcing a portion of its orders to Relay, another delivery application. This move came as a way to circumvent New York City’s delivery-app minimum-wage requirements.

NYC Delivery Wage Law

NYC’s delivery-app minimum wage requirement was designed to support and protect drivers operating as independent contractors. These workers often lack traditional employee benefits like health insurance and workers’ compensation. The law initially mandated a minimum pay of over $19 an hour, adjusted annually for inflation.

The Grubhub-Relay Partnership

Internal documents reveal that Grubhub, now owned by Wonder, subcontracted to Relay to avoid paying the mandated minimum wage. According to Streetsblog, this partnership began in January 2024, with 20 to 30 percent of orders being outsourced to Relay.

Exploiting a Legal Loophole

A judge previously granted an injunction allowing Relay to operate outside the scope of the NYC law, creating a legal loophole. Grubhub then “ruthlessly exploited” this loophole, as reported by Streetsblog.

Impact on Delivery Workers

Grubhub workers were reportedly removed from the app without explanation, leading many to sign up with Relay. Relay paid its contractors significantly less – $13.35 per hour – for the same work. Relay workers were also assigned longer trips, further violating the city’s worker protection laws.

Cost Savings for Grubhub

Grubhub anticipated saving 39 percent on each order sent to Relay, totaling approximately $5 million annually. “Grubhub wanted to use Relay because they wouldn’t have to pay for the workers’ time,” explained New School economist James Parrott, who helped write the minimum pay standard law. “Since Relay was not subject to the pay standard, they could take advantage of free labor that way.”

Relay's Closure and Future Automation

Once the loophole allowing Relay to avoid the minimum wage was closed, the company ceased operations in NYC, leaving thousands of delivery workers unemployed. Grubhub is now exploring automated delivery options, utilizing Dexa’s DE-2020 aircraft, potentially impacting even more courier positions.