Jersey City legislators this week passed a new law restricting how much third-party delivery apps like Grubhub, Uber Eats and DoorDash can charge restaurants for their services — and providing new protections for the “deliveristas” who shuttle food around New Jersey’s second-largest city.
The ordinance is slated to go into effect on Aug. 1, should Mayor Steven Fulop sign it. A spokesperson for Fulop hasn’t returned a message on Friday asking if the mayor supports the law.
Many of the new rules on licensing and restricting costs to restaurants are the first of their kind for a New Jersey municipality. Some of the companies behind the delivery apps said they’re open to working with Jersey City to address their concerns, but Grubhub told Gothamist the ordinance would “devastate food delivery in Jersey City” by imposing impractical regulations and requirements. And some delivery drivers and restaurant owners said they worried that over-regulation could put them out of work or hurt their business.
The ordinance, passed by the Jersey City Council, would require delivery app providers to pay for permits to operate in the city. They would have to pay $1,000 in the first three years and $500 after that. Companies would also be capped at charging restaurants 5% of the order price if a company is simply making orders available through its app and is not offering delivery services from drivers contracted with the company.
Councilman James Solomon, the bill’s author, estimated that the companies charge restaurants between 5% and 10% just to be on the apps, while the restaurants who use the services’ delivery workers are charged higher fees. He said that under the ordinance, if a restaurant is using the companies’ delivery services, the apps must offer a “tier” that charges no more than 15% of the order.
“Our cap of 5% is at the lower margin of what they’re currently charging,” Solomon said. “In terms of delivery services … oftentimes, 20% to 30% or even up to 40% of an order can be taken out.”
A 2020 state law that was passed to protect restaurants amid the pandemic’s economic crash and lockdowns capped the amount third-party delivery apps could charge restaurants at 20%. But the law expired in January 2021.
The new ordinance bars the apps from charging customers higher prices for menu items than a restaurant normally charges. The app service can only ask for a tip on a delivery order if the full amount would go to the delivery worker. The apps also must let delivery workers know how much travel time an order will take and ensure workers can decline an order without penalty.
Additionally, the companies would be required to provide reflective vests for delivery workers who use e-bikes or bicycles. They would also be required to provide a safety course through the apps for delivery workers, and any rider making at least five deliveries in a quarter must complete the course within 30 days of it being made available.
The ordinance passed by a 7-1 vote on Wednesday. Solomon said he authored it after talking with restaurant workers and owners in his neighborhood, which he said has several “beloved” restaurants. He added that as the pandemic-era caps on allowable fees ended “a number of the restaurant owners reached out to me, asking to work with us on this type of legislation, so we wanted to really do right by them.”
Solomon said the service charge caps were modeled on similar laws in San Francisco, Seattle and Washington, D.C, while the worker protections were modeled on rules in New York City. For the safety protections and training requirements for e-bike and cyclist delivery riders, he said the Council looked to neighboring Hoboken as an example.
Restaurant associations in those other cities told Solomon the regulations were working, he said. “Their basic summary was they didn’t seem to have companies blatantly violating any terms,” the legislator noted.
Solomon also said policymakers spoke with the app companies and that he believes the ordinance is “in the realm of what’s reasonable” for them. He described DoorDash and Uber Eats as open to working with the city but said Grubhub took a more “antagonistic approach” and told the city it opposed the regulations overall.
A spokesperson for Grubhub said in a statement that the company is “disappointed” that the City Council “has chosen to move forward with this ordinance that would devastate food delivery in Jersey City.” “The law would interfere with restaurants’ ability to select services from delivery marketplaces, threatens couriers’ ability to make ends meet, and imposes impracticable licensing requirements — all amounting to a massive, difficult-to-implement regulatory overreach,” the statement said.
A DoorDash spokesperson said the company was “eager to continue working with policymakers on practical and effective solutions that best address these issues and allow everyone to safely share Jersey City streets.” Uber Eats has not responded to a request for comment made on Thursday.
In an opinion piece in the Jersey Journal last month, several restaurant owners said they worried that the bill would lead delivery companies to “geofence Jersey City borders, effectively creating a digital barrier around our businesses.” “While this ordinance may seem like a measure to protect local merchants and support workers, it fails to account for the broader implications,” the owners wrote. “By limiting our delivery radius, we risk cutting off a significant portion of our customer base.”
In a separate piece, DoorDash worker Aiman Ali argued that additional rules for delivery workers who use bicycles and e-bikes could result in more “cars doing deliveries and clogging our streets.” He wrote that if the companies stopped providing deliveries in Jersey City instead of complying with the new rules, delivery workers would themselves lose business.
Solomon, the legislation’s sponsor, said enforcement would be up to the city’s Office of Code Compliance, which could crack down if it receives reports that companies are violating the ordinance. Violations could lead to the revocation of permits for the companies operating in Jersey City, he said.
He also acknowledged that the city of 300,000 people lacks a “massive staff” who could police every alleged violation, but he added that he was optimistic that the companies would comply. He said Jersey City recognizes some of the challenges of enforcement “when you’re dealing with multibillion-dollar tech companies.”
“If we are going to dialogue with the restaurants, if we are going to dialogue with the deliveries, we think we can stay on top of things,” Solomon said. “We know it’s not going to be 100% perfect but we think it’s a substantial step forward.”
“We know that it’s impossible to pass an order and snap your fingers and solve every problem,” he continued. “But we think that this creates a real foundation to protect [both] our restaurants” and workers.
Mike Hayes
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